Inflation is starting to subside, according to data released on Wednesday. But Minneapolis Fed Chairman Neel Kashkari warned that day that a recession could still occur in the “near future,” as Reuters reported.
So, which companies are best prepared to face a possible downturn?
These may not be the companies you expect. Notably, Airbnb (ABNB) could be poised to weather a recession well, analysts and business watchers told Yahoo Finance. This is counter-intuitive, as one would think consumers might cut back on travel when money is tight.
But experts point out that Airbnb can increase consumer income, an option landlords are particularly likely to explore in a downturn. Although revenues generated by Airbnb hosts vary widely, the company said last year that the average annual income of hosts who had at least one guest was $9,600.
“You have to remember, if you step back, that the company was founded during the financial crisis of 2008-09,” Oppenheimer analyst Jed Kelly told Yahoo Finance last week. “You would actually potentially see more people listing their homes or rental properties on Airbnb, increasing supply, which should improve volume.”
Benefits for hosts and guests
Some industry experts agree that while Airbnb isn’t fully recession proof, the company could hold up relatively well in a downturn. For example, Luca Zambello, CEO and co-founder of hotel technology company Jurny, agrees that there could be a massive increase in guest supply if the economy slips into a recession. If more consumers list their homes as Airbnbs, this increased supply could create more competition between rentals, driving lower costs for consumers.
“The idea of listing your home or short-term rental property as a microentrepreneur is appealing today because it gives you the incentive to earn extra money,” he told Yahoo Finance . “As more people feel the pressure of a mortgage with less income growth, they may turn to Airbnb as a secondary source of income. Customers would benefit from lower prices if there were more market availability.
These lower prices would be a welcome development as Airbnb rental rates have skyrockets as travel demand rebounded from its pandemic lows. Airbnb average daily rate for the second quarter of 2022 was $164 – a steep 40% increase over the same period in 2019, before the pandemic.
There are still possible downsides, but Airbnb looks pretty solid
While the spike in rates may discourage some travelers, M Science analyst Michael Erstad said Airbnb’s latest round of revenue was fundamentally encouraging. “Things were pretty healthy,” he told Yahoo Finance.
Still, analysts have lingering concerns with the company. While Airbnb reported strong results last week, meeting analyst expectations for revenue and slightly exceeding them for earnings per share, the number of bookings was lower than expected. The number of nights and “experiences” (visits and events organized via Airbnb) booked amounted to 103.7 million actual against 106.1 million expected.
If there is a dramatic recession, there is always the possibility that American consumers will reduce their travel. This happened during the last major downturn.
As the Great Recession hit the economy beginning in 2008, consumer travel spending fell sharply, according to data from the Bureau of Labor Statistics. published in 2012. Even in 2011, travel spending was still below its 2007 peak. However, if a recession were to officially occur, history might not repeat itself this time around. The reason is simple: COVID-19, which has kept consumers home for so long. Even if money is scarce, it is quite possible that consumers will continue to favor going out and visiting family.
There is evidence that people spend money on travel even in the midst of historically high inflation. Even though travel has been far from easy this summer, it’s still where people spend money. The United States Travel Association reported August 4 that travel spending exceeded 2019 levels for the third consecutive month in June.
“Global travel declined during the last recession, which would likely affect customer demand,” Zambello said. “However, many believe the pandemic has created so much pent-up demand that people will continue to travel regardless.”
If we land in a recession, Airbnb’s rates will also be tied to the severity of that downturn, if it occurs, Erstad added.
“I generally buy into the narrative that if things get tougher for the consumer, some landlords might consider renting a vacation home they never really wanted to rent before,” he said. “While it’s a bit difficult to quantify, I can see inventory coming online from this momentum.
Allie Garfinkle is a senior technical reporter at Yahoo Finance. Find her on Twitter @agarfinks.
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