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The Biden Administration Is Maintaining Travel Restrictions: What That Means for Airbnb

By Parkev Tatevosian, CFA – Aug 5, 2021 at 8:02AM

Key Points

  • Travel restrictions could be concerning in the short term since it hampers Airbnb's major segment catering to international travel.
  • However, domestic travel within the U.S. is fortunately picking up the slack.
  • Pent-up demand for travel will eventually explode, and Airbnb is positioned to benefit immensely.

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Travel companies were urging the administration to ease restrictions to help their businesses rebound.

Airbnb (ABNB 1.08%) is a global facilitator of travel. Therefore, it was no surprise that its business was devastated by the coronavirus pandemic, partly because of restrictions on cross-border travel, and partly because people were hesitant to get on planes or trains. 

Fortunately, several effective vaccines have been developed against COVID-19, and that's leading governments and countries to ease business and travel restrictions. However, the spread of the highly contagious delta variant is giving people pause in the midst of reopening. And the Biden administration has announced it is keeping foreign travel restrictions in place for the time being.

A man and woman unpacking a luggage.

Image source: Getty Images.

Cross-border travel was a big part of the business

The extension of travel restrictions is concerning for Airbnb because nearly half the nights booked on its platform before the pandemic were for cross-border, or international, travel. Company management has been hoping for a recovery in the segment as the world gets vaccinated, but it seems it will have to wait a little while longer.

Specifically, restrictions on travel to and from the U.S. are likely to affect Airbnb more than any other country's restrictions. Travelers in the U.S. collectively spend more on their trips than travelers in other countries. And stays in the U.S. cost more per day than stays in many other countries.  

Moreover, when full-scale travel returns, it's going to look very different. According to CEO Brian Chesky, people will travel more broadly, stay longer than they used to, and are generally more flexible than before the pandemic. Those are all areas Airbnb is focusing on and intends to excel in as consumers prepare to take long-delayed trips.  

In the meantime, travel between cities is picking up the slack from cross-border travel. People prefer to get in their cars and travel someplace close for a little rest and relaxation. Undoubtedly, that was a factor in pushing Airbnb's revenue back up above its levels before the pandemic.

Eventually, cross-border restrictions will be lifted, and that will be a boon for Airbnb. Chesky said as much: "So I think that as restrictions lift in countries, as vaccinations rise, we think this is a significant tailwind to both urban travel and cross-border travel."

What this could mean for investors 

The company is preparing for an epic rebound in travel worldwide. There is likely pent-up demand for travel in areas that have had been restricted to travelers both inbound and outbound. After all, the pandemic forced cancellations of all kinds of travel, and not just vacations.

Airbnb is investing in a campaign to bring more hosts to the platform, make listing properties easier, and add features that will persuade travelers to be flexible in their destination and date requirements. It all should lead to a more robust offering from Airbnb for guests and hosts as the rebound in travel progresses. 

Folks were already looking to Airbnb over hotels on some occasions because it offers greater convenience and variety. Airbnb is enhancing its businesses to capitalize on those advantages even further. The extension on travel restrictions could be an opportunity for long-term investors to get in on the stock before the recovery in travel accelerates. 

Parkev Tatevosian has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Airbnb, Inc. The Motley Fool has a disclosure policy.

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