Airbnb used its IPO prospectus to described the travel industry of “offering standardised accommodations in crowded hotel districts”.
The platform, which has yet to put a price on its listing, said it had identified a market worth $3.4 trillion, including $1.8 trillion for short-term stays, $210bn for long-term stays, and $1.4 trillion for experiences.
Airbnb said: “Travel is one of the world’s largest industries, and its approach has become commoditised. The travel industry has scaled by offering standardised accommodations in crowded hotel districts and frequently-visited landmarks and attractions. This one-size-fits-all approach has limited how much of the world a person can access, and as a result, guests are often left feeling like outsiders in the places they visit.”
The group said that it intended to use the proceeds of the IPO for general corporate purposes and investments, although have not, at this point, committed to any deals.
Looking at performance during the pandemic, Airbnb said that, in early 2020, as Covid-19 disrupted travel across the world, business declined “significantly”, but had started to rebound within two months, even with limited international travel.
It added: “People wanted to get out of their homes and yearned to travel, but they did not want to go far or to be in crowded hotel lobbies. Domestic travel quickly rebounded on Airbnb around the world as millions of guests took trips closer to home. Stays of longer than a few days started increasing as work-from-home became work-from-any-home on Airbnb. We believe that the lines between travel and living are blurring, and the global pandemic has accelerated the ability to live anywhere.”
Airbnb drew attention to the likely impact of the pandemic on supply growth, commenting: “Just as when Airbnb started during the Great Recession of 2008, we believe that people will continue to turn to hosting to earn extra income. We believe that as the world recovers from this pandemic, Airbnb will be a vital source of economic empowerment for millions of people”.
It added: “Our hosts largely come to us organically with 79% of our hosts coming directly to our platform to sign up to host in 2019. In 2019, we added more hosts than any year in our history with 23% of our new hosts first starting out as guests on Airbnb.”
As of 39 September Airbnb had over 4 million hosts around the world, with 86% of hosts located outside the US. There were 7.4 million available listings of homes and experiences as of 30 September of which 5.6 million were active listings ie have been previously booked at least once on Airbnb.
The group reported adjusted Ebitda of $60.0m, $170.6m, $(253.3)m, and $(230.2)m for the years ended December 31, 2017, 2018, and 2019 and for the nine months ended September 30, 2020, respectively.
Gross nights and experiences booked contracted on a year-on-year basis, with a low in April 2020, down 72%. From April through June 2020, there was rebound in gross nights and experiences booked before cancellations and alterations, down 21% in June against 2019. From July through September 2020, gross nights and experiences booked were stable, down approximately 20%.
Airbnb has incurred net losses in each year since inception; $70.0m, $16.9m, $674.3m and $696.9m for the years ended 31 December 2017, 2018, and 2019, and nine months ended 30 September, 2020, respectively. The group’s accumulated deficit was $2.1bn as of 30 September.
Professor John Colley, associate dean at Warwick Business School, said: "Airbnb’s proposal to list on the Nasdaq comes as little surprise in view of the current enormous valuations accorded to anything ‘tech’. Asset prices continue to balloon as cash seeks to find a home with high growth rates.
"Despite a couple of very difficult years for Airbnb, there is clearly a concern that the ‘bubble’ might be missed if Airbnb were to wait for better results. Indeed market valuations are a consequence of growth rates rather than any likelihood of consistently making significant profits, ask Uber, Lyft and many others.
"However, the risks are significant. Airbnb still makes substantial losses after 12 years and was effectively rescued from Covid in April 2020 with $2bn from private equity. Clearly the backers are looking for a rapid sell out and profit.
"Airbnb has been spending significantly to increase growth rates ahead of the IPO and attempting to reduce the criticisms in relation to safety, fraud and product descriptions.
"Airbnb continues to face competition from Booking.com, Expedia, Google and a host of others in what are becoming very competitive markets. Future growth is likely to be narrow margin with head on competition from Expedia and Booking.
"There are also governance issues with the three founders requiring 20 votes for each of their shares against 1 for subscribing shareholders. Weak governance often results in badly run business. Certainly the non founder shareholders will not have much of a voice.
"No doubt the IPO will be a success in view of the current investor appetite and the fact that Airbnb is nearer to profit than many recent and current IPOs. However shareholders may well find the future a turbulent ride."
Insight: Turbulent or not, much like the pricing, remains to be seen. After many a long year of having Airbnb in the marketplace, hotels can at last take a look at what’s been nibbling into their business and who is opening up their sofa/futon/hammock to the travelling masses.
There were no specifics on how many professional hosts were involved on the platform, but some glimmers. Airbnb defined hosts as: “Individual hosts are those who activate their listings directly on Airbnb through our website or mobile apps. Professional hosts are those who run property management or hospitality businesses and generally use application programming interfaces to list their properties on our platform.”
As of 31 December 2019, 90% of hosts were individual hosts, and 79% of those hosts had a single listing. And as of 31 December last year 72% of nights booked were with individual hosts, out of 327 million nights, putting 92 million nights in the hands of what Airbnb considers to be professional hosts. If you consider that Marriott International’s total inventory as of the same date was 1,380,921 rooms, that’s a chunk of overnight stays in the hands of Capitalist Others - or almost 67 nights of full occupancy across Marriott’s estate, if you ignore those non-professional hosts who go direct.
The question for hotels remains whether those guests really would have stayed at a Marriott International property or not. From what we saw over the summer, the attraction of the sharing economy - but without any actual sharing - was great. Marriott International used its results to confirm that it was talking to developers to add inventory in resort markets which would attract the “whole home” consumer. The niche is getting bigger.