Airbnb can settle into a post-pandemic market

3 min read . Updated: 26 Feb 2021, 06:11 PM IST Laura Forman, The Wall Street Journal

The home-share giant’s market value beats that of hotels—probably for good reason

Against all odds, Airbnb might be a relatively safe place to rest both your family and your money in 2021.

It is true that the stock appears, on its surface, death-defyingly overvalued. With a market value of $120 billion, Airbnb is now worth more than Marriott International, Hilton Hotels & Resorts, Hyatt Hotels and InterContinental Hotels Group combined. That is to say, a bet on Airbnb this year reflects a conviction that the homestay market will own the hotel business to a degree that it never quite recovers in full.

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The home-share giant reported fourth quarter results Thursday—its first report as a public company—showing revenue down just 22% year over year. That is hardly ideal, but it looks fantastic in comparison to its lodging peers. Revenue in the same period was down an average of 61% for Marriott and Hilton, for example, and an average of 65% for major online travel agents Expedia Group and Booking Holdings, which derive a significant portion of their business from lodging bookings such as hotels and homestays. Perhaps more important, Airbnb’s business performed significantly better in the fourth quarter relative to its full-year results. Major hotels and online travel agents performed significantly worse.

Bottom-line comparisons look positive, too. Airbnb said it lost just $21 million on the basis of adjusted earnings before interest, tax, depreciation and amortization in the fourth quarter, compared with a loss of $276 million in the same period a year prior. Marriott meanwhile swung to a loss in the fourth quarter and said it lost money for all of 2020 for the first time since 2009.

That bodes well for Airbnb’s pace of recovery and consumers’ likelihood to opt toward the safety of a homestay over the exposure of a hotel as the world slowly opens back up. Marriott, for one, is trying to revive its business by branding itself as the destination for “bleisure,"—the blending of post-pandemic work travel with a leisure vacation. But with millions of listings in 100,000 cities world-wide, that is exactly how Airbnb has been used for years. As Chief Executive Officer Brian Chesky said Thursday, his company is already a noun and a verb in pop culture.

This isn’t to say it is all smooth sailing ahead for Airbnb. Commentary from Booking’s fourth-quarter conference call Wednesday suggests international travel remains extremely depressed. It is likely to remain so until government orders are broadly lifted, vaccines are largely distributed and consumers begin to feel comfortable flying again. As much as Airbnb has promoted domestic drive-to travel and its presence in remote areas, the reality is that the majority of Airbnb’s listings are outside of the U.S. and in and around more densely populated urban areas. Things won’t improve everywhere overnight and, when they do, Airbnb is going to face more competition in its largest markets as hotel stays become more viable in travelers’ eyes.

Early indications are that consumers are itching to get back out, though. OpenTable data shows recent restaurant reservations are nearly back to pre-pandemic parity nationwide, for example. And an Airbnb survey referenced by Mr. Chesky on Thursday found people miss travel even more than they miss restaurants.

If you are going all-in on the reopening trade, not all travel stocks carry equal risk. Shares of major hotel companies are already trading above pre-pandemic levels, despite the fact that hotel occupancy rates are still hovering below 50% in the U.S., according to data from hotel analytics firm STR. Meanwhile, the alternative accommodations space overall has led travel’s recovery, a data point supported by results from both Booking and Expedia this month.