Travel company Airbnb (ABNB 0.44%) posted phenomenal third-quarter earnings last week. While they were deservedly cheered on by investors, it's the future that looks particularly bright. Airbnb is well-positioned to keep up its high growth, and although its shares are expensive, there's a reason investors are assigning it a high premium. 

Nailing the fourth quarter

Airbnb had an outstanding 2021 after a dismal 2020. Travel picked up even as broader global travel restrictions remained intact, and that's at least partially due to the company's adaptability. It can meet demand wherever and whenever it is through its constantly expanding fleet of rental homes in any location. These include locations that large hotel groups can't service since they're too small, giving Airbnb almost a monopoly in some far-flung locales. 

Three people siting at a table.

Image source: Airbnb.

Many of the trends that first sprung up at the beginning of the pandemic continued to strengthen in the fourth quarter, such as longer stays and greater domestic travel. Almost half of nights booked in the fourth quarter were for stays of a week or longer, and 20% were for a month or longer. Average trip length increased by 15%. Nights booked in non-urban locations increased 45% year over year in the fourth quarter.

Overall, total revenue increased 78% year over year and 38% over the 2019 fourth quarter, and nights and experiences booked increased 59% year over year, although they were still 3% behind the 2019 fourth quarter. Net income was a record $55 million after a $3.9 billion loss last year (mostly related to the company's initial public offering or IPO).

Imagine a normal travel season

If Airbnb's performance is this good when travel is restricted, imagine what it will look like when travel is totally open. Trends have been shifting back to pre-pandemic style as social distancing efforts are curtailed, and Airbnb saw that in the fourth quarter. Urban gross nights booked accelerated from the third quarter and closed in on 2019 levels.

When things do go back to normal, that should shift some of the company's business away from its new booking sources, meaning longer and domestic stays. But those should remain viable options for travelers, who are not likely to completely abandon them. Management cited hybrid living as a new direction for the company, and this should power some of its growth.

So while Airbnb is likely to see demand adjust to whatever the reality is at the moment, there are now more iterations of its business model to service its customers depending on what they want. That's something most travel companies can't offer, especially at the scale of Airbnb.

Management cited three priorities for 2022: Enable people to live anywhere using Airbnb, unlock the next generation of hosts, and make Airbnb the ultimate host. Those are goals that work with whatever model its customer base is demanding at any time, and can dramatically increase its revenue over time.

The wild ride is smoothing out

Airbnb's stock has been volatile since its IPO at the end of 2019. It was the largest IPO that year as far as valuation, and it probably got too big too fast, closing at $140 on its first day of trading and hitting as high as $212 less than three months later. It's now trading at a high but more reasonable $186 as of this writing, which is about 130 times forward one-year earnings. 

The market is more temperate in general in 2022 as the economy continues to deal out inflation and macroeconomic uncertainty. So investors shouldn't expect skyrocketing gains this year. Instead, focus on slow and steady long-term growth, and Airbnb should be able to deliver.