Dhe apartment broker Airbnb is going public in the midst of a pandemic with severely restricted tourism activities and is then faced with such high demand for its shares that the price range was even raised again before the IPO. Why is the company, valued at around $ 42 billion, showing such impressive resilience despite the rampant pandemic that has hit the travel industry in particular? An analysis.
The decisive ingredients for the success of the former start-up are its offer and its host community. Airbnb stands for the “sharing economy” of the future. Rather than settle for a hotel in a sterile tourist area, Airbnb lets travelers enjoy real life in any neighborhood, run by local hosts – around 30 percent cheaper on average than a hotel. Without question, Airbnb has built a leading brand for itself. It takes a vision, not just a business model, to capture the hearts of consumers. In times of Google and the corresponding search algorithms, the brand is one, if not the decisive component for success. Because travel planning almost always starts with finding accommodation, and this fact makes Google the most valuable player in the travel industry. In 2019, for example, the marketing expenses of the Booking.com and Expedia portals on Google alone were over eleven billion dollars. And that after CEOs made reducing reliance on Google a strategic imperative.
Airbnb is the only travel company that doesn’t have to rely on Google. Two thirds of customers come directly to Airbnb – a significantly higher proportion than the rest of the industry and thus a decisive advantage. The power of these consumer relationships was especially evident in the pandemic. When bookings worldwide crashed, Airbnb cut its marketing spend. Nevertheless, the search queries remained largely constant. Customers came to Airbnb directly instead of through paid campaigns.
Any progress in the fight against Covid-19, and in particular potential vaccines, their approval and ultimately administration to the masses of people are a boon for the entire travel industry, including Airbnb. A commitment to the share is therefore also a bet on the end of the pandemic. The company estimates the size of its total addressable market at a whopping $ 3.4 trillion. Due to this incredible market size, Airbnb’s current rating also seems moderate at first glance. With a company valuation of over $ 40 billion, the stock is no longer a bargain, even when you consider that a financing round three years ago generated a valuation of $ 31 billion, while in the midst of the pandemic, when Airbnb was in dire need of money, it was only were still 18 billion euros. In the long term, Airbnb still has a good chance of becoming a success story on the stock exchange.
However, the legal disputes that Airbnb is leading could cause difficulties in the future. Renting your own apartment has largely normalized thanks to Airbnb, but from a legal point of view, this is still a gray area. The powerful hotel lobby continues to aggressively persuade local authorities to put strict regulations in place against this type of home rental. Some homeowners, landlords, and house associations are also trying to ban Airbnb’s services. Should a court decision be made against Airbnb here, the business model would be wasted and the valuation would prove to be the smallest problem for the Airbnb shareholder.
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