How Airbnb got its IPO plans back on track
It has been a roller coaster year for Airbnb and its highly anticipated IPO or IPO plans. The home-sharing platform had planned to return in March to go public, but the coronavirus then struck and its revenue in free fall.
Now it looks like the plans are back on track. Airbnb has confidentially filed its IPO documents with the Securities and Exchange Commission in mid-August. None of the financial details were revealed, but the company was valued at US $ 18 billion during its last round table in April, which is a far cry from its previous valuation of $ 31 billion in 2017.
Of course, like the entire tourism industry, the coronavirus pandemic has had a huge effect on Airbnb’s finances. New bookings have stopped, cancellation rates have skyrocketed, refunds to hosts and guests cost millions and income has falleneven as cost reduction measures like layoffs have been implemented. To help alleviate this, he was forced to fundraise US $ 2 billion in debt and equity securities in April 2020 with expensive terms.
So, the decision to file its IPO documents and potentially a listing in 2020 surprised some. Critics point to the ongoing pandemic and the many issues it continues to raise: hosts and guests who have been angered by modify the cancellation conditions, new laws and regulations in cities seeking to to recover housing for residents, as well as declining income and continued losses. Others point to the lackluster IPOs Uber and Lyft sharing economy teammates in 2019, not to mention WeWork’s disgrace.
Reasons for the IPO
But there are many reasons to go public, including employee pressure (the shares held by the first employees will expire this year). But another big motivation is the fact that Airbnb has bounced back better than its competitors from the coronavirus. Booking rates were above expectations from June 2020 and the Airbnb model could benefit from the change in behavior of hosts and tourists during the pandemic.
The overhead costs of the business are much lower than those of the hotel industry due to its limited fixed costs. It also benefited from the increase in domestic stays in rural areas across the world, and the increased demand for rural retreats where people can safely distance themselves socially. Unlike hotels, short-term rentals tend to facilitate longer stays and can offer full service amenities, living space and gardens. Studies show that the more spacious environments for short-term rentals have been popular with vacationers and people who want to work from home elsewhere.
Despite wide cuts in marketing to reduce losses, Airbnb has strong brand awareness through past campaigns such as “Do not go. To live”Which drew on people’s desire not to just visit a place, but to have a more authentic experience. This has helped it become the go-to platform for short-term rentals during the pandemic.
With the broader tourism and hospitality sector weak, Airbnb may be seeing this stage of the pandemic as the time to shine and move its IPO forward. In addition, the stock markets in the United States are on a record, fueled by the Washington stimulus.
However, questions remain for Airbnb. In particular, when will travel behavior return to the status quo, if at all? This will determine if growth in current bookings will lead to profitability.
Then there are the security concerns that have haunted the business for years and played a big part in Airbnb. loss of profitability in 2019. He spent US $ 150 million on security initiatives, including verifying the accuracy of listings, setting up a 24/7 security hotline, and even employee safety bonuses.
There is also the threat of increased taxes and regulations in key markets, which could emerge as authorities seek new revenue to pay for the effects of the coronavirus on their economies. The basis of favorable market conditions is also questionable, as there are concerns that the current strength of the stock markets is not based on strong economic fundamentals and is forming a bubble. waiting to burst.
Success in the tourism industry is never a given. Airbnb will be all too aware of this, having fully upset the hospitality industry. Airbnb has over 7 million listings, eclipsing the largest hotel chain, Wyndham Worldwide, which has 8,000 hotels. But rather than seeing it as a burden, Airbnb is taking advantage of it.
But for all his market positioning as a different travel provider – delivering unique, authentic and personalized experiences – Airbnb is still firmly anchored in the tourism industry. Like its competitors, its success still depends on the rebound in post-pandemic travel.