At first look, Airbnb might just look like another expensive stock, with a market capitalization of about $120 billion and a valuation of over 20 times its sales. But do not be fooled — this company is massively disruptive and has the capability of dominating its market.
Recent results reveal that travel demand is increasing and the market is absorbing the current inflation nicely. Here is a rundown of where the Airbnb business stands at today, and why this might become a trillion-dollar company over time.
Airbnb: Where do things stand now
To call Airbnb’s growth an impressive one wouldn’t do it the justice it deserves. The travel disruptor has come from literally just three air mattresses in the co-founder’s homes (this is where Airbnb got its name from) into a huge travel-booking platform that is currently seeing around $45 billion in yearly booking volume.
Recent growth has been quite impressive as the world is continuing its gradual return to normalcy. In the fourth quarter, there were about 73.4 million nights booked on the Airbnb platform. This was up 59% from the year before, although it is still a bit less than pre-pandemic levels were. However, because average costs each night have increased a lot, Airbnb’s revenue in its most recent quarter has increased by 38% from the comparable 2019 levels.
Not only is its growth impressive, Airbnb has a clear road to profitability. The company is not consistently profitable yet (although it was during its fourth quarter), but losses have lessened considerably, and the company produced $1.5 billion of adjusted earnings before taxes, interest, depreciation, and amortization last year.
There is reason to expect that 2022 will be an excellent year for the company. Airbnb reported that at the end of Jan., there were about 25% more nights booked for the Summer 2022 than in the comparable pre-pandemic times. When you combine that with a 20% boost in the average nightly rate, you have a recipe for significant growth.
Future potential is massive
It may sound like $45 billion in yearly booking volume is a large number — and that is because it is. However, it is important to put it into perspective, as the vacation-rental industry still has many potential properties that are not yet on its platform. In fact, Airbnb has estimated that the global market for short-term rentals is around $1.8 trillion.
If you were to include adjacent experiences, as well as the long-term vacation rentals, the market is thought to be a staggering $3.4 trillion in true size. And it is worth pointing out that this was at the time of Airbnb’s IPO (just over a year ago), so it does not take count the recent increase in average nightly rates.
Airbnb has about 1.3% of its addressable market opportunity today. it is never going to get close to touching 100%, but the point is that there is room for Airbnb grow considerably.