🏨 Can Airbnb Create More Room For Growth?
Disney hikes prices.
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🏨 Airbnb: Room For Growth?
Homestay’s operator Airbnb Inc. (ABNB) reported record revenue for 2021. This, despite two significant Covid-19 waves. The guidance for 2022 also paints a pretty picture. With shares not having done much over the last 12 months, is it finally time for them to take off? (Tweet This)
Goodwill All Around!
Marketing costs were slashed by $1B, executive pay cut in half, and focus returned to its bread and butter - home rentals. Ancillary offerings such as traditional hotel and luxury property listings were streamlined. It also made a nice gesture to its guests. In the face of a slew of cancellations at the last minute, the company issued full refunds, no questions asked.
Transparency was also big on the company’s agenda. With enhanced cleaning procedures and requesting hosts to increase the time between guest stays, Airbnb tried to instill confidence as people slowly started venturing out.
All these measures, however, came at a cost. For example, Airbnb laid off a quarter of its workforce or nearly 2K employees. Still, employees were allowed to keep the company-issued laptops as part of the severance. US-based employees also received a year of health insurance.
This goodwill was much-needed as the company prepared to go public. The sizzling IPO market made Airbnb the largest IPO of 2020. Airbnb sold shares at $68 apiece, much higher than the initial range of $45-$50. The IPO valued the company at $47B and raised $3.5B.
Shares zoomed to an all-time high of $218.78 within two months of the IPO and spiraled down to a 52-week low three months later. Even as the Delta and Omicron variants took the world in a tailspin, Airbnb reported record revenue and profit in Q3 2021.
Perhaps, seasonality was at play here, as the company had reported profits both in Q3 2020 and Q3 2019 when it was a private enterprise. Quarters other than the third saw losses.
Can The Gains Check-In?
Q4 results managed to beat street estimates. But revenue and profits were lower than the record levels in Q3, courtesy of Omicron.
Key Highlights From Q4:
Revenue: $1.53B Vs $1.46B expected
EPS: $0.08 Vs $0.03 expected
Gross Booking Value: $11.3B Vs $11.08B expected
For the year, Airbnb reported revenue of $6B, a growth of 77% year-on-year. However, the company is yet to turn profitable on an annual basis. Net loss for 2021 stood at $352M, narrower than the $4.6B loss in 2020 and $674M loss in 2019.
Remote working meant people could move to a location of their choice and continue to work from there while staying for an extended duration. As such, long-term stays of 28 nights or more continue to be the fastest-growing category for Airbnb.
Hosts joined the party by raising prices for their services with average daily rates in Q4 clocking $154, up 20% Y-o-Y. Active listings were the highest ever in Q4, with Latin America leading the pack, followed by North America and the EMEA.
For Q1, the company forecast revenue of ~$1.44B, lower than both Q4 and Q3 but higher than analyst estimates of $1.24B. Average Daily Revenue is expected to be 4% higher than Q1 2021 levels. Airbnb expects to turn EBITDA positive in a Q1 for the first time.
Rising inflation in the US may mean more homeowners flocking to Airbnb to list their properties to supplement their income. Even so, some of the localities have imposed restrictions on properties within their jurisdiction in terms of listing on Airbnb.
For instance, New York City Council passed a bill in December making it illegal to rent an apartment in a building with three or more units for less than 30 days. Other destinations have insisted on mandatory licensing or have otherwise limited Airbnb’s entry into a given neighborhood.
All said and done, Airbnb's shares have lost 8% in the past year. Since the IPO, shares have been up 30%. The business cycle seems to be looking up with all the positive commentary even as competition and regulations remain on its heels. Nevertheless, Airbnb seems to be adding more rooms than ever as it focuses on being consistently profitable.
Market Reaction
ABNB ended at $174.90, down 4.74%.
Company Snapshot 📈
ABNB $174.90 -8.70 (4.74%)
Analyst Ratings (35 Analysts) BUY 43% HOLD 49% SELL 8%
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7:00 PM IST: Producer Price Index
Today's Market Terminology: Operating Profit (Or Loss)
A firm's operating profit or loss is the revenue from its regular activities minus costs and expenses before income deductions
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