Even a stopped watch is right twice a day. No finer proof of this exists than my prescient prediction of a blockbuster IPO for Airbnb two months ago. But at what price?
Airbnb hit a lofty $31 billion valuation at its peak, but was forced to accept an $18 billion valuation in a panicked fundraise in early April - with onerous terms that would certainly bring that valuation down if it was just common equity. So what could Airbnb hope for?
Well the overall market dynamics are superb. Nasdaq is at record highs, and 60% up since Airbnb hit the panic button with its fund-raise.
On the flip side, the booming stock market has bifurcated, and anything with a whiff of travel or tourism has been well hammered. So where would Airbnb sit?
While the old hands list on many, many platforms and fervently seek direct bookings, the greenhorns will go straight to the brand equity they know - Airbnb.
The numbers leaked by Bloomberg would ordinarily see any IPO cancelled and the founders being offered bereavement counseling. Revenue down by 67% on the same period last year. But we know these are exceptional times. Note Airbnb stated that bookings were only down 30% in June, and as we at AirDNA observe the bookings as they come in, it is possible that August could actually be up year-on-year.
How can this be with the collapse in international travel and popular destinations, like Rome and Barcelona, that Airbnbs plague, lying empty and possibly leaving the short-term market?
Well it seems traveller demands have crystallized in recent months. I personally split my summer sojourn this year between a hotel and a holiday villa. The W in Ibiza was doing all it could, but COVID was an ever-present backdrop. Mandatory masks everywhere. Two people maximum per lift. Rooftop pool closed. Gym appointments required. Hectoring signs reminding me to wash my hands. Reduced housekeeping. The upmarket hotel became a motel. Urgh.
The villa was the opposite. As soon as you were inside, COVID was no more.
The world seems to be reaching the same conclusion. AirDNA’s joint report with STR pinpoints the increasingly stark differences between traditional and alternative accommodation. While large vacation rentals are booming in many countries, the great travelers of Northern Europe are eschewing the Mediterranean to flock to long-forgotten seaside towns.
But is this a flash in the pan? The clear shift is the collective realization that COVID is not going anywhere soon. The tribulations of a vaccination are clear. The attempts to eliminate transmission have proved impossible, even for New Zealand antipodeans. One by one we are reaching the collective realization that we have three to five years of living under the specter of COVID.
The masses are reacting, real estate agents are having a boom time in the right areas. The balance has significantly altered for the marginal decision to consider purchasing a second home. A place you can work from remotely, a lockdown bolt-hole, a place you can breathe freely during the school holidays. We at AirDNA are seeing a deluge of queries as people assess the best place to invest with our Rentalizer tool that predicts the short-term rental income of any address in the world.
So what does this all mean for Airbnb? Well the vacation rental industry outside urban centers will boom. Airbnb may also be sneakily well-positioned to come out on top.
The received wisdom is that Airbnb’s strength in urban markets will be its achilles heel against Vrbo, which historically has had more proportional inventory of the holiday villas so in demand. But the new short-term rental crowd are neophytes to listing a second home. While the old hands list on many, many platforms and fervently seek direct bookings, the greenhorns will go straight to the brand equity they know - Airbnb.
Airbnb, and newly more nimble as it has broken away from other more tenuous projects like hotels and flights, will pick up on this and ultimately crush its revenue goals.
If the market holds up, Airbnb is set for a blockbuster IPO. Though stopped watches can be right twice a day, they are wrong a lot more.