Airbnb IPO – Things for investors to know

Trading Blog | 5 min read 

Airbnb IPO - Top things for investors to know

An Airbnb IPO is in the works, here’s what to expect from the world’s biggest people-to-people accommodation marketplace going public.

Written by Mitchell Roach
@mvtchh

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What is Airbnb?

Founded in 2008, Airbnb is the world’s most popular travel accommodation marketplace, empowering millions of people all over the world to monetise and unlock their homes, allowing them to become hospitality entrepreneurs in the process. The company’s people-to-people platform delivers benefits to all its members, including guests, hosts, communities and employees.
 

Why is Airbnb going public?

Good question! The majority of companies go public with the aim of raising capital. With Airbnb it seems that it needs neither the immediate funds nor the reputation boost, so why is it thinking about an IPO?

Airbnb profits are stable. Even though it is a private company, and we don’t have exact financial metrics, TechCrunch reports that the company earned more than $1 billion in revenue in Q3 2018. Furthermore, Wall Street analysts predict that Airbnb’s revenue will continue its steady growth from $3.8 billion in 2018 to $8.5 billion in 2022.

Commenting about the Airbnb’s IPO plans, Mr. Blecharczyk added: “We have not decided if we will go public in 2019, and our focus is on building a 21st-century company, and we’re all committed to that goal”.

 

Airbnb fast facts

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Airbnb listings worldwide
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Cities with Airbnb listings
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Countries with Airbnb listings
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People staying on Airbnb per night

What is an IPO?

An initial public offering is a process by which a company lists its shares for public trading. The company decides how many shares it is going to offer, and an investment bank typically estimates the initial price of the stocks based on supply and demand. After the company’s shares are listed on the stock exchange under a particular ticker symbol, these shares can be publicly traded. 

Learn more about IPOs here >

Airbnb IPO date – When will Airbnb go public?

Despite all the media hype about Airbnb going public this year, we still don’t have an exact IPO date. Recently the company has said that it might wait until 2020, although in April, Airbnb’s co-founder Nathan Blecharczyk confirmed that the company is taking steps to be ready to go public this year.

The market is already oversaturated with giant IPOs, and maybe it’s a smart decision that Airbnb has decided to wait until the end of the year. The ‘no rush’ approach might be also caused by the company’s strong financial position and the fact that it doesn’t need an immediate cash injection to stay afloat.

What is Airbnb’s valuation?

Airbnb hasn’t officially filed papers for an IPO yet. According to the most recent internal estimates, Airbnb is likely to be valued at $38 billion, which supersedes the previous valuation of $31 billion.

For now, if this valuation remains unchanged and when the Airbnb listing is confirmed, the company will enjoy one of the world’s largest market caps within the online travel and accommodation industry. Just for quick reference: Booking.com takes the lead with $80 billion, followed by Expedia and TripAdvisor having $18 and $7.4 billion respectively.

What is Airbnb’s business model?

Airbnb’s business model is based on helping travellers to book privately owned accommodation online. It acts as a broker between traveller and property owner – allowing the owner to list their space for rent and connecting them to the traveller. Airbnb also manages payments, acts as a mediator in the case of grievances, and lists reviews of both hosts and travellers.

The accommodation listed by Airbnb ranges from private homes to hotel rooms, and even novelty lodges such as treehouses. There are listings in over 81,000 cities in 191 countries to choose from. Besides accommodation, a small part of the business focuses on restaurant and experience bookings. Airbnb Experiences offers users more than 25,000 local activities to choose from when they travel.

The strength of the Airbnb business model lies in its competitive pricing, the unique user experience and its huge global presence.

In order to stay competitive in the hotel industry, the company is currently working on diversification of its offering and including some complimentary travel services.

According to Brian Chesky, the company’s CEO, Airbnb platform is opening a studio for streaming and creating original travel content. A small part of its business is dedicated to restaurant and experience bookings. The ‘Experiences’ segment offers travellers over 25,000 local activities to choose from.

By 2022, new company’s activities, including experiences, transportation and other segments will take up a significant portion of its business. Still, Airbnb’s major revenue comes from helping travelers to book privately owned apartments online. The key drivers of Airbnb’s market success include competitive pricing, an extensive global presence and advanced user experience.

Who owns Airbnb?

The company doesn’t have one single owner. Most of the Airbnb stock belongs to the company’s founders, Nathan Blecharczyk, Joe Gebbia and Brian Chesky, who launched the business in 2008.

Besides, the company has many private investors, including Sequoia Capital, CapitalG, TCV, FirstMark and Manhattan Venture Partners among others. All in all, Airbnb has 53 investors, who gave $4.4 billion in funding.

What is Airbnb likely to be valued at when it lists?

According to internal valuations, Airbnb is likely to be valued at around $38 billion when it lists. This surpasses a previous valuation of $31 billion. However, this figure may be distorted due to media hype, and it may not reflect the true value of Airbnb stock to the customer.

When the Airbnb listing is confirmed – and if the valuation remains unchanged ­– Airbnb will have one of the largest market caps in the hotel and online travel agency industry. TripAdvisor is currently valued at $7.4 billion, Expedia at $18 billion, while Booking.com takes the lead at $80 billion.

What’s the outlook for Airbnb?

Airbnb has had major success since its launch in 2008. And, with $5 billion in the bank, the outlook is bright. To remain competitive in the industry, the company is working on diversifying and expanding its platform to include complimentary travel services. Plans also include launching a loyalty programme, attracting higher quality hotels, and creating a corporate travel business. The CEO revealed that Airbnb is even considering launching an airline.

By the year 2022, experiences, transportation and other unexplored segments could make up a considerable part of the business – even though it may still rely heavily on accommodation to create revenue.

How has Airbnb been performing?

Airbnb is outperforming many of its peers and has made a profit for two consecutive years (2017 and 2018). During the early years, the company reported a very healthy growth rate of between 150% and 300% a year. In 2013, nearly 250,000 properties were added to Airbnb and revenue started growing at an incredible pace – almost 1000% between 2013, when it was $250 million, and 2017, when it reached $2.6 billion.

In 2017 it posted a $93 million profit from its $2.6 billion income, and in the third quarter of 2018 it raked in more than $1 billion. Final revenue and profit figures for 2018 have not yet been released.

Who are Airbnb’s biggest competitors?

Airbnb’s biggest home-sharing competitors are HomeAway, VacayHero and HouseTrip, to name a few. However, Airbnb’s presence across the globe far outweighs any of these companies, and none of them have released an initial public offering. As for online travel sites, Airbnb shares the limelight with the likes of Booking.com, which does sell shares to the public.

While there are many similarities between Airbnb and other home-sharing services, it remains the forerunner in the market. Besides having more rooms listed than the top five hotel groups combined – a staggering 6 million – Airbnb also has more (and less conventional) options to choose from, such as castles, boathouses and treehouses.

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