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Market Views

Why investing in Airbnb might be worth it

Nairametrics reviews the fast-growing startup, Airbnb amid concerns it has regulatory and competitive risks.

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Airbnb plans $30 billion IPO valuation

Airbnb, the biggest and most popular vacation online rental marketplace, known for disrupting the hospitality industry, is preparing for its initial public offer in the coming days as the long-awaited listing would be on the Nasdaq under the ticker symbol ‘ABNB’.

Airbnb has become a household name amongst millennials and a growing middle-class population as it has changed the hold big hotel businesses had on the accommodation industry, leading hotels to reform their business strategies.

Nairametrics decided to review the fast-growing start-up amid concerns it had regulatory and competitive risks.

Though Airbnb’s seeming entry into the public market looks new, the business has built a consistent pathway of generating impressive revenue, that its closest rivals (Bookings, Expedia) would turn green at.

  • Last year alone, Airbnb’s gross bookings earnings of $38 billion were 35% that of Expedia and 39% of Booking Holdings Inc, and its kept the momentum fired up, that it closed it amazingly to 62% and 64%, respectively, when taking to account the recent year to date periodicity.

Airbnb on its retention recipe

Some stock experts have been wary of such performance reoccurring amid the bias that the COVID-19 pandemic has slowed the movements of business travelers’ from one point to another, still Airbnb believes it has the retention recipe in keeping its customers on its platform.

“69% of our revenue in 2019 was generated from stays in that year by repeat guests, defined as guests with at least one prior booking, up from 66% in 2018 and 62% in 2017,” the company said in its S-1 filed earlier this week.

“We believe the guest revenue retention of our community is higher than the customer retention of OTA distribution platforms in the United States, based on available third-party credit card data.”

Still, a significant number of stock analysts seem to be excited about Airbnb, evolving its business model around cryptocurrency and blockchain technologies, on the bias that the company has deemed such platforms as integral to its future success.

Airbnb on the role of emerging technologies

In its recently released prospectus filed to the US Securities and Exchange Commission (SEC) for its long-awaited IPO, the company gave an in-depth insight on the role cryptos, blockchain will play.

“Our future success will also depend on our ability to adapt to emerging technologies such as tokenization, cryptocurrencies, new authentication technologies, such as biometrics, distributed ledger and blockchain technologies, artificial intelligence, virtual and augmented reality, and cloud technologies.

“As a result, we intend to continue to spend significant resources maintaining, developing, and enhancing our technologies and platform.”

A key advantage sighted in Airbnb’s business model, similar to what is seen in Google is that most of its customers’ on Airbnb’s platform enjoy the user experience and amazing brand synergy, leading many to believe the largest online home rental company doesn’t need a huge advertising budget to succeed, taking into consideration that its brand loyalty does the heavy burden of marketing and generating loads of direct traffic.

Airbnb on future revenue

Airbnb in its recent filing acknowledged the huge challenge the tourism, hospitality sectors face in overcoming COVID-19. It says:

bitcoin train

Our future revenue growth depends on the growth of supply and demand for listings on our platform, and our business is affected by general economic and business conditions worldwide, as well as trends in the global travel and hospitality industries.” 

Binance

Not forgetting the significant regulatory risk to the online vacation company faces, on the bias that some large cities around the world, have recently embraced curbs on short-term vacation rentals.

What you should know about Airbnb

  • Airbnb is an online marketplace that allows individuals to let out their apartments or spare rooms to intended guests, at prices often lower than hotels.
  • Airbnb makes a cut of 3% commission of every booking from those individuals listing their apartments on Airbnb’s platform, and between 6% and 12% from guests that book via its platform.
  • Airbnb estimated at over $35 billion valuations, but it’s within the striking distance of a leading hospitality brand, Marriott International Inc, valued at $43 billion and about almost the same as Hilton Worldwide Holdings Inc.
  • Such valuation would come to question on the bias that the prevailing environment is looking inconducive for the hospitality business amid an era of COVID-19 and taking into account that the company is already feeling the pinch, as it cut 25% of its workforce, reduced salaries and marketing budgets, leading some analysts into curbing much room for its stock upsides when it goes public.

Bottom-line

Airbnb IPO would no doubt be one of the most important IPO debut this year, but its lasting role in the hospitality industry would be decided by its investors and how it handles the pandemic-stricken environment.

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Olumide Adesina is a France-born Nigerian. He is a Certified Investment Trader, with more than 15 years of working expertise in Investment trading. Follow Olumide on Twitter @tokunboadesina. He is a Member of the Chartered Financial Analyst Society.

1 Comment

1 Comment

  1. Joseph Adepoju

    December 6, 2020 at 4:23 pm

    Is there any Nigeria trading platform where I can find it when it’s finally enlisted?

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