Results from Airbnb disappointed investors with an outlook for subdued bookings in the second quarter. They also reveal something about consumers’ state of mind.
Revenge spending—when shoppers spend more than they otherwise would after a shock like the Covid-19 pandemic lockdowns—appears to be dying out. Airbnb CEO Brian Chesky said people are becoming more price sensitive, going for cheaper bookings, rather than splashing out.
The spending splurge was especially strong for services after lockdowns were lifted. Having splashed out on durable goods such as computers and washing machines while stuck at home, people later rushed to eat out in restaurants, travel, and stay in hotels. That’s one reason services inflation, a key metric for the Federal Reserve, has been so sticky.
Wednesday’s inflation data are a key indicator of how persistent that stickiness is. It stands to reason that, at some point, consumers will try harder to hang on to their money after experiencing the fastest inflation in 40 years.
If that moment is now, it’s good news for the Fed. It has raised interest rates by 5 percentage points in the space of about a year, which is another reason to make shoppers wary of spending too much. The odds of a Fed pause in June are very high. After that, things get trickier.
An inflation rate that continues its downward trajectory, will mean the Fed will be able to pause for even longer. Chairman Jerome Powell says it’s too soon to consider cutting rates.
But markets disagree and anticipate some reversal of the past year’s hikes later this year. The death of revenge spending will determine whether that becomes an option for Powell down the road.
—Brian Swint
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Airbnb Warns Bookings Won’t Compare Favorably With ‘Revenge Travel’
Airbnb’s
cautious outlook for the second quarter sent its shares down 10% in after-hours trading. It said bookings for nights out and experiences will compare unfavorably with last year’s quarter, when so-called ‘revenge travel’ (making up for lost time) after the Covid-19 pandemic was in full force. The hosting and experiences site still expects a strong travel season.
- Earnings of 18 cents a share and revenue of $1.82 billion in the first quarter beat expectations. It was its first profitable quarter on a generally accepted accounting principles measure.
- Gross booking value reached $20.4 billion, driven by 19% growth in nights and experiences booked, compared with the same quarter last year. From the fourth quarter, the number of nights and experiences booked rose 49%.
- Airbnb said it was increasing investments in foreign markets where it wants to build market share, adding that Brazil and Germany are two of its fastest-growing markets. It also said its backlog of night bookings is 25% stronger than a year ago.
- Second-quarter revenue is projected to be $2.35 billion to $2.45 billion, up 12% to 16% from last year. But nights and experiences bookings will be lower than revenue growth for the quarter, it said. Analysts expected second-quarter revenue of $2.42 billion.
What’s Next: The U.S. is ending Covid-19 vaccination requirements for inbound international air travelers as of Friday, when the federal government’s official public-health emergency ends.
—Liz Moyer
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Biden, Congressional Leaders Meeting Again Friday on Debt Ceiling
President Joe Biden called his Oval Office meeting with the “Big Four” congressional leaders “productive,” but it ended without a deal to raise the debt limit. Biden, speaking to reporters later on Tuesday, said he wouldn’t rule out a short-term extension.
- The group said they would meet again Friday to continue negotiations. The Treasury Department and outside budget experts have said Biden needs to sign a bill as soon as June 1, to avoid a default on its obligations, which they say would trigger catastrophic economic consequences.
- Republican leaders told reporters there was little progress. Everybody just reiterated their prior positions, House Speaker Kevin McCarthy said. Senate Majority Leader Chuck Schumer said McCarthy refused to take default off the table.
- Senate Minority Leader Mitch McConnell expressed confidence that the two sides will reach a solution. “The United States is not going to default,” McConnell said. “It never has, and it never will.” House Minority Leader Hakeem Jeffries said of everyone agreeing to keep negotiating: “That’s progress.”
- The Bipartisan Policy Center said the strength of government revenue this month will materially affect the X-date between early June and early August, when the U.S. runs out of money to pay its obligations, noting a projected influx of quarterly tax receipts around June 15.
What’s Next: Biden said he is ruling out default and he wasn’t going to pass a budget that has drastic cuts in spending, especially to the clean-energy programs passed last year. If it gets down to the wire with no deal, he wouldn’t attend the G-7 meeting in Japan May 19-21.
—Megan Cassella and Janet H. Cho
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Wynn Earnings Show Fast Start to Macau Recovery
Wynn Resorts
provided more evidence a strong Macau casino comeback lies ahead as the company beat earnings and revenue estimates in the first quarter.
- The casino operator’s Macau property portfolio returned to profitability, posted adjusted Ebitda of $155.8 million, up from a $5.5 million loss the previous year, and at around 40% of 2019 levels. Its Macau operations generated revenue of $600 million, ahead of estimates of $588 million.
- “In Macau, after several challenging years, we were pleased to experience a meaningful return to visitation and demand, particularly in our mass gaming and retail businesses,” CEO Craig Billings said. He added that Wynn was “well-positioned for success in Macau’s next phase of growth.”
- Macau casino rival Las Vegas Sands also beat expectations last month on the back of the travel and tourism recovery in the region after Covid-related restrictions were lifted in January.
- The region’s recovery is only getting started. Las Vegas Sands noted that ferry capacity between Macau and Hong Kong had only reached 25% of 2019 levels by the end of March, while airport passenger volumes reached 39%, citing official travel data.
What’s Next: The first quarter reveals a strong start to Macau’s post-Covid recovery. Provided visitor numbers and travel to the region continue to grow, the coming quarters could be even better for the Macau casino operators.
—Callum Keown
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Rivian Reiterates 2023 Target of Making 50,000 Vehicles
Rivian Automotive’s
first-quarter results were mixed, but it kept its full-year guidance. Investors sent shares up 6% in after-hours trading. More important than first-quarter numbers, the electric-truck start-up expects to produce 50,000 vehicles in 2023, the same as prior guidance.
- Rivian reported an adjusted loss of $1.25 a share and sales of $661 million. The per-share loss was narrower than what Wall Street analysts expected, and the sales were slightly below expectations.
-
First-quarter results from rival EV start-ups
Lucid
and
Fisker
underwhelmed. Lucid spent about $1 billion of its cash during the quarter. Both Lucid and Fisker cut their production guidance for 2023 just as legacy auto makers ramp up their EV efforts. - Rivian had $11.8 billion in cash as of March 31, down from $12.1 billion at the end of 2022, CNBC reported. Capital expenditures for the first quarter were $283 million, compared with $418 million in the same quarter a year ago.
- Large numbers of Rivian’s orders for R1T pickup trucks, or R1S SUVs, came before it raised prices to help offset rising raw-material costs, meaning it is selling many vehicles at a loss, The Wall Street Journal reported.
What’s Next: Rivian told shareholders in a letter that its supply chain will continue being “the main limiting factor” of its output, adding that it is introducing new engineering design changes and key technologies in the second half of 2023 to “help mitigate anticipated supply-chain constraints,” MarketWatch reported.
—Al Root and Janet H. Cho
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Retailers Ramp Up Discounts to Bring Back Shoppers
Mall-based retailers are increasingly using promotions to woo shoppers back to stores, as consumers focus more on value and reconsider nonnecessities as their discretionary budgets shrink. As average tax refunds declined this year,
Walmart
and other retailers have warned that customers are feeling particularly pinched.
-
Jefferies analyst Corey Tarlowe found that discounts at
Abercrombie & Fitch,Urban Outfitters
’ Anthropologie, and
Gap’s
namesake stores and Old Navy brand increased by about 2.75 percentage points on average from last year. -
Off-price retailers in general, especially
TJX Cos.,
which caters to higher-income shoppers, will benefit from the trend. Barron’s has noted that TJX has been a long-term market-share gainer that has been scooping up customers as Bed Bath & Beyond closes locations. - Online prices fell 1.8% in April, dropping for the eighth straight month, an Adobe Analytics report said, as consumers pull back on discretionary spending. Appliance prices fell 7.1% in April from last year, its largest year-over-year drop for the segment since at least 2014.
- Electronics prices fell 11.6% in April from one year ago, and computer prices declined 15.4%. Grocery store prices rose 9.3% in April from a year ago, but have now slowed for seven months in a row.
What’s Next: Morgan Stanley analyst Simeon Gutman said price gains are moderating and promotions are trickling back in more durable goods and food retailers, with investors bracing for more bad news among more discretionary retailers such as
Home Depot,
Lowe’s,
and
Williams-Sonoma.
—Teresa Rivas and Janet H. Cho
***
Dear Quentin,
I’m afraid to bring this up with friends in case they call me a “Karen” or tell me I’m being selfish or a skinflint. Over the last 12 months, I have seen my rent go up by 25%. I’m paying $3,200 for a one-bedroom apartment. I will never be able to save for my own place. I struggle to pay off my credit cards every month. I wear dresses and, in some cases, shoes that I bought 10 years ago. I’m lucky enough to fit into the dresses, and I can’t afford to spend money on “luxury items” or “wants” anymore. My company is cutting back on staff, and I’m waiting for the other shoe to fall.
I eat out twice a week, usually on weekends, and I am constantly put out by how much it costs for a glass of wine or a cocktail with dinner. As much as a starter, if you want to ask. I went to a famous pizza joint in my neighborhood last weekend, and we had two pizzas, a shared starter, a gin and tonic, and a Negroni, and a glass of wine each, and it cost us $208. That’s $104. Plus, another $20 each for a tip. We started out going for pizza. How is this possible? My friend didn’t even eat her pizza and I told her, “You just spent $124 on a cocktail and a glass of wine.”
Given the increase in the cost of living, I’m hung up on the 20% rule. I live in a big city, and everything is expensive. You can pay $7 for a coffee. A coffee! Not tipping 20% makes you look like some kind of fascist. I tipped 15% once on a date, and the guy made some smart comment, “Oh, you’re only tipping 15%?” and I never saw him again. Cabs now cost $30 for a three-mile ride. Is it ever OK to tip less than 20%? Soon we will be tipping 25% or 30%, or more. I’m sorry for ranting, but I’m sick and tired of being guilted into tipping everywhere I go.
Am I right? Or am I a skinflint? Please enlighten me.
—Over Tipping
Read The Moneyist’s response here.
—Quentin Fottrell
***
—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner
Read the full article here
