The chief executives of the world’s largest hotel companies often like to sweep the idea of the alternative lodging sector under the rug. After all, this sector — led by the vacation rental platform Airbnb — is a threat to their business.However, Airbnb’s most recent financial reporting should be a wake-up call to the hotel industry. Traditional hotel players can’t afford to sit idly by and watch this leg of the travel sector grow rapidly.This week, Airbnb reported a $379 million profit for the second quarter — slightly higher than the $367 million profit Hilton posted for the same timeframe. It’s an impressive gain. Also, Airbnb executives earlier this year indicated they expect the company to post its first full-year profit since it was founded in 2008.For more TPG news delivered each morning to your inbox, sign up for our daily newsletter.Airbnb earnings and trendsLike hotel executives who already reported earnings earlier this cycle, Airbnb CEO Brian Chesky downplayed the idea that economic uncertainty would be a massive drag on the company he founded.“Our business model is adaptable. We have nearly every type of space in nearly every location, so however travel changes, we can adapt,” he said on an investor call this week. “Regardless of the economic environment, our guests come to Airbnb because they can find great value and our host can earn extra income.”Airbnb reported customers booked 103.7 million nights and experiences (the platform also offers experiential features like cooking classes) for the quarter — a 24% jump from the same time in 2019.It’s the highest showing of any quarter in company history. This largely came from demand outside of the Asia Pacific region (earlier this year Airbnb announced plans to pull out of China).This isn’t to say there aren’t some signs of weakness at Airbnb. The strong quarter was driven by previous bookings, and Chesky noted growth rates weren’t as strong in May and June as they were earlier this year. However, there was a reacceleration from June to July amid the busy summer travel season.Sign up for our daily newsletterEmail addressSign upI would like to subscribe to The Points Guy newsletters and special email promotions. The Points Guy will not share or sell your email. See privacy policy.The types of stays booked on the vacation rental platform look different today than they did before the pandemic. For starters, stays are a lot more expensive.Across April, May and June, the average daily rate for an Airbnb stay was $164 — a 40% jump from the same time in 2019.The amount of time people spend at an Airbnb is also on the rise. Stays of 28 days or more represented the fastest-growing trip length category at the company.These long-term stays accounted for 19% of gross room nights booked in the second quarter compared to 13% in the second quarter of 2019. During the second quarter of this year, 45% of gross room nights booked were for stays of at least seven nights.There was also significant growth for stays in suburban locations, showcasing the pandemic trend of travelers wanting more space outside of major cities. Still, there were signs of travelers returning to cities, as gross room nights in these areas represented 47% of Airbnb’s bookings during the quarter — exceeding pre-pandemic performance.Wake up, hotel industryThis might be a story about Airbnb’s financial showing during the second quarter, but it’s hard not to mention Hilton CEO Christopher Nassetta because of some remarks he made about Airbnb last month.“What they do is they serve a certain customer need, and we serve another customer need,” Nassetta said on a July investor call. “I have said it for a long time: There is plenty of room for us to coexist given what we are delivering is very different. It’s generally for different types of stay occasions.”Nassetta, like many of his traditional hotel company CEO peers, publicly maintains the idea that his company serves one type of customer while Airbnb serves another. While he has called Airbnb a strong business in the past, Nassetta also noted on a 2015 earnings call that he “strongly [does] not believe that they are a major threat to the core value proposition we have.”It’s hard not to roll your eyes just a tad at that. After all, the lodging industry fought tooth and nail against Airbnb and other short-term rental providers from expanding in major U.S. cities in recent years.In the eyes of their executives, hotel companies exist in a different lane than vacation rental platforms.Look at it this way, though: Airbnb now has 6 million listings. This is a hefty lodging offering that hotel brands could have taken if they used the strategies of a tech company and tried to appeal to younger travelers.One company’s recession is another’s growth opportunityEven amid fears of a recession, Airbnb’s leadership team has its eyes on growth. Economic uncertainty could even help the company bring in more hosts and boost the number of listings on its platform.There are 4 million hosts on Airbnb, and Chesky noted he felt there could be “millions more."“Hosting is one of the easiest ways to be able to make money with an asset that you already have,” he said. “There are a number of things that we’re going to be doing this fall — this winter and beyond, but one of the most important things we want to do is continue to make it easier to host.”Chesky didn’t provide much in the way of details regarding what could make it easier to host. He noted the company offers additional protections for hosts (recent crimes at Airbnb listings almost certainly were a catalyst for this) and other “opportunities to continue to reduce friction.”“Airbnb was founded during a recession in 2008: the financial crisis. People were worried about being able to pay their bills, pay for their homes and their income,” Chesky said. “So, they turned to hosting, and we think a lot of people may turn to hosting once again. This is a big opportunity for us.”
