And don't forget the millions of listings in urban centers around the world. Our bookings disappeared overnight. And, I am assuming never picked up. I don't know because I decided to switch to extended stay until we get to the other side of this pandemic but I feel pretty confident that vacationers are not jumping in their cars and heading to a city that has been mostly closed down. I'm sure the urban listings were the backbone of the Airbnb business.
Losing money isn't new for them. They lost $306 million in Q1 2019. Their losses are rising to be sure, but pre-IPO big tech doesn't tend to turn a big profit anyway.
Not so fast, folks. Sure, Airbnb had a terrible 2nd quarter. So did every hospitality company. But now the outlook is much brighter for vacation rentals than for hotels, and Airbnb's IPO is back on track. Brian Chesky is being quoted all over the place. Check it out from the CNBC article below:
"Expedia and Booking Holdings both saw a roughly 90% drop in gross bookings in the second quarter, reflecting just how difficult the past three months have been for the travel and hospitality sector.
While the outlook remains uncertain, there is one segment of the travel market on fire: vacation rentals.
With the center of gravity shifting from cities to suburbs, demand for homes close to beaches, recreational parks and trails continues to grow across the nation."
I can anecdotally confirm that vacation rentals have been "on fire". We have raised rates and booked out for the balance of 2020! We will likely match 2019 revenue even with 5 weeks of COVID shutdown (zero revenue)! We are looking to dive in with another vacation rental here in the back half of the year.
This is peanuts for a company like Airbnb. They are a giant and will be a giant. To go through a Q2 like that they are coming out relatively unscathed. Let’s not forget they are simply a broker between home owners and renters with excellent technology to facilitate that. Little fixed costs. They control their fees (Revenue) and an event like Covid required them to control their costs. While not perfect I don’t see them going anywhere but up. Interestingly, for the first time, I’m getting a bit more bullish on VRBO (Now that they are really shedding their Homeaway legacy). It’s critical we have a viable competitor in this space or all our eggs as hosts will be in one basket. They do need to up their technology game as Airbnb while not without issues is far slicker and resonates much more so with the next generation.
@John Underwood yes, they cut their workforce by 25% which explains (but not excuses) the customer service issues. They have also scaled back their Experiences division. I know they also borrowed a significant amount at the height of the pandemic. It will be interesting to see where they end the next quarter.
They are looking to go IPO by the end of this year. They may have to given the debt load they have taken at a very high interest rate. I am wondering why they are paying 11% on debt when junk bond offerings are selling for 2 - 3%.
I feel investors will gobble up the IPO offering in no time because coming out of this pandemic ABB will likely be the most viable hospitality company in the world. At this time it seems they are leading the market. Of course let’s also acknowledge the market itself is 30% of what it used to be.
@Justin Thorpe "ABB will likely be the most viable hospitality company in the world" agreed. Amazing considering all the naysayers and WSJ articles just a few months ago who were predicting their demise.
Hi Christina - I live in Atlanta, but our STR is in Blue Ridge, GA. I'm bullish on STR - especially in "drive to" locations. People want out of the house and a change of scenery from the last 5 months!
Paul, I can confirm that. My vacation rental is on the California Coast, half way between Monterey and Santa Cruz. We had a few weeks where we couldn't book, but once we could, it caught fire. It is about an hour to two hours from San Francisco and Silicon Valley. A drive-to location. It's booked solid for July and August, and starting to book up for the fall as well.
Although this might be a good time to pick up a bargain in Hawaii.....
Are you eagerly waiting the IPO that’s talked about being available later this year? Will you invest?
No, I will not. The first book I ever read on investing was The Intelligent Investor (written by Warren Buffett's mentor) and there is very strong admonishment against IPO investing, if memory serves. I'm stocking cash for more real estate deals!
Hey @Chris Purcell, yes I can do math. I don't think everyone is expecting those kinds of losses every quarter until they are dead. Maybe just you think that. I am saying that one bad quarter isn't going to kill AirBNB.