Why Airbnb Could Overtake Booking.com
Airbnb's hotly anticipated IPO is finally coming. But should you invest at the proposed valuation of $30 to $33bn?
Airbnb is poised to publicly list its stock in its upcoming IPO in December 2020 at a valuation of $30bn. Relative to other travel giants like Booking.com ($83bn) and Expedia ($17bn), this valuation may seem high at first glance. However, Airbnb could grow into the most important, if not the biggest travel company in the world, meaning Airbnb's stock could actually be undervalued relative to its potential.
Executive Summary
- ABNB's competitive advantage is its lead in providing properties hosted by single homeowners as opposed to professionally managed properties. Even Booking doesn't seem to have caught up on this well as its alternative accommodations seem to still consist largely of professionally managed "hotel apartments" operated by multi-home owners.
- Using this unique offering, ABNB has built one of the strongest brands in travel. Google Search for Airbnb already surpassed search for Booking globally.
- COVID-19 pandemic may have actually helped ABNB cement its position as a synonym for travel and establishing itself as the long-term leader in the travel industry
- ABNB has an opportunity to be the leading destination site for all travel matters. It should have an easier time incorporating traditional travel business like hotels, flights and car rentals than for traditional OTAs to incorporate replicate ABNB's
- Relative to BKNG's valuation of $80bn, ABNB at $30-33bn could provide an exciting upside for investors as ABNB catches up to and eventually surpasses BKNG as the leading travel provider globally
Why Airbnb's Unique Competitive Advantage in Single Home Owner Hosts
Airbnb's true strength lies in its unique portfolio of real homes that its users can rent. These are properties owned by single-property owners whose full time jobs aren't to rent out their homes and maximize their revenue. They have a deeply emotional connection to their properties, and they want to be able to rent it out to people that they can trust. Their priority is not to make sure their homes are occupied 24/7; it is to keep their homes safe while making some money on the side. Airbnb is able to satisfy this need due to its network of 2-sided reviews of both hosts & guests, which allows both hosts and guests to confirm Booking.coms with confidence that they aren't going to get any negative surprises.
