Today, Airbnb is going public after a phenomenal rise in IPO stocks over the last two years. This company goes public as a groundbreaking innovator that has driven a major culture shift in how consumers travel. And, they do so in such a unique fashion, leaving investors attempting to compare Airbnb against Expedia, Booking, Marriott, or Hilton — when in reality, none of these companies can compare or really compete with Airbnb.
It’s truly a unique company and should be treated as such.
Let’s talk about the reasons for which it’s unique.
For one…
Unlike Hilton or Marriott, Airbnb doesn’t actually own any property. That means no walls to paint, no property taxes, no worries over natural disasters or regular upkeep. This matters because their margins are higher, and as they invest in their business and continue to improve their product, these margins will only grow over time.
I believe the Airbnb phenomenon began with millennials.
As a travel-loving millennial myself, my generation entered adulthood with a thirst for knowledge and a love of exploration. Of course, being broke and just out of college, traveling via plane and staying in expensive hotels without so much as a fridge wasn’t a possibility. But, low and behold, came Airbnb.
Suddenly, my siblings and I could split the cost of an entire house, buy groceries in addition to our own drinks (which massively cuts down on travel costs), and afford regular vacations, while all staying together. My brother used the Airbnb method to travel to Europe after he graduated from college. My sisters and I have stayed at various Airbnb’s all over the place: California, Hawaii, Floria, Texas, and more. I’ve even chosen Airbnb to travel with my family in our new home state of Texas.
Now, while demand may have initially been driven by the above factors, there’s more that’s fueled it.
The Unique Value Proposition:
Let’s talk about the unique value proposition.
You can’t go to Expedia.com and rent a modern treehouse for adults, an igloo, or specific themed locales. Prime example? I once rented a Disney themed Airbnb along with my entire family to take my son to Disneyland for the first time. My son got to sleep in a room with pirates painted on the wall, and we could all cook dinner together in the kitchen and then dip in the hot tub during the evening.
Not only are travelers loving the freedom of getting away from the cookie-cutter hotel layout, but there’s also just so much more possibility in the range and scope of properties Airbnb has available.
What about the pandemic?
Investors love to argue this point. Yes, sales have been down this year due to the pandemic. But, relative to travel overall (airliners, hotel chains, trains) I’d argue that Airbnb continues to have more demand than the rest of the sector. Due to the pandemic, people want to stay closer to home, explore their own cities and states — without getting close to others. What better way to do that than by venturing to a private Airbnb? I tried booking lakeside Airbnb’s all summer in Texas… they were completely sold out. Not so for hotels.
I believe that those who love travel are going to continue to travel (safely) and will be far more likely to do it via Airbnb than Marriott or Hilton anytime soon.
Even with the vaccine, when (and if) things ever return to normal, consumer behavior has shifted so dramatically, I see the pandemic effects of being largely positive for Airbnb. Millennials already preferred Airbnb’s before the pandemic. Do you think Generation Z is going to even consider traveling via hotel? I don’t. Why sleep next to your friends in two double beds when you can each have your own room, a kitchen, and a yard for less? (And, don’t even get me started about traveling with kids.)
How many times have you taken your family on vacation to sleep in the same room as your kids? Once Airbnb became popular, there was absolutely zero need to do that ever again. I don’t know about you, but for me, a vacation is not quite a vacation if my son is sleeping five feet away from me and my husband while we try to whisper after 8 pm.
Airbnb Trading-Wise:
So as you could probably guess…
I’m very bullish on Airbnb, particularly on a 5-10 year timeframe.
But of course, please note that with any company (especially an IPO) we don’t have any data as far as how the company will trade, nor do we truly know what the next 5-10 years will bring. I think the biggest risk here is potential regulations that cities and states could put into play. But, at this time, we have no idea what they could be.
The IPO market has been hot — but notice, the hottest companies are those that had potential before 2020 took a match and lit the fire ablaze.
Airbnb is like Peloton, Zoom, and Chewy — in the way that it’s a unique company, a leader in its space, has clear brand recognition, a loyal customer base, and has the potential for explosive growth due to the pandemic. When ZM, PINS, and SPCE held their IPOs, we talked about those as well. So far, they’ve been right on track. What do you think the next 2-5 years in Airbnb will bring?
Waiting for the option chain and may entertain LEAPs as far and as cheap as we can go. Retail traders completely unable to get a decent “entry” on IPO day, so we will take the wait and see approach for a bit.