Should you buy Airbnb shares now?

After being devastated by the pandemic, Airbnb (NASDAQ: ABNB) is able to benefit from economic reopening. Many people have stayed home much longer than they would have liked over the past year and are ready to get out and travel.

To better advocate for Airbnb, many travelers prefer it to a hotel stay. Airbnb offers more choices in more geographies, and very often it’s cheaper than hotels. For these reasons, this is an attractive growth stock for long-term investors to consider.

Image source: Getty Images.

Better days to come

The pandemic rebound is taking shape, and it looks strong. Airbnb released its second quarter results on Thursday, August 12, revealing several indicators above pre-outbreak levels. Additionally, forward-looking figures such as unearned fees, which are fees for bookings made but not yet experienced, are more than 40% higher than 2019 levels.

Additionally, a consequence of the pandemic could bring long-standing benefits to Airbnb. The expansion of remote working opportunities will allow people to travel more often than before. If you are not tied to an office five days a week, you can move from place to place; as long as you have an internet connection you can work.

Indeed, long-term stays of 28 days or more are the fastest growing segment for Airbnb. According to a business survey, 81% of guests staying long-term in the second quarter of 2021 said they plan to book another long-term stay in the coming year.

This is an area where Airbnb has an advantage over hotels. People staying in a long-term location probably prefer to have amenities like a kitchen and laundry room, which aren’t always included in hotel rooms unless you’re staying in more expensive rooms. The increase in long-term stays due to the increase in remote work favors Airbnb.

Should you buy Airbnb shares?

Airbnb is doing a great job after the pandemic. The business has reduced its expenses and will likely operate more efficiently afterwards. And it wasn’t until the start of the market share in the estimated $ 1.2 trillion hotel and resort industry.

A graph comparing the price / sales ratio of Airbnb, Hyatt and Marriott.

Data source: Ycharts.

The stock is trading at a forward price / sell ratio of 17.48. This is a huge bonus for other travel agencies like Hyatt Hotels (NYSE: H) and Marriott International (NASDAQ: MAR), which will also benefit from the rebound in travel. The important difference to note here is that the hotel operator’s business model does not have the same potential as Airbnb’s light business model. Over the past decade, Hyatt has achieved an average operating profit margin of 5.7% and Marriott of 8.8%. Building and maintaining hotels is expensive, and you are limited to the economies of scale you can achieve.

In contrast, Airbnb creates and maintains a platform that brings together hosts and guests and levies fees on all bookings. It can expand by encouraging hosts to list more properties for more nights. As it expands, its operating profit margins can become much larger than the less than 10% earned by hoteliers. There is no need to add a maintenance staff to accompany each new property listed on its website.

It can be pricey, but Airbnb shares have the potential to make the price interesting.

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Parkev Tatevosian does not have a position in any of the stocks mentioned. The Motley Fool owns stock and recommends Airbnb, Inc. The Motley Fool recommends Hyatt Hotels and Marriott International and recommends the following options: Long January 2023 $ 115 calls on Marriott International. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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