Airbnb IPO filing reveals how pandemic has devastated rentals
The company says any projections for growth — including an eventual path to profitability — depend on a vaccine and the spread of Covid-19 being curbed
San Francisco — Airbnb’s long-awaited filing for an initial public offering makes the devastation wrought by Covid-19 abundantly clear, and shows how its business now hangs on domestic travel.
Since the coronavirus pandemic swept across the world in March, closing borders and grounding flights, the travel sector has suffered.
Public companies such as Marriott International and Booking Holdings grimly tallied tumbling revenue, mounting losses and mass furloughs and layoffs. Airbnb, which is a private company, had largely stayed mum on the pandemic’s effect on its business. Until now.
Airbnb highlighted in its IPO prospectus its reliance on its guests continuing to travel — just not as far as they did before the pandemic. The IPO was filed late on Monday with the US Securities and Exchange Commission.
“Against an otherwise highly negative travel backdrop, there are several areas of our business that have shown resilience, notably, domestic travel, short-distance travel, travel outside our top 20 cities, and long-term stays,” the company said in the filing. “While we believe that travel will change as a result of Covid-19, the adaptability of our business suggests that we are well positioned to serve this dynamic market as it continues to evolve and recover.”
While Airbnb’s bookings nosedived in April, people quickly grew antsy under shelter-in-place rules and took advantage of remote-work policies by fleeing to holiday rentals within driving distance of their homes.
With the pandemic intensifying in the US and Europe and a vaccine still months away from wide distribution, few travellers are likely to need their passports soon. Yet, Airbnb believes it can rely on their wanderlust — a road trip is a road trip even if it’s just up the highway.
Short-distance stays, what Airbnb describes as a stay within 80km of where a guest lives, have shown extreme resilience, according to its filing. Bookings within an 800km radius of a guest’s home have started to recover, too, it said.
Globally, domestic nights and experiences — bookings for tourism activities — made up 77% of Airbnb’s overall bookings in September, compared with 52% in January.
“Domestic travel quickly rebounded on Airbnb around the world as millions of guests took trips closer to home,” it said. “Stays of longer than a few days started increasing as work-from-home became work-from-any-home on Airbnb.”
The elasticity of Airbnb’s supply and its ability to quickly pivot to domestic travel has allowed it to fare better than its rivals.
After a rough second quarter, a surge in people taking near-term holidays elevated the third quarter to Airbnb’s most profitable ever on the basis of earnings before interest, taxes, depreciation and amortisation.
On a revenue basis, Airbnb was down 18% from the same period a year earlier, reporting $1.3bn for the third-quarter, according to the filing. Booking Holdings reported a revenue drop of 48% in the third quarter while Expedia Group Inc.’s revenue plunged 58%.
Airbnb also has fared better than the hotel industry as travellers have shown a preference for homes in secluded areas over hotels bound by strict social-distancing rules. Three out of four guests in a March survey conducted by the company said they would be more comfortable staying with their families in an Airbnb listing than in a hotel with other people, according to the filing.
Bloomberg Intelligence analyst Mandeep Singh said Airbnb’s bookings recovered much faster than its peers because “customers favoured alternative accommodation for domestic travel”.
“Covid-19” is mentioned 215 times in Airbnb’s 350-page filing. The company said it is not possible to predict the pandemic’s future impact on its business and any projections for growth — including an eventual path to profitability — depend on the spread of the virus being curbed.
As the company moves towards its virtual roadshows, investors will want to know whether domestic travel is sustainable. If people are travelling domestically in large numbers today, does that mean they will continue to do so if the pandemic worsens, and how will that change once a vaccine is available?
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.