Airbnb, the leader in alternative living
Established in 2008, Airbnb (“Narrow Moat”) is the world’s largest online travel agency offering alternative accommodation, as well as boutique hotel booking services and experiences.
The Airbnb platform offered 6 million active accommodations in 2021.
The company’s 4 million hosts are listed in 220 countries and 100,000 locations.
In 2021, 54% of revenue came from North America, 32% from Europe/Middle East/Africa, 7% from Asia-Pacific and 7% from Latin America.
Transaction fees for online bookings represent the company’s entire revenue.
We believe that Airbnb, a global online travel agency, or OTA, driven by the leading alternative accommodation network (the source of the narrow moat) with more than a billion guests and 4 million hosts since its launch in 2008 will maintain its position. Until 2021.
We believe this network advantage will be supported by continued expansion through various types of experiences over the next few years.
Airbnb is also well-positioned to take advantage of the continued shift to mobile bookings, as evidenced by Airbnb being one of the top 10 compared to iPhone travel apps in 87 markets. Expedia (“Narrow ditch”) and for 156 Reservation (“Dar Moat”) Holdings according to App Annie.
We expect telecommuting to continue somewhat to increase demand for long-term travel.
Threats from competition, regulation and structural costs dampen our positive view of Airbnb’s network position in the growing online travel industry.
We expect Expedia and Booking’s investment in the vacation rental industry to increase over the next few years.
Google target login/Alphabet (“Wide Ditch”), Meta-platforms (“Wide Moat”), Alibaba, Amazon (“Wide Moat”) and others can double the number of dominant scale players, which will have a significant impact on profitability.
However, replicating Airbnb’s network will take a lot of time and money, and we expect most of the aforementioned operators to position their meta-search model (which does not control hotel relationships) directly with Airbnb’s OTA model (which controls hotels) rather than the competition. relationships).
Beyond competitive threats, Airbnb’s alternative-living hub faces opposition worried about the industry’s impact on society (residents’ quality of life), safety (code compliance), and the economy (cost of living).
Regulations can impose requirements (such as sharing personal information with local governments) and restrictions (such as the number of days a listing can be rented) for hosts and guests, which reduces demand and increases costs.
And in addition to these regulatory costs, servicing individual vacation rental homeowners can increase costs seen in the traditional lodging industry.
Fair value is recorded
After reviewing Airbnb’s third quarter results, we increased our fair value from $113 to $117 per share to reflect increased near-term demand and time value.
Our fair value estimate assumes 19 times enterprise value/adjusted EBITDA for 2024.
Demand from Airbnb is beginning to moderate as the travel industry recovers from the depths of the pandemic in April 2020.
Our order growth forecast is a CAGR of 16% (previously 17%) over 2022-31.
As part of this forecast, we expect Airbnb bookings to reach 165% of 2019 levels in 2022, up from 174% previously.
Our bearish view comes from lower overnight expectations, tempered by more stable overnight rates.
In the long term, we continue to see continued growth in full-time and hybrid telecommuting in the United States, which is driving demand.
We see Airbnb’s share of online vacation rentals growing from 45% in 2019 to over 50% in 2026.
We expect Airbnb’s revenue take rate to increase from 12.8% in 2021 to 14% in 2031, helped by expanded experience, insurance and promoted listing offerings, but this is tempered by content hotelier and competition.
We see Airbnb benefiting from short-term investments in the platform in the medium to long-term.
We expect operating and support costs to be 11% in 2031, versus 17% pre-pandemic, as short-term investments in trust and security decrease and automated customer service creates long-term savings.
We also expect product development spending to reach 11.5% of sales in 2031, compared to 20% in 2019, a heavier investment year as Airbnb relies on more comprehensive data (product development as a percentage of sales in 2018 was 15, 9%) network financed by short-term investments.
Additionally, we expect Airbnb to reduce marketing spend to 17.8% of revenue in 2031 from 34% in 2019 (2019 was a heavier investment year, with marketing spend at 30% of sales from 2018 -as long as it was), because the company has strong global brand recognition and a more comprehensive platform that offers long-term.
As a result, we estimate that Airbnb’s revenue growth will average 16% to 17% over the next 10 years (previously 18%), and that operating margins will continue to increase to 30% in 2031. -based compensation and 10% in 2019).
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