Airbnb - ABNB - Share Chat

I love AirBnB however with my investing hat on there is considerable political risk (similar to Uber). It’s a fantastic product (like Uber) but governments in the developed world are becoming more strict on rules

Contrary to Uber, they are truly a global company without any strong competitors (vs Lyft and all other local competition).

Let’s see the numbers!

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I second that sentiment.
They were already profitable pre-corona. But I expect this year’s results to be very loss heavy.

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The CEO of Airbnb did a fantastic appearance on the brilliant Recode Decode podcast. It’s well worth a listen for anyone unsure about the company.

I’ve always been against it. I think it’s exploitative, a disaster for independent hoteliers, detrimental to proper town planning & zoning efforts, a nightmare for people who have to live next door to the properties, a pain in the arse for inflating property prices and helping property barons expand their portfolios even more (hurting millennials and upcoming zoomers) and generally just a horrid company.

That said after listening to this, they also appear to be highly adaptive with a good vision for the future. As always with American podcasts, it’s best listened to at 1.5x speed… why do they talk so slowly?!

Airbnb CEO Brian Chesky returns to Recode Decode to talk with Kara Swisher about how the company is “going back to [its] roots” after the COVID-19 pandemic delayed its IPO; the future of travel and hospitality in a world with way fewer people taking airplanes; and how Airbnb tried to “lead by example” in its severance payments and benefits to laid-off employees. Chesky also talks about the delay of projects such as a previously-announced flight booking program, why fewer people will work from only one city when their lives get back to normal, and why raising $2 billion in debt was the right move for the company when everything was on fire.

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Yep not doubting AirBnBs competitive advantage and current moat. It’s just they’re ruffling feathers in some countries facing similar obstacles Uber had with governments

I’m hoping for Airbnb to be added when it’s floated on the stock market

Yeah that sounds like a great idea

They have mentioned some sort of IPO list on the app recently. There’s more airbnb info here: Airbnb - $ABNB - Share Chat - #32 by engineer

Yeah, would be great if Freetrade can list this when it goes live. They seem to like adding stocks in bulk, so always miss out on these hot IPOs…

I’m hoping for Airbnb to be added when it’s floated on the stock market

Hey Cal, we’ll do our best to have Airbnb available on your app ASAP when it IPOs! :house:

@Top2020 For sure, we have managed some on the IPO day this year and definitely do want to add as many more new ones as we can when they go live.

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With the upcoming floating of Airbnb onto the market, will we be getting access to the shares when it hits? It would be a fantastic long term growth hold and if you guys got it onto the app when it hits the market it would really benefit users.

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https://community.freetrade.io/t/2020-ipo-tracker-when-will-airbnb-snowflake-palantir-doordash-go-public/24300

They’ve said it will be available :+1:

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Not surprised. Airbnb is cheaper, more comfortable and safer in this environment.

Brilliant! Cheers!

S-1 filing incoming any minute now, we’re hearing…

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Here is the S-1

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2019 saw several big US tech IPOs, like Uber, Pinterest and Lyft, plus many others which you can find on our app.

Looking to 2020’s crop of potential tech IPOs, and perhaps the most eagerly anticipated of all, Airbnb, will likely go public this year.

In our latest company deep dive, we’re looking at the public prospects of one of the most valuable Silicon Valley startups in the world.

Who are they?

Founded in 2008 by designer Brian Chesky and his friends, Airbnb is a San Francisco-based travel tech business.

What do they do?

Airbnb provides a platform for individuals and companies to rent out homes, rooms and other properties on short-term lets for vacations or other stays.

Airbnb has listings in about 190 countries and more than 81,000 cities.

Over the last couple of years they’ve expanded their remit to cover more than stays by starting to offer special tours and activities called ‘Experiences’ and launching partnerships, such as their restaurant reservation integration.

Analysis

One of the most surprising things for a lot of Airbnb fans is that, as a pure idea, it wasn’t that innovative. Platforms like HomeAway and VRBO were already in place to allow homeowners to moonlight as innkeepers.

Driven by a Eureka moment when the cash-strapped founders rented out an air mattress on their apartment floor, Airbnb’s big shift was to strip out the formality and offer a real taste of urban life.

Their version of an existing idea, slightly re-tweaked, had a new resonance during the lean years after the financial crisis and the birth of the sharing economy. Airbnb certainly benefitted from good timing.

Airbnb were also able to tap into the new cultural longing for authenticity and the vogue for meaningful travel instead of ‘shallow’ tourism. Airbnb promised that you didn’t just have to rent a villa or book a hotel, you could live like a local. In the age of Instagram, this proposition suddenly had a lot of appeal.

So Airbnb’s defining attributes:

  1. Informality
  2. Authenticity
  3. Tech company credibility
  4. All wrapped up in sleek, modern platform design and branding

The fact that the company’s big differentiator was rooted in brand and experience design, rather than tech or business innovation, is less surprising when you reflect that Brian Chesky and the rest of the founding team were originally designers.

Now, Airbnb has come a long way from its streamlined sharing economy origins. The original proposition of crashing in a host’s spare room is just a fraction of their current offering.

Just as Uber expanded from Friday night limo rentals to a sort of omni-mobility, Airbnb now provides access to every conceivable vacation destination: genuine spare rooms, short-term rental flats intended to live on the platform permanently, luxury villas, bed and breakfasts, and even good, old hotel rooms.

Their recent acquisition of last minute hotel rooms app HotelTonight is a neat indication of their growing product sprawl.

They have more scale than ever, pretty healthy financials for a tech startup (as we’ll see below) and they’re arguably the coolest brand in travel.

However, this transition from nimble room-sharing startup to travel titan has also brought new challenges. Let’s dive in!

The numeros

First, let’s have a peek at the numbers. Like many startups, solid financial results for Airbnb are scarce on the ground, but we’ll work with what we have.

Airbnb’s last financials for 2017 showed the following:

  • 2017 Revenue $2.6B
  • 2017 Profit $90M+

Stats from 2019 released by the company include:

FYI, that private valuation is based on the value in stock paid to the owners of HotelTonight when Airbnb acquired them, rather than a direct cash injection. The last VC rounds in 2016 and 2017 saw the company valued at $30B.

Speculation continues on the IPO price but we would expect a significant bump up from $30B to make those VC rounds worth it.

For comparison, Expedia Group generated roughly $11B revenue in 2018, $902M profit and is valued around $17B.

Booking.com, the largest travel conglomerate, is worth a staggering $80B, with net profits at around $2B for 2017.

So then Airbnb is a profitable unicorn, albeit not yet as profitable as its veteran competitors. What are the positives?

Incredible brand

Airbnb have successfully built arguably the most compelling brand in travel. “Getting an Airbnb” is synonymous with holidaying in private home, even though other options exist. Chesky and co’s design chops are evident from the booking experience to their community of hosts.

While online travel services can often be ugly, commoditised and focused on prices and availability, Airbnb has created a quality online experience to reflect the actual experience of an ideal vacation: smooth, easy and fun.

Their extension into Experiences is primarily a business innovation, driven by commercial gain, but it’s also perfectly aligned with their ‘live like a local’ proposition.

Could they own an end to end travel experience?

There’s been speculation since 2016 that Airbnb would launch a flights offering and with last year’s arrival of Virgin America ex-CEO, Fred Reid, as their Global Head of Transportation, it looks like this’ll be taking off soon.

As the big travel search groups know, while margins are negligible, there’s huge strategic advantage in offering flights booking as holiday planning often begins by organising the transportation to get you there. This could potentially come through a partnership with a big flight aggregator, rather than a full in-house build.

If Airbnb can nail their transport offering in a more transparent, attractive user experience than the current aggregators, they could well grab significantly more market share.

While Airbnb may look like a gleaming opportunity full of promise, there are some significant caveats.

Regulatory pressures

While Airbnb has faced less scrutiny than, say, Uber, officials from cities across Europe and the US have started to decry the platform.

Activists and officials argue that Airbnb is damaging local communities by creating a deregulated accommodation sector and incentivising property owners to rent to vacationers rather than local communities. Regulation tends to be passed on a city by city basis, rather than countrywide. More cities than ever have passed regulations limiting the platform’s operations.

This may have helped instigate Airbnb’s embrace of more traditional accommodation options.

It’s worth mentioning Airbnb’s competitors also face a regulatory burden over non-transparent selling practices. However, Airbnb’s regulatory struggles will likely generate more controversy and political pressure.

Slowing growth

Airbnb’s growth over the last couple of years has been slowing down and possibly even plateauing. In this report from Morgan Stanley, the researchers found that the proportion of travellers using Airbnb had increased by only 2% (to 27%) and 3% (to 25%) in 2018 and 2017 respectively. In 2016, that increase was 8% - from 14% to 22%.

That comes in the context of increased competition, as well as a potential ceiling in consumer demand for the sharing model.

In a sense, Airbnb could be the victim of their own success. They grew so fast and popularised their niche so quickly, that they may have already entered a new stage of company maturity.

Powerful, savvy competition

When it launched, despite the existence of competing services, Airbnb positioned itself as offering a completely new product to the travel giants. Now, Airbnb is increasingly in direct competition with the travel incumbents. And unlike incumbents that many startups face, Expedia, Booking and Ctrip (the online travel agency giants) are no slouches.

Airbnb’s competitive pressures basically condense down to this:

  • As Airbnb expand into hotels and villas, they have to compete with the global incumbents, with significant hotel inventory
  • As these incumbents enter the personal rental vacation market, Airbnb have to compete on this too

Airbnb is trying to take Booking and Expedia’s lunch by offering hotel rooms, but the competition are returning the favour.

Expedia’s acquisition of HomeAway, a pre-Airbnb demonstrates their willingness to hit Airbnb quite literally at home. In the Morgan Stanley report, the researchers mention that while consumers still currently see distinctions between Airbnb and the travel giants, they expect those lines to blur.

Their analysis suggests that all platforms and dominance will come down to inventory and scale. Airbnb have the lead on private inventory, but the big sites have far more hotel rooms.

It’s arguably harder for the established companies to build private inventory than for Airbnb to build hotel inventory. Ironically, Airbnb feeder companies like Airsorted and HelloGuest which offer property management for Airbnb hosts, will also potentially funnel those hosts to their competitors too.

Whereas Airbnb previously stood out by offering a distinct experience, by competing for more of the travel market, Airbnb may risk losing what made them special. And their competition are also trying to take what has previously made them unique and turn it into a market standard.

To sum up

Airbnb has seen meteoric growth since 2008. The challenge for Airbnb as a startup was clear: can they use an awesome brand, superior UX and a cultural moment to popularise a new way to travel? The answer was a resounding yes.

The big question for Airbnb as a public company is can they now leverage that awesome brand, as well as superior UX, to expand out of that niche and outcompete in a ruthless, competitive and saturated travel sector?

If you look at Airbnb as a Silicon Valley unicorn, it’s probably one of the most well-run, financially sound examples out there.

If you consider it as another travel tech company, at $35B+ IPO valuation, it may already be too expensive compared to its peers.

Freetrade does not provide investment advice and individual investors should make their own decisions or seek independent advice. The value of investments can go up as well as down and you may receive back less than your original investment. Tax laws are subject to change and may vary in how they apply depending on the circumstances.

What are your thoughts on the upcoming Airbnb IPO? Let’s continue the discussion in the comments thread. :speech_balloon:


Freetrade does not provide investment advice and individual investors should make their own decisions or seek independent advice. The value of investments can go up as well as down and you may receive back less than your original investment. Tax laws are subject to change and may vary in how they apply depending on the circumstances.


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Excellent again :+1: look forward to seeing them in the Freetrade app

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