Source: Company Financials, Leverage Shares analysis

After 2021, the number of nights and experiences booked does tend to march in lockstep with gross booking. In 2nd-order terms, however, the growth of these metrics has been in double-digit negatives since. The derived « booking per night or experience » ratio is an indicator of the premium for the experience the company purportedly offers end users: after the massive boom in 2021, there has been a slip to a level well under half of that in 2020. 2nd-order terms indicate that it is less worse than in 2022 but that’s no small comfort given the modest ratio contribution.

A Strained Business Model

In nearly nearly every major social media forum (even the AirBnB subreddit, which is a Top 1% channel² on that platform), the digital footprint of negative experiences faced by end users with the company’s offering significantly outweigh the positive. Even if the property were to be as advertised, add-on fees have high potential to sour a user’s experience and impact their budget. Numerous surveys indicate that favour towards the company’s offering have been slipping since 2019³, which were reaffirmed in 2021⁴ as well as in 2022⁵. This is a far cry from 2015 when Goldman Sachs reported⁶ overall favorability tilted towards Airbnb (and away from traditional hotels) after a first-time user avails its services.

Given the vast outlay of host properties across a large number of nations and regions, it’s entirely logical to assume that manually ensuring a high quality of experience and effectively adjudicating issues would be prohibitively expensive (if not impossible). Further personnel costs would also likely elevate the pricing for the end user (or « guest ») well above the average cost charged by most hotels. In other words, the company’s disruptive model would fail against that of legacy players.

In Conclusion

Taking into account survey trends vis-à-vis line item trends, it’s evident that the company is struggling with onboarding new users and maintain a high level of repeat business from those already on the platform despite the company reporting that two-thirds of its platform hosts now offer weekly or monthly discounts. The company’s working on expanding its footprint in Switzerland, Belgium and the Netherlands. Given that at least two of these territories are traveller favourites that are exceptionally well-catered by hotels, lodges and hostels, it remains to be seen if this will turn the company’s growth outlook around without significant additional costs. Added to that is the fact that a stalling in « vacation splurging » trends, highlighted in the middle of last year⁷, delivers a macroeconomic bearish impetus that would likely weigh down the company’s growth in the year to come.

Current trends indicate that the industry Airbnb is operating in do not face a significant disruption from its operations while end user preferences do not show significant monetizable upticks. Stock price corrections wouldn’t entirely be out of order.

Footnotes:

1. “Airbnb to pay $620 mln to settle some Italian tax obligations », 13 December 2023, Reuters
2. Rank as shown in « r/AirBnb », 15 February 2024
3. “Airbnb vs. the hotel industry », 1 July 2019, Real Assets Adviser (Institutional Real Estate, Inc.)
4. “Study: 72% of Americans prefer hotels and resorts to vacation rentals », 15 July 2021, Hotel Business
5. “Airbnb or Hotel? How Travelers Choose », 4 October 2022, The Brink: Pioneering Research from Boston University
6. “Once someone tries Airbnb, they’re less likely to prefer a hotel, says report », 17 February 2016, Business Insider
7. “Revenge Spending Helped Push Prices Higher. The Trend Is Turning. », 13 June 2023, New York Times