Skift Take
Despite the Covid-19 hit, Airbnb stands above its fellow travel rivals due to its ability to continue to book sales during the crisis and turn those stays into cash flow.
Airbnb was one of the fastest growing travel companies in the world before the pandemic hit. It grew gross bookings at an average annualized rate of 36 percent per year over five years. It hit $38 billion of bookings by 2019, up from $8B in 2015. Earning a commission of just under 13 percent, this translated to an impressive take of $4.8 billion in revenue for Airbnb in 2019, according to paperwork filed Monday for Airbnb's IPO, one of the most anticipated public offerings of the year.
But then Covid-19 hit. And Airbnb’s lofty growth was knocked off course. Year-to-date, the company has sold just under $18 billion of gross bookings. That’s down 39 percent from the same time period in 2019 and puts the company on track for a lower level of bookings than it saw in 2018.
Despite challenges posed by the pandemic, Airbnb did manage to post an operating profit of $418 million in the third quarter of 2020. This was partly achieved by a rapidly cutting costs, most notably turning off effectively all marketing spend and laying off 25% of its workforce.
Profits were also aided by a sharp rebound in revenue during peak summer vacation season as Americans experimented with restarting domestic travel, but with a twist. Rather than use a hotel, many preferred to stay in short-term rental where they could stay longer, fit more people, and have more control over their living environment. Revenues quadrupled sequentially, hitting $1.3B in 3Q, from $334M in 2Q.
The caveat is Airbnb's extreme seasonality. It regularly earns the majority, or even all, of its annual profits from the third quarter. So even with the swing to a 3Q profit, the company may still see its fourth quarter and full year numbers end up in the red.
Airbnb's Market Position and Cash Flows Give Advantage Over Peers
Beneath the hood though, there is reason for Airbnb to be optimistic. It is well-positioned in the short-term rental space which has been the least bad segment in all of travel. In September, for instance, Airbnb saw its gross bookings decline by 17 percent compared to last year. Let’s put that in context though, in the third quarter of 2020, Expedia Group saw gross bookings fall 68 percent year
