2020 has been great to Brian Chesky, now worth about $3.1 Billion. 2020 has been incredibly strange. Imagine a hotel business doing an IPO during a pandemic when their business has been suffering incredibly and instead of the stock price going down it goes up like a rocket.
Right now, the day after launch the price of a share of ABNB is $139 with a market cap of $82Billion.
Why is Wall-Street so pumped about this business more than others?
This youngster is more valuable than all the other hotel chains.
Well this is the new economy and the new world that we are living in.
I love traditional hotel chains. I love the architecture. The lounge. The pool. And most of all the service. I love having my bedsheets changed each day and the floor vacuumed. It makes me feel taken care of and like someone is looking after me.
But Airbnb is different. Like Uber for your home. They do not have physical hotel buildings. They rely on you. The user to offer up your place.
There are several things that make Airbnb more valuable than traditional hotels.
Airbnb is only limited by how many users they can sign up to their platform. They do not need to purchase or build physical structures. There are enough homes and apartments for already on the market that can be used as rentals.
Airbnb allows individuals the ability to list properties for rent. These people instantly become entrepreneurs. They make money and they spread the word about making money. The more money Airbnb makes the more their users make.
B.) Lower costs
Less staff, less property taxes, less employees. Employees can be oversees and get paid less with only a handful here in the US.
C.) Millennial investors
Nice hotels can be expensive and therefore their customers are older. Airbnb is often cheaper than traditional hotels. This lends itself to a younger clientele.
Millennials are also interested in investing. They like to invest in businesses they use. Apple, Amazon, Stitch Fix, Starbucks. And now Airbnb. This drives the price of the stock up, even though the numbers might not be as strong on the backend.
D.) Cool factor
There are a million different designs on Airbnb to choose from. Each house is different. This lends itself to advertising. Creativity. This and the network effect of users means that Airbnb will have to do a lot less advertising over the competition.
Airbnb is really a tech company. And tech companies are good at diversifying. Google, Amazon, Apple. Airbnb will use their core business to extend itself into other lines of business. Maybe they will start offering home furnishings or allow people to sell products on their platform. Maybe they will create a design service. Or create their own cloud and offer those cloud services to other businesses. They ideas are endless.
Tech business like to experiment. As a customer you have an expectation of Marriott. They have a business model that works for them. They are not going to experiment much with their bread and butter. But Airbnb will. They will add new features and offerings to their users. They will update their business model and try and improve the experience. They may branch out into other areas of business that the public has not even thought of yet.
What can other businesses learn from Airbnb?
Every single business needs to be a tech business. They need to leverage technology to make their business better and streamline the process.
The need to have multiple streams of revenue. If a business just manufactures metal pipes they need to start selling the product that makes their product. Or create a market place where other people can products related to what they manufacture.
What can you learn from Airbnb?
Think differently. What problem can you solve in your life that also affects a billion people.
How can you leverage the people around you to create a business or just bring in income?
Can you create something that is easy to use? or make something difficult easier?
Airbnb is easy to signup and list your property to rent. Or easily rent someone’s property to stay for a vacation. And you never have to interact with other people.
What are the long term prospects of Airbnb?
Unintentionally it was brilliant to IPO during a pandemic. Never let a crisis go to waste. The business has been hurt by the global illness. Revenue is down. But the end is in sight. The vaccine is being produced and delivered.
The economy will slowly come back to life.
Expectations have been lowered for the business. Every business right now is hurting and nothing more than travel.
This will probably be the lowest point of revenue for the business in the next 10 years. People will slowly start to travel again and the numbers of people out and about will rise. The number of people needing a hotel to stay at will increase for the next 5 years. Airbnb is in the perfect position to take advantage of this macrotrend.
It can tough to invest in an IPO, because there is no track record. You have to believe in the management of the company to get the job done. But it can be very lucrative if you pick a winner.