Airbnb Inc. shares fell after the company gave a disappointing outlook for bookings in the fourth quarter, suggesting that consumer preferences are shifting away from higher cost rentals that thrived during the pandemic and back to urban and cross-border destinations. 

The San Francisco-based home-sharing platform said it expects the pace of nights and experiences booked will “moderate slightly” in the fourth quarter compared with the third quarter's gain of 25 per cent. Airbnb reported 99.7 million nights and experiences booked in the three months ended in September, falling short of analysts' estimates of 99.9 million. 

The shares fell about six per cent in premarket trading before exchanges opened in New York. The stock rose 2 per cent to close at US$109.05 in trading on Tuesday and had declined 35 per cent this year. 

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Airbnb also said it expects average daily rates to moderate this quarter due to a strong dollar and a shift in people heading back to cities, which tend to have lower rates based on smaller-sized accommodations. The company forecast fourth-quarter revenue of US$1.80 billion to US$1.88 billion, with the low end of that range below Wall Street's estimate of US$1.86 billion.

The muted outlook comes after Airbnb recorded its highest revenue and most profitable quarter yet over the summer. Revenue jumped 29 per cent in the third quarter to US$2.88 billion and the company earned US$1.2 billion in net income, topping analysts' estimates.

The third quarter had been expected to be a blowout season, as Chief Executive Officer Brian Chesky and other industry executives banked on pent-up summer travel demand after two years of COVID-19 restrictions. Indeed, travelers seemed to swarm hot tourist destinations despite disruptions at airports and flight cancellations that jacked up ticket prices. Airline companies from Deutsche Lufthansa to American Airlines and United have predicted a sustained rebound in travel from an early pandemic slump. 

Airbnb said said the average daily rate for a rental increased five per cent in the third quarter from a year earlier. The boost was entirely driven by price appreciation, the company said, which more than offset some negative impact from a shift back toward urban destinations and other bookings.

But travelers may draw a line at rising prices and some hosts are already starting to see a pullback in bookings for the rest of the year. That could be due to inflation, which is running at a 40-year high in the US, pushing prices on rentals out of reach for some, as well as the fact that there are many more hosts now on the platform than there were pre-pandemic, leading to a glut in supply. And, in some super hot markets that boomed as people took advantage of work-from-anywhere policies, hosts are starting to feel a lull. For example, demand and occupancy in Lake Tahoe sunk 20 per cent and 18 per cent in the second quarter compared with last year, according to data compiled by AirDNA.

Airbnb could also start facing renewed competition with hotels, which are now seeing more inventory come back online after the pandemic rout, Bloomberg Intelligence analysts Mandeep Singh and Damian Reimertz wrote in a note before the results were released.

In a letter to shareholders, Chesky remained upbeat. “Regardless of continued macro uncertainties, we believe we're well positioned for the road ahead,” he said. Guest demand remains strong, Chesky said, adding that longer-term stays and non-urban travel, features that helped Airbnb thrive during the pandemic, “are here to stay, as millions of people have newfound flexibility in where they live and work.” Even with more companies requiring employees to return to the office, Airbnb said nights booked for long-term stays remained stable in the third quarter from a year earlier at 20 per cent of the total.

After the pandemic years, when travelers tended to remain close to home, the number of cross-border gross nights booked increased 58 per cent in the third quarter, while high-density urban nights booked grew 27 per cent from a year earlier, Airbnb said. 

Kevin Kopelman, an analyst at Cowen Inc. said a strong performance in last year's fourth quarter, as the delta variant subsided, sets Airbnb up for a tough set of comparisons going forward.

Airbnb is the first of the major travel companies to report earnings this week, ahead of Booking Holdings Inc., which reports on Wednesday and Expedia Group Inc., owner of Airbnb rival Vrbo, on Thursday. 

Despite its strong performance over the summer, investors have been punishing richly-valued technology stocks as interest rates nudge higher and Wall Street worries about a potential recession. Shares of Airbnb have sunk about 35 per cent this year, compared with declines of about 47 per cent and 22 per cent for rivals Expedia and Booking. 

The strong dollar has also weighed on companies with international sales, from Alphabet Inc. to Amazon.com Inc. Airbnb is no different, as more than half of its revenue came from foreign currencies in the third quarter. 

Airbnb rewarded shareholders this summer by announcing a US$2 billion buyback program, which also helped to offset dilution from an employee stock program. As of the end of September, the company has bought back US$1 billion of shares.