Like Airbnb? Then you will love this growth stock.
It’s not often that a company completely revolutionizes an industry. But that is precisely what the vacation rental platform Airbnb (ABNB -3.10%) do. With over 6 million active listings, Airbnb has established itself as the mainstream for alternative vacation homes.
While Airbnb was the first, it is no longer the only one. Now there are companies like Vacasa (VCSA -5.80%)which offer complementary services to vacation rental platforms, which could further grow the world of the vacation rental industry.
Here’s an overview of Vacasa and why, if you like Airbnb, you might also like Vacasa.
Not your average vacation rig
On the surface, Vacasa doesn’t seem too different from Airbnb or Expedia Groupby VRBO (NASDAQ: EXPE). Its listings platform has approximately 35,000 vacation properties in North America, Belize and Costa Rica. However, there is a big difference.
Vacasa is a property management service that works directly with landlords, listing the properties it manages for rental on its listing platform. Other listing platforms, like Airbnb or VRBO, place the responsibility of managing a vacation rental with the owner. But Vacasa uses local management teams to handle things like coordinating repairs, checking in guests, cleaning the property between bookings, and more.
Standard listing fees are around 5% to 7% on most traditional vacation booking sites. Vacasa charges 30% for its property management and listing services, which may seem like a significant difference, but it removes much of the financial and ongoing management responsibilities from the owner, saving them time and expense. long term money.
How big can Vacasa get?
Vacasa went public late last year after merging with a special-purpose acquisition company, TPG Pace Solutions. Unlike many other SPAC IPOs that have happened over the past few years, Vacasa is actually on track to reach its growth potential.
As a vacation property manager first and a listing platform second, Vacasa is not in direct competition with much larger listing platforms like Airbnb or VRBO. The company charges much higher fees for its property management services than for its listing platform, so it’s focused on acquiring new owners, not the next big listing platform. registration.
Vacasa manages a growing number of properties for owners listed on these platforms. For example, Vacasa handles about 47% of all Airbnb listings in Destin, Florida, and 24% of listings on VRBO. He also sends the vacation property he manages to be listed on 100 independent booking sites to ensure his properties get as many bookings as possible for his clients.
Currently, Vacasa only has about 1% of the vacation home market listed in the US on VRBO and Airbnb, which leaves huge growth potential for its future. Additionally, there are approximately 20 million vacation homes in the global market that it can expand into when it establishes services in these areas. However, market penetration will take time. Its revenue for the second quarter of 2022 increased by 31% compared to the period of the previous year.
In the second quarter of 2022, Vacasa had net income of $9.9 million. However, its earnings before tax, interest, amortization and depreciation (EBITDA) were negative $2.5 million. It has not been able to maintain consistent profitability. As a result, the company announced a plan to suspend discretionary programs in order to achieve profitable EBTIDA more quickly. He appears to be carefully managing his $285 million in cash from the Special Purpose Acquisition Company (SPAC) fund.
Is Vacasa a buy?
Vacasa’s share price has been hit hard by the stock market crash, down 65% since its IPO earlier this year. Honestly, a lot of his stock price loss is due to bad timing. I believe that its intuitive platform and ease of management will attract more and more vacation rental owners to its platform. He just needs time. Travel is very cyclical, and given that it’s still a smaller name, converting new owners is expensive until it becomes a more mainstream solution.
Of course, there is no guarantee that the company will achieve the growth it hopes for. Developing a business like this requires a lot of capital. If there’s less than expected interest from owners in Vacasa’s services or a downturn in the vacation rental market, it could leave the company falling short of its growth targets and quickly running out of cash.
But investors who believe in the long-term success of the vacation rental industry should consider adding Vacasa to their portfolios. With its share price down sharply and at $3.33, this is a super cheap buy that could potentially pay off big if held long term.