AirBnB

[Wildreamz]

Changing dynamics of work and travel: work from anywhere, travel anytime.

Comments from Brian Chesky (CEO of Airbnb):
https://twitter.com/bchesky/status/14579...92354?s=20

1. I think we’re on the verge of a revolution in travel
2. Before the pandemic, most people were tethered to the place they worked because they had to go into an office
3. The pandemic accelerated the mass adoption of technologies (like Zoom) that allowed millions of people (not everyone, but a large chunk) to work from home
4. Suddenly, they were untethered from the need to work in specific places at specific times
5. Millions of people can now travel anytime, anywhere, for any length — and even live anywhere
6. All you have to believe is that Zoom is here to stay to believe this trend is here to stay
7. This newfound flexibility is bringing about a revolution in how we travel
8. In recent months, some of the largest companies in the world, like Amazon, P&G, Ford, and PwC, have announced increased flexibility for employees to work remotely, and I expect more companies to follow
9. We’re seeing this in our own data
10. Travel anytime: Monday’s and Tuesday’s are our fastest growing days of the week for families to travel
11. Travel anywhere: over 100,000 towns & cities had a booking on Airbnb during the pandemic (6,000 places had their 1st booking)
12. Live anywhere: between July and September, 1 in 5 nights booked were for a month or longer. This is our fastest growing category by trip length
13. So basically, people aren’t just traveling on Airbnb, they’re now living on Airbnb
14. Okay, last tweet… to respond to this moment, I’ll share some updates to the Airbnb service at 8am pst tomorrow on our homepage (I have a short demo that I’ll share)

TAM estimation probably needs some recalibration. Also, CEO seems like a good marketer (ie storyteller).

(vested)

[Wildreamz]

Brian Chesky teases a new product announcement: "The Miniverse". 

Source: https://twitter.com/bchesky/status/14579...59489?s=20

Possibly relating to the the Metaverse, NFTs, neither or both.

[weijian]

I think it is only the minority of the minority of the minority, that one can be just as efficient via a semi/permanent/majority work-from-home arrangement for the long term. Yes, there is definitely a tail wind for AirBnB but the permanent effects will probably be between what Brian Chesky is saying and pre-covid19

The Home Is the Future of Travel

Thompson: The other thing to be careful about when talking about white-collar-work trends is that only a minority of workers can work remotely, and a minority of those workers are still working remotely. So this trend might involve millions of people, but we’re talking about a minority of a minority.

Chesky: Obviously there are many, many jobs that aren’t affected by the rise of remote work. But for people within offices, those who work for tech companies or younger companies will embrace a more flexible policy. Within that group, you see that some companies, like Wall Street banks, are being less flexible, while others, like PricewaterhouseCoopers, Amazon, and Procter & Gamble, have announced permanent semiflexible policies. People without children are less tethered to their home than people with children. It’s easier to go somewhere for two weeks or a month if you don’t have kids. And it’s easier to turn a normal weekend into a three-day blended work-and-travel weekend if you don’t have to worry about their school.

https://www.theatlantic.com/ideas/archiv...on/620722/

[karlmarx]

Given its popular use-case among hosts and guests, there's tremendous potential for ABNB since it has no significant comparable competitors (yet). Regulators and traditional hotel chains will continue to fight it but the use-case advantage lies with ABNB, and their service-level, and cross-sell opportunities, will only improve. Chesky is smart, energetic, and still young, so there's a lot that he can still deliver. Looking at ABNB's valuation -- which is pretty crazy -- the market seems to have reached way more bullish conclusions that I have.

I will probably consider owning some ABNB stock if it becomes significantly cheap. But I will definitely be adverse towards owning any of their competitors, or businesses which rely on their competitors (e.g. online hotel booking sites). There will still be demand for hotels. But as soon as the hotel market/revpar stagnates, or worse, starts declining, the small margins which hotels count on will be gone. The ratio of residential housing to hotels is huge and just introducing a small portion of it into the short-term stay market can (or has already, in some instances) cause prices to go down.

Singapore has been a luddite in this regard, and the local hotel industry should be extremely thankful to the government for not allowing short-term stays in public/private housing. Given the tight housing supply -- and the government's intention to maintain this -- it is also not likely that short-term stays will be legalised in SG anytime soon. Disturbance to local communities, the possibility of vice activities, and damage to the hotel industry would be other reasons why the government will not favour short-term stay.

But some local hotels like Lyf, and some of the smaller boutiques, are already embracing and introducing communal concepts in their operations to appeal to the younger demographic of travelers. Else where in the world, it is a good time to be a traveler.

[Wildreamz]

..
Looking at ABNB's valuation -- which is pretty crazy -- the market seems to have reached way more bullish conclusions that I have.
..

Valuation needs to take into consideration future growth (and normalization of global travel to 2019 volume; as well as pent-up demand) and future profitability at scale (since AirBnB is one of these platform businesses with near zero marginal cost as they grow). And most importantly, durability of that growth (is AirBnB taking share from hotels permanently? are there more use-cases that didn't existed before Airbnb?).

There are some fundamental issues/pain-points with the traditional travel industry and real estate industry that I think AirBnB is uniquely positioned to solve (for example, tourists always visit the same place at the same time of the year, causing congestions; real estate cost at certain parts of the world rising exponentially, and concentrated in fewer hands; there are idling assets everywhere, that could otherwise be productive) .

Despite COVID headwinds, Airbnb already making more revenue than they did in 2019 in recent quarters, ahead of their competitors like Booking.com and Expedia.

There are many more secular trends happening beneath the hood of AirBnB that will be interesting for prospective investors to explore (https://skift.com/2021/06/28/travels-cre...next-boom/) that I don't have the space and time to touch on in this thread. Will be interesting to look back at this several years down the road.

Note: Airbnb business model is not without risks. Regulation is a concern and they have frequently been fraught with controversies, though they seem quite good at protecting their public image.

(vested)

[weijian]

..
Looking at ABNB's valuation -- which is pretty crazy -- the market seems to have reached way more bullish conclusions that I have.
..

Valuation needs to take into consideration future growth (and normalization of global travel to 2019 volume; as well as pent-up demand) and future profitability at scale (since AirBnB is one of these platform businesses with near zero marginal cost as they grow). And most importantly, durability of that growth (is AirBnB taking share from hotels permanently? are there more use-cases that didn't existed before Airbnb?).

hi Wildreamz,
I wonder what is the kind of quantitative valuation principle you will use?

I refer back to the previous posting in GRAB's thread where CY09 used "price earnings", and the "earnings" come from the accounting statement. Personally, I feel that might not be reflective of Grab's business model/earnings.

Since Grab is a superapp, it is somewhat similar to AirBnB. Both are platforms and are true ecosystems (I use "true" because every1 is trying to masquerade themselves as building some ecosystem now). My initial thoughts are using customer life time value (CLV) as a starting point to build the unit economics and then extrapolate from there.

I have to state that I am a noob in this and trying to learn. Would be glad if you were graciously share your thoughts and principles of valuing such platform businesses.

[CY09]

I always fall on the principle of earnings since company need earnings to justify their growth and existence. However, there is an element of speculation where I have to predict how much more such companies can grow.

While it is indeed true that Airbnb's current valuation is crazy, do note in a normal quarter where everything opens up, airbnb is able to record 800 million in quarterly profit without any financial shenanigans or abnormal line items. This shows the business model is profitable. If we extrapolate and assume the company earns 3 billion in profits during tourism recovery times, the company is selling at 33 times P/E. Tad too expensive for me, but considering this quarter results only showed Europe and North America opening up, the reopening of Asia and Australia potentially adds another 30% increase in earnings, which will put it at around 18-20 times P/E.

Hence current market cap to me prices it nicely but with no margin of safety. The other assumption is that there are no new entrants who can fight Airbnb in its network of properties which Airbnb has developed extensively since 2012.

Most other South East Asia listed companies we talk about are only fighting to be the leader in South East Asia which has 700-800 million population, and breaking into the global stage for them is unthinkable because their well capitalised competitors embed this regions. This hampers their ability to grow into a behemoth with large earnings. Airbnb on the other hand has dominated almost every aspect of developed markets and hotel chains don't seem intend to fight them, likely due to the scale needed and they dont seem to have ready available buildings scattered across a country to retrofit; it is difficult for hotel chains such as Hyatt, Marriott or Shang ri la to outsource to private owners to deliver their hotel experience and amenities since they literally have to knock the door of almost every residential district in that country to ensure standards are maintained. Telling a residential owner to own ten different types of pillow just for his accommodation will incur a huge cost to him. Small/ boutique hotel chains don't fight airbnb but instead sign up to Airbnb platform as a form of booking site

[karlmarx]

I wouldn't consider ABNB an 'ecosystem' in the same ways that Grab or Apple are considered ecosystems, where the user achieves a greater experience by using separate products from the same ecosystem (the local banks does this too by rewarding you when you use their CC, savings account, and wealth management products, etc). Though ABNB is certainly moving towards that direction by introducing tours/experiences as another product.

===

ABNB is a marketplace for a very specific product and that is places for short-term rentals. Probably the main reasons that they have succeeded thus far is that they have done better than any of its competitors in providing value to both hosts and guests, in a manner as frictionless as possible.

But the fact that there were rental marketplaces that existed before ABNB tells us that ABNB's leading position today could be displaced by yet another marketplace operator which can provide even more value to all stakeholders. The new operator (or old, maybe one of the existing booking sites?) only need to be willing to charge lower fees than ABNB to build supply. The users features managing trust have already been figured out by ABNB so that can be copied too. I think Carousell (which itself gained traction on the weaknesses of ebay sg) has been very intelligent to do this. The competitor for ABNB to fear is not the traditional hotel chains.

For now, a superior copycat of ABNB does not seem to be on the horizon, but it is probably only a matter of time (which could still be many years out). Even then, the triumvirate co-founders of ABNB have proven to be an extremely effective team and they are already building products (e.g. tours/experiences) in anticipation of such competition.

[brattzz]

it has to be a entire value chain for a tourism super-app!...

Accommodation rentals+transportation tickets+F&B buffets passes + entertainment passes + shopping passes + currency pass + travel insurance pass + tripadvisor/youtrip/FB/Instagram/youtube content for the trip sharing!

Wooohooo!

[Wildreamz]

I wouldn't consider ABNB an 'ecosystem' in the same ways that Grab or Apple are considered ecosystems, where the user achieves a greater experience by using separate products from the same ecosystem (the local banks does this too by rewarding you when you use their CC, savings account, and wealth management products, etc). 

..

I think you are thinking about product ecosystems like Apple. I'm talking about how Airbnb has a buyer-seller ecosystem, like Youtube.

Platforms like YouTube and Airbnb offers sellers of a product (video, short-term rental etc.) access to buyers. The platform/ecosystem gets more valuable to sellers as the number of buyers on the platform increase, and vice-versa. A flywheel effect.

In fact, Airbnb doesn't just have a buyer-seller ecosystem, but also an ecosystem of startups built around it: https://www.bloomberg.com/news/articles/...-t-have-to ; https://www.cnbc.com/2018/05/22/the-airb...world.html

Peace.