While Airbnb has done better than most of its competitors in the pandemic, it still faces a challenging road ahead.
The world’s largest hospitality company is going public in December—in the midst of a pandemic that has crippled the global travel industry.
Online lodging-rental marketplace Airbnb is surviving—and almost thriving—in what’s been an exceptionally challenging macro environment of global lockdowns and the collapse in travel caused by the coronavirus.
Granted, in the first nine months of 2020, the company’s revenues fell by a sharp 32%. But that isn’t so bad compared to traditional hospitality-industry titans such as Marriott and Hilton, which have seen revenues collapse by approximately 75% this year. The top lines of online travel-booking companies Expedia and Booking.com, meanwhile, have fallen by roughly 50%.
In the third quarter, Airbnb already showed strong signs of recovery. Revenue was down by a comparatively modest 18% from last year, as the company pivoted to appeal to customers looking for “staycations” close to home.
And in the third quarter, Airbnb turned a $219 million profit. That’s thanks, in part, to the quick response to a rapidly changing travel industry environment by CEO Brian Chesky earlier in the year, when he cut a quarter of the workforce and refocused the company on its core business.
Airbnb—to be traded under ticker symbol ABNB—is reportedly aiming to raise around $1 billion, for a preliminary target valuation of $30 billion. The company was valued at the same level by private investors as of late 2019.
With around 7 million accommodation options on its platform, Airbnb is twice as big as hotel chains Marriott, Hilton and InterContinental combined. Unlike traditional hospitality companies that own their accommodations, individuals who post their properties on the Airbnb platform are the owners. That makes expansion cheaper and easier. And when the travel industry contracts, it means Airbnb doesn’t have to pay to maintain tens of thousands of empty rooms.
While Airbnb has done better than most of its competitors in the pandemic, it still faces a challenging road ahead. Despite posting a profit in the third quarter, the company posted a nine-month net loss of nearly $700 million, on revenues of $2.5 billion. Even before the coronavirus, growth was slowing—and the timeline for the recovery of the global travel industry is likely to be extended. Meanwhile, many cities around the world have started to regulate short-term rentals, which may hurt Airbnb’s growth in the future.