Public holidays – Airbnb’s stockmarket debut might be a success | Enterprise
November 21, 2020
T.ALK OVER terrible timing. By the time the pandemic hit in March, Brian Chesky had just finished the paperwork for Airbnb’s much-anticipated public listing. Instead of traveling to New York to ring the opening bell on the Nasdaq stock exchange, he spent days (and nights) at Zoom in his home office in San Francisco, struggling to keep his online vacation rental marketplace alive. “It was like going 100 mph and suddenly having to hit the brakes,” recalls Airbnb’s boss.
This time Mr. Chesky might have better luck. On November 16, Airbnb released its prospectus and prepared it for an IPO next month as soon as the first doses of the Covid-19 vaccine could be available. The IPO could value Airbnb at more than $ 30 billion. The company’s longer-term prospects are harder to guess.
The vaccine isn’t the only thing Airbnb is doing at an opportune time to go public. The window for tech IPOs hasn’t been that wide open since the dot-com bubble 20 years ago. According to Dealogic, a data provider, more than 50 tech startups have launched this year, raising a total of $ 26 billion. Many Airbnb employees want to take advantage of the shares they received before their right to do so expires. And the company needs money, on top of the $ 2 billion it raised earlier this year to solve the problem – hence the decision to cancel previous plans to directly list shares without raising fresh capital.
Mr. Chesky also has a good recovery story to tell. In the painful second quarter, the number of nights booked with Airbnb fell from 84 million in the previous year to 28 million. Gross bookings plummeted two-thirds to $ 3.2 billion. However, over the next three months the numbers rebounded to $ 62 million and $ 8 billion, largely thanks to what Mr. Chesky calls “travel redistribution”. Guests avoided virus-stricken foreign cities, formerly Airbnb’s stronghold, for domestic and rural destinations. Stays less than half a mile from home increased more than 50% this summer.
Mr. Chesky also made Airbnb leaner. Before the pandemic, the company had poured money into new businesses, including flights and a television studio, to boost pre-listing revenue. Since then, his motto has been “Back to the roots”. He has laid off around 1,800 employees, a quarter of the workforce, stopped most new activities and radically reduced online advertising (more than 90% of guests now book directly on the Airbnb website). Although the company lost $ 916 million in the first six months of the year, it posted net income of $ 219 million in the third quarter.
Can Airbnb go on like this? Even before the pandemic growth slowed. Once things get back to normal, the room for further expansion may be limited, at least in the company’s core market. Research company Bernstein assumes that annual growth in private rents will slow from around 20% in recent years to 7 to 8%. Airbnb’s operating margins are behind those of closest rivals Booking.com and Expedia (which run VRBO, a website that primarily lists vacation rentals).
Airbnb’s future also depends on its ability to oversee its service and meet a growing list of legal requirements in many of the countries in which the company operates. As with other large online businesses, tenants have found ways to abuse the platform, such as using rental properties for parties. In July, New Jersey police broke up a noisy incident involving 700 people. Regarding the regulations, the company states in its prospectus that by October 2019, 70% of the top 200 top-selling cities had imposed restrictions, such as: B. Limits on the number of days a residential property can be rented per year.
However, Mr. Chesky’s biggest job will be figuring out what Airbnb, reaching its youth, should be when it grows up. He said he’d love to see it play out like Apple or Disney – companies that have adapted over time and outlived their founders. The pandemic was a setback for the new business areas. “Either we keep doing new things when the world changes,” he says, “or we stop doing new things – and we will no longer exist in the future.” Even if doing new things occasionally means sticking to the old ones. ■
Editor’s Note: Some of our Covid-19 coverage is free to readers of The Economist Today, our daily newsletter. Check out our hub for more stories and our pandemic tracker
This article appeared in the business section of the print edition under the heading “Holidays”
Please use this content againThe trust project