Airbnb (ABNB 2.48%) is finally rebounding from the devastating effects on the travel industry brought on by the coronavirus pandemic. Even if people's willingness to travel was unchanged, restrictions on cross-border travel by governments constrained activity.
Thankfully, several vaccines have been approved to combat the spread of COVID-19, and as of this writing, more than 1.75 billion doses have been administered worldwide. As a result, travel is beginning to rebound, and Airbnb is starting to see the benefits.
Rebounding from COVID
In the first quarter, Airbnb reported revenue of $887 million, which was 6% higher than last year and 5% higher than the comparable quarter in 2019. In other words, its revenue is back to pre-pandemic levels. What makes that more impressive is that significant travel restrictions remain globally. For example, Walt Disney's (DIS 3.30%) Disneyland theme park in California isn't allowing anyone outside of the state to enter the park until June 15.
And while vaccination rates are progressing well in wealthier countries like the U.S., the U.K., and others, wide disparities remain with poorer countries. This could be creating a bottleneck for prospective travelers. However, that could be a tailwind for Airbnb as vaccination rates improve over the next several quarters.
Indeed, Airbnb expects a travel rebound unlike any in the history of travel. To prepare for this, the company launched its first-ever ad campaign in the year to attract more hosts to its platform. Therefore, it seems prudent for management to increase the supply of listings on its site if it expects a surge in demand. What's more, increasing supply could decrease prices for travelers, which could spur demand even further.
A scalable business model
Longer-term, folks are appreciating its business model when traveling. People may be able to find an Airbnb destination in areas that don't have hotels. Furthermore, people like the option of renting an entire home rather than a room in a hotel. The global market size of the hotel and resort industry was $1.2 trillion annually in 2019. If you compare that to Airbnb's $887 million in first-quarter revenue, you can start to see the scope of the potential opportunity in front of it.
And Airbnb seems built to scale up efficiently. Consider a hotel company — if it wants to expand, it needs to spend a large upfront sum on building out a hotel. But its spending is not done there — it also needs to hire staff and pay to maintain that property — in good times and in bad.
If Airbnb wants to scale, it invests in bringing in more hosts. Once a host comes online, they list a room or a home, and Airbnb takes a percentage of the total booking value.
Should you buy Airbnb stock right now?
Airbnb is trading at a forward price-to-sales ratio of 15.47 as of this writing, roughly 40% lower than its 2021 peak near 25. That's despite its prospects improving as the year progresses with the administration of more and more vaccinations, easing of travel restrictions, and folks in parts of the world feeling more comfortable traveling.
The sell-off had more to do with the broad selling of profit-less growth stocks than anything specific with Airbnb. So that could be an opportunity for investors looking for a growth stock poised to rebound as the world recovers from COVID. Keep in mind, however, that it's not certain that the direction of recovery will be smooth or balanced.