Airbnb (ABNB 1.09%) operates a platform that connects people looking to travel with hosts offering a place to stay. The company gets hosts and travelers worldwide, so it inevitably hurts Airbnb when frictions are added to travel plans.
The world and Airbnb recently got another bout of bad news regarding the coronavirus pandemic. A new variant (omicron) was discovered in South Africa. In response, several countries started increasing travel restrictions from South Africa.
Airbnb's revenue fell in 2020 as a result of the coronavirus pandemic. Image source: Getty Images.
Travel restriction could slow momentum for Airbnb
Importantly, Airbnb does not own or operate any travel destinations. Instead, it runs the platform that facilitates travel by encouraging hosts to list homes, rooms, and other spaces on Airbnb. The company makes money by charging a fee to travelers and hosts alike for the privilege of using Airbnb.
The asset-lite business model allows Airbnb to expand and contract faster than hotels and resorts in response to consumer demand. The latter would have to forecast an increase in demand months or years ahead to have enough time to build a new structure with rooms.
Folks have liked Airbnb's services that frequently match more closely with what travelers are looking for. If you are with your spouse and children, you may want to book a home with a yard. If you are traveling alone, you might only want a small room. That's usually in stark contrast to hotels, which, in most cases, only offer you a choice of a room with one bed or two.
Airbnb gained traction rapidly, growing revenue by 42.6% in 2018 and 21.6% in 2019, before the pandemic crushed revenue by 29.7% in 2020. It rebounded nicely in 2021 -- revenue was 36% higher in the third quarter compared to the same quarter in 2019. However, the added travel restrictions caused by the omicron variant might slow down its momentum.
It's interesting to note that when the onset of the coronavirus pandemic halted travel worldwide in 2020, Airbnb's revenue fell at a slower rate than the overall industry. What's more, as travel demand has rebounded, Airbnb's revenue is above pre-pandemic levels, while the industry has yet to recover the losses. In both good times and bad, Airbnb outperforms its industry.
No reason for Airbnb shareholders to panic
Airbnb reported its highest-ever net income of $834 million in Q3. Management adjusted the business to operate more efficiently and prepared for an extended period with an unpredictable virus. That's resulted in the company reporting record revenue and profits, despite high levels of the COVID-19 disease still in circulation.
A worldwide travel slowdown caused by the rise of a new variant will undoubtedly harm the business. However, it is not a cause for shareholders to panic and sell Airbnb stock. On the contrary, if the stock falls significantly due to the bad news, it might be a good time for long-term investors to buy Airbnb. The company offers a superior form of travel, and a temporary slowdown is unlikely to stop it from gaining market share.
