Airbnb shares more than double the price of its long-awaited IPO
By Dee-Ann Durbin
Airbnb has proven its resilience in a year that has turned global travel upside down. It must now prove to investors that it expects greater growth.
The San Francisco-based home-sharing company made a triumphant public market debut Thursday, with its shares more than doubling to open at $ 146. Airbnb had valued its shares at $ 68 apiece on Wednesday night. The shares trade on the Nasdaq Stock Market under the symbol “ABNB”.
Instead of the traditional ringing of the bell before trading day, Airbnb featured a video of Airbnb hosts from around the world ringing the doorbell. In a video message, CEO Brian Chesky also thanked the millions of guests who stayed on his lists.
“You gave us hope that the idea of strangers staying together, in each other’s homes, wasn’t that crazy after all,” Chesky said. “Airbnb is rooted in the fundamental idea that people are good and that we are in the same boat. “
Airbnb raised $ 3.7 billion in its offering, making it the largest IPO in the United States this year, according to Renaissance Capital, which tracks IPOs. The company initially set a price range of $ 44 to $ 50 for its shares, but raised it to a range of $ 56 to $ 60 earlier this week, indicating growing investor demand.
Airbnb wants to add more hosts and properties, expand into markets like India, China and Latin America, and attract new customers.
First of all, he will have to recover. Airbnb – which has never recorded an annual profit – said its revenue fell 32% to $ 2.5 billion in the first nine months of this year as the coronavirus forced travelers to cancel their plans. The company delayed its IPO – initially slated for spring – and funded its operations with $ 2 billion in loans. In May, Airbnb cut 1,900 employees – or 25% of its workforce – and discontinued programs unrelated to its core business, such as film production.
But in the months that followed, Airbnb’s business rebounded faster than hotels, as travelers felt safer booking private homes away from crowded city centers during the pandemic. In Miami, for example, the occupancy rate for short-term rentals hit 83% in October, while the average hotel occupancy rate was 42%, according to STR, a lodging data company.
Airbnb said the number of nights and experiences booked, which fell 72% in April from levels a year ago, was down 20% in September. Airbnb launched experiences – from cooking classes to surf lessons – in 2016.
Airbnb now has 7.4 million listings, from castles to treehouses, in 220 countries. They are operated by 4 million hosts. The company controls around 39% of the global short-term rental market, according to Euromonitor. It’s the market leader in Europe, but behind VRBO, an Expedia-owned vacation rental company, in North America.
Going forward, Airbnb believes it could see an increase in business from people who can work remotely.
“We believe the lines between travel and living are blurring, and the global pandemic has accelerated the ability to live anywhere,” Airbnb said in a recent financial report.
It could also expand its offering to boutique hotels, as it reported with its 2019 purchase of last-minute hotel room provider Hotel Tonight.
Nonetheless, Airbnb recognizes that it will be difficult and expensive to attract new hosts and guests. Its rate of income growth was already slowing in the years leading up to the pandemic.
“I think the company will benefit from pent-up travel demand once the vaccine is widely distributed, but why would anyone want to buy into an unprofitable travel-related company that is slowing growth?” said Scott Rostan, CEO of Training the Street, which advises Wall Street analysts.
Airbnb was born 13 years ago in the San Francisco apartment shared by Brian Chesky – now the company’s CEO – and Joe Gebbia, who runs his design studio and Airbnb.org, its charitable arm.
Chesky and Gebbia were looking for a way to subsidize their apartment. When they learned that a design conference was being held in town and the hotels were full, they set up a website – AirBedandBreakfast.com – and rented air mattresses. They had three takers. In 2008, they formed a company with Nate Blecharczyk, a software engineer.
Home sharing was nothing new. VRBO was launched in 1995. Another older Amsterdam-based rival, Booking.com, primarily offers hotel rooms, but has branched out into vacation rental as well.
What Airbnb has done differently is focus on affordability, letting hosts rent spare rooms and sofa beds, said Tarik Dogru, assistant professor at Florida State’s Dedman College of Hospitality. University that studies Airbnb. Customers have strayed further into neighborhoods than they would if they were staying in a hotel.
“Airbnb has offered this sense of authenticity to those looking for it,” Dogru said.
This has sometimes been a problem. The company has angered some cities, which accuse it of promoting overtourism and making neighborhoods less affordable by taking housing off the market. Los Angeles, Paris and even Airbnb’s hometown of San Francisco have passed laws restricting its rentals.
Relations with hosts and guests have at times been difficult. After several reports of racist behavior targeting travelers, Airbnb has implemented a non-discrimination statement that all travelers and hosts must sign. It will not display a guest’s profile photo until a property is booked, so a host cannot decline a room based on a guest’s race.
And earlier this year, hosts revolted after the company let guests cancel reservations and get a full refund due to the pandemic. Airbnb responded by promising hosts $ 250 million to help close the gap.
Cary Gillenwater, a university professor and Airbnb host in Duivendrecht, the Netherlands, said the company had not provided him with much financial assistance, even though he had allowed many guests to cancel without penalty.
Gillenwater typically earns over $ 21,000 each year by renting a room on their property with their own entrance. This year, he will have the chance to win $ 2,500. He plans to rent the room to office workers for daytime use.
Despite his experience, he is considering investing in Airbnb and believes it will continue to grow. Sharing the home is invaluable for his family of five, he said, as hotel rooms that are big enough are difficult to find.
“I feel like there is a future for them, but we have to get through all of this first,” he said.
Updated December 10, 2020 at 2:21 p.m. ET with the latest information.