Airbnb — why this company is a generational opportunity.
I can’t help to be drawn to companies that change habits of people around the world. They don’t come around often — Tesla, Apple, Amazon, Microsoft, Square, Netflix, Facebook, Google, and so on. These companies have massive brands around the world, and that is because each of them was able to revolutionize how people operate daily.
However, this is nothing new, we have seen this throughout history with technology. As companies get comfortable and obtain larger market shares in their respective industries, there are always newer (hungrier) new players that want to introduce a more efficient and cost-effective product or service that will overtake the legacy companies. For the legacy companies, sometimes it is not possible to make this change as quickly one may assume — this may be due to partnerships, contracts, lack of [new] talent, and obligations to serve shareholders on a short-term basis.
This is the exact situation in the Hotel & Travel industry. Hotels are the legacy players. Airbnb is the new kid on the block.
Airbnb is that newer player that entered the industry a little bit over 10 years ago. For Airbnb, they are able to serve their guests through enabling the hosts to publish their short-term or long-term rentals on their platform.
Thus, Airbnb owes almost no real estate. Airbnb is a platform that is powered by Amazon Web Services, and the company is a full-technology company that specializes in their digital services. In contrast, all the legacy players in this industry own (or rent) real estate. There are significant costs surrounding this — hotel staff and everything that comes around maintaining the said real estate. How can Marriott just switch to a digital platform? Not only they don’t have the talent to execute this project, but what do they do about their existing real estates around the globe?
Let’s take a look at some numbers. 54 million active bookers booked 327 million nights and experiences on Airbnb. 90% of the hosts on the platform are individual hosts, and over 79% of that segment have only one listing on the platform. Their Total Addressable Market is estimated to be $3.4 trillion, where $1.8 trillion is for short-term stays and $1.4 trillion for experiences. For every $100 price set by the host, Airbnb will generate $15, and the host will collect a total $116 (before taxes & fees, obviously). With four million hosts as of September 30th 2020, 55% are women with over 86% hosts located outside of the U.S. Finally, 63% of the revenue in 2019 was generated from outside the U.S., and 69% of the revenue was from repeated guests. Finally, the most exciting statistic is that 91% of its traffic came from direct or unpaid channels.
The Airbnb brand is global and loyal.
It’s hard to beat new habits that are proven to benefit the masses. Part of traveling is experiencing the culture of the said place, and staying at some corporate establishment is not considered to be the experience that most travelers seek, especially not when visiting a whole new cultural region. You can’t beat experiences, and you certainty cannot beat communities.
I actually couldn’t believe it when my father-in-law said he booked two nights on Airbnb for a stay in the eastern part of Canada. This is when I knew this company is not just serving the newer generations, but it is serving all age groups of our communities.
The pandemic will end at some point, traveling will pick up. Browse around social media, you will see how people are itching to travel again. There will be massive boom of traveling in the upcoming years I suspect. Nonetheless, I don’t think traveling will ever be the same — and I actually believe Airbnb will be the front runner of this industry through their community, global network/brand, and a digital platform designed to ease the customer experience. We haven’t even talked about the costs compared to paying for a short-term stay in a hotel.
I think the skeptics are reasonable when they bring up the biggest challenge to Airbnb — regulations. I actually think this is good. Whenever there is a new technology that comes into town, there is always friction. Legacy players will lobby against it. There was a time that communities did not want to give up their horses. People did not want to adopt the Internet in the 1990’s. Shopping online — no way. Having money stored digitally? Yeah no. These are only few frictions of the many that occurred over time.
I actually think ultimately people speak louder.
The people drive the Airbnb brand, and Airbnb serves the people.
The people want to have the proper accommodations and experiences during their travels. I strongly believe cities and Airbnb should continue negotiations and I do believe there is a win-win scenario here — cities can benefit from the increase of tourism and taxes generated by Airbnb. Money speaks.
By providing more opportunities to hosts around the world to host on the platform, by expanding in regions such as India, China, and Latin America, and by designing and offering new services such as Airbnb Online Experiences, I can see good days ahead of this company. Wait until businesses use Airbnbs, this will be exciting B2B partnerships between Airbnb and corporate employees. Opportunities and Airbnb go together.
They are attracting the right talents in the technology & engineering industry, they are appealing to all segments of the population, they are working with regulators to come to a win-win situation, the founders are still leading the company today, and the brand is going public by the end of this year.
Plus, you know when Scott Galloway is bullish on this company, you just can’t pass on this company.
Airbnb is here to stay, and it is changing how we travel. Working remotely has never been easier, and Airbnb is the “last product” we needed to enable this transition to this new way of working and traveling in general.