Airbnb Surges Ahead
Better book your summer vacation this year right now as home-sharing rental platform Airbnb (ABNB) revealed growth surpassing pre-pandemic performance and global travel is back with vengeance.
It’s highly likely that travel restrictions continue to fall by the wayside, opening up what could become the most furious travel season in the history of the human race.
This has spurred consumers to book their summer vacation rental many months in advance and it appears that no amount of supply will satisfy the summer travel season of 2022.
People have been dreaming about international travel for the past 2 years.
Airbnb has capitalized from their position as the nimble option, along with not having to provide the hardware to the final product.
They are just an internet platform that owns no houses.
Hotel companies like Marriott and Hilton have had empty hotels sitting idly while consumers choose to stay in a more rural setting for the past 2 years, within driving distances of big cities.
Another positive trend is Airbnb users choosing more expensive accommodations, which I understand with business travel reformatting itself to go straight into an Airbnb-based house or apartment.
The highest cost also relates to bigger unit sizes as home offices need to be absorbed into living situations.
Hotels have the handicap of needing to renovate their existing stock of rooms since the hotel layout is simply not as attractive as it once was.
Airbnb has a massive advantage here that will lead to margin expansion.
Customers need fast Wi-Fi, a kitchen to at least make their morning coffee, and more amenities that a personal home might offer such as a washing machine.
Even if there is another pandemic on the horizon, the work from home narrative will fortify itself for good with no back-to-office plans in sight.
Airbnb would benefit as Airbnb-hosted units are the best choice for remote workers.
I have noticed that Airbnb hosts have really improved the internet connection at their houses to adjust for the change in connectivity demand.
Airbnb has reimagined itself since the beginning of the pandemic when the company cut thousands of jobs and considered delaying its initial public offering as travel crumbled to a halt around the world.
After the initial pain, business boomed as workers no longer had to be in traditional offices five days a week and could work from anywhere.
Almost half of the number of nights booked in the fourth quarter were for stays of a week or longer and one in five were for stays of a month or more.
This validates my thesis of Airbnb being a sticky product, because they have essentially bolstered their product to perform better during a health crisis relative to competition.
Longer and more expensive stays also mean higher commissions for Airbnb.
Taking a small sample of January 2022, bookings were 25% higher than in 2019, which bodes well for the rest of 2022 as everyone I know is itching to not only travel but to spend more and to make visits to far-flung places.
Pointing to margins as another signal of success – Airbnb has increased them from minus 5% back in 2019 to 27% in 2021.
The company has explicitly said that the growth of incremental supply won’t come from institutional investors, but individual retail units that realize inflation is so bad that they need the extra $10,000 per year to supplement their life standard.
With all the positivity, it is no surprise that Airbnb’s stock has responded to this improving sentiment and shares are up 25% in the last three weeks.
I would wait for a pullback to put new capital to work in this company, but Airbnb is poised to roar ahead in 2022 if international travel opens up and mask mandates are dropped, which appear inevitable.
