Airbnb is worth another stay

This column is part of the Heard on the Street Stock Picking contest. You are welcome to play with us here.

In the 1993 comedy “Groundhog Day”, Bill Murray has to wake up several times on the same day to realize that tomorrow doesn’t come so soon. Online travel investors have to be faster than that.

At Thursday’s close, shares in homestay giant Airbnb ABNB -0.77%

are down 30% from their highs in February this year. They are now trading just 21% above lows seen last December amid pandemic lockdowns. This despite the fact that Airbnb bookings were already growing in the first quarter from pre-pandemic levels. And on Thursday, the company said its gross book value in the second quarter was up 37% from the same period in 2019. For investors, this represents an opportunity.

Compare these results with those of the online travel agency Expedia Group,

whose stock is now well above its trading level before anyone sees Covid-19 coming, even though it reported second-quarter bookings that were still 26% below what they were two years ago earlier. It is clear that investors are just as hungry as consumers for the status quo in online travel. Unfortunately, we are not yet out of the pandemic time loop.

Comments on Expedia’s earnings last week were upbeat but honest. The company said it has invested heavily in advertising the brand to be there for a booming travel recovery when it occurs. But CEO Peter Kern made it clear that the company “saw a decline in July”. He added that unknowns were starting to “percolate through cancellation rates and greater volatility of the numbers,” also noting “obviously we don’t know where Delta [variant] going. ”

Reserve assets,

BKNG 1.69%

also, noted last week a “modest decline” in bookings in July compared to June. While the company also said it remains confident of a possible strong recovery in global travel demand, it also said concerns about the Delta variant demonstrate “the volatility and uncertainty over the exact time and form. of this recovery “.

In its outlook on Thursday, Airbnb said it expects a combination of high second quarter bookings and higher average prices per night to generate record third quarter revenue. But he also said he expects bookings for the third quarter to decline sequentially and remain below levels seen in the third quarter of 2019 amid “a patchwork of local travel restrictions and slowing of vaccinations “. Airbnb shares fell 5% in after-hours trading after its second quarter report.

For the travel industry, uncertainty does not necessarily mean that all bets are off. The pandemic has brought new travelers to homestay platforms for the first time, while opening up new use cases such as stays in remote locations, extended stays and travel of “leisure”, or by mixing home work and leisure vacations. For Airbnb, it brought a resilience in the midst of adversity that was virtually unmatched in hosting.

At the start of the pandemic, Airbnb CEO Brian Chesky said in an interview with CNBC that his company had lost almost everything it had built over the course of 12 years in a matter of weeks. Soon after, the pandemic shook the accommodation industry, with foster families shifting from a road less traveled to a first choice for consumers. Even for online travel agents, who book everything from hotels and plane tickets to cruises, homestay has grown from a rapidly growing ancillary activity to a kind of saving grace.

Data shows that consumer demand for homestays over the summer months of last year quickly drove Airbnb back to growth in many areas. In mid-August 2020, for example, data from Edison Trends suggests spending on the Airbnb platform may have been significantly higher than the equivalent period in 2019. And in the fourth quarter of last year, Airbnb’s revenue was down just 22% from the previous year. During the same period, Expedia and Booking reported an average drop in revenue of 65%.


In what ways has Delta changed your travel plans? Join the conversation below.

Is the journey as we know it over, as Mr. Chesky so aptly stated last year? The appeal of Airbnb is that it still benefits from it. As the Covid-19 variants persist, it’s hard to argue that Airbnb’s dominance in hosting won’t be either. Despite this, the company said on Thursday that travel to major cities had yet to regain 2019 levels, while nights and experiences booked in Europe and Asia-Pacific for the second quarter remained below average. same period of 2019. These details imply a further rise to come. when conditions finally improve.

Airbnb was bleeding money earlier this year, making its plans to go public by the end of 2020 grim. But by adapting its business to the pandemic, Airbnb appears to have saved its IPO and possibly its future. Photo illustration: Jacob Reynolds / WSJ

While much has been said about the host leak in the midst of the pandemic, July data from vacation rental data provider Transparent shows that active listings were stable year over year on Airbnb, but down 13% over the same period on Expedia’s Vrbo. Competitors have spent the pandemic chasing after what Airbnb has. Meanwhile, Airbnb’s value proposition still appears to be selling. In the second quarter, Airbnb spent less than 24% of its revenue on sales and marketing, while Expedia spent more than 56%.

Savvy investors will use déjà vu to their advantage.

Stock selection ranking heard

Write to Laura Forman at [email protected]

Copyright © 2021 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

Comments are closed.