Hot Stocks / 3 Questions That Will Make or Break Airbnb's Future
3 Questions That Will Make or Break Airbnb's Future
These three questions will drive ABNB stock going forward
April 20, 2022 By Ian Bezek, InvestorPlace Contributor Apr 21, 2022, 8:30 am EST April 20, 2022
Airbnb (NASDAQ:ABNB) did a great job of overcoming the pandemic.
There are certain trends it was able to leverage over the past 18 months.
Whether or not Airbnb can continue growing in these areas will determine the company's future success.
Source: Kaspars Grinvalds / Shutterstock
Airbnb (NASDAQ:ABNB) has been one of the more surprising success stories of the re-opening era. Things were looking grim in mid-2020. Travel was largely on pause and Airbnb was forced to lay off 25% of its worldwide employees. The company, long known for its amazing workplace culture, threatened to unravel amid the historic upheaval. And yet, Airbnb held together. The company managed to go public despite the odds in late 2020. And since then, ABNB stock has been a resilient performer even amid a brutal sell-off in the technology sector. What has explained Airbnb's outperformance and can it continue going forward? The three questions I will ask today hold the keys to Airbnb's future outlook.
ABNB Airbnb. Inc. $165.18
Are Long-Term Stays a Permanent Trend?
The biggest change to the Airbnb business model since the pandemic has been the rise of long-term stays. Previously, much of Airbnb's activity was focused on leisure trips in the range of a couple days up through a week or so. It was much less likely to see much activity in extended stays.
Now, with remote work, Airbnb found a broad new category: people wanting to rent a place for a month or sometimes even longer. With the pandemic causing folks to move out of cities, it became attractive to rent a place at the beach or in the woods for awhile. With fast internet, skilled professionals could work from anywhere. A cramped apartment in a locked-down big city didn't look good compared to Airbnb's plethora of alternatives.
It remains to be seen if this is a new normal or just an artifact of the unsettled environment during the pandemic. We simply don't have enough data yet to see what travel patterns will look like once Covid-19 restrictions are no longer a top-of-mind concern for travelers. That is especially true in markets such as Europe and East Asia where pandemic restrictions remained heavily in force longer than in much of the United States.
Can ABNB Stock Hold its Own in the Business Travel Market?
Related to that previous point is the market for work-related trips. Historically, Airbnb has not garnered all that much market share against the major hotel chains. That is not for lack of trying, however. Airbnb has invested resources in attempting to convince large companies to use Airbnb for some lodging instead of just the tried-and-true major hotel chains.
The pandemic gave Airbnb an inroads here, however. With companies giving workers the flexibility to set up base wherever, many employees were able to use Airbnb for long-term work-related stays instead of hotels. Airbnb has also done a good job in terms of making its listing quality more consistent so business travelers would be willing to rely on the site for lodging.
Will this hold as business travel returns to something more like the old days? In a lot of ways, it depends on the fate of telework. Airbnb does better for stays that are a week or longer, where business hotels still win for quick in-and-outs. If people have to be at the office five days a week, Airbnb will struggle to keep its work travel foothold. In a climate where folks can take a business trip and then remote work from the destination for a little while, however, look for Airbnb to have more success. It is still an uphill fight against the hotels and their generous loyalty and rewards programs, but Airbnb has a shot.
Will Experiences Move the Needle?
Just prior to the pandemic, Airbnb tried to broaden its platform by offering experiences. These are local tours and trips for individual cities or tourist destinations. Think cooking tours, boat excursions, bike tours and so on in a local area. These experiences pair nicely with an Airbnb while on vacation.
The pandemic, of course, made Airbnb pull back on this. However, the idea wasn't forgotten. The company is now making a renewed push into the experiences arena. This could be of vital importance for the company. There is a sense that the company has pushed pricing about as far as it can go, especially around things such as booking and cleaning fees. So, if profitability is to rise, Airbnb needs to do better in terms of generating ancillary income. Experiences could be a game-changer on that front.
Bottom Line for ABNB Stock
Airbnb has done the hard part: It got through an incredible blow to the travel industry without losing its unique culture and way of doing things. The Airbnb spirit is alive and well and the company's operating metrics are pointing upward once again.
It will still be a major challenge to deliver on the company's valuation, which now once again tops $100 billion in market capitalization. However, efforts such as experiences and long-term stays could grow Airbnb's market share significantly in future years.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.
Article printed from InvestorPlace Media, https://investorplace.com/2022/04/3-questions-that-will-make-or-break-abnb-stock-future/.