After two years of the pandemic, there are signs that the economy is finally ready to fully reopen.
Mask mandates have come down across the country, hospitalization rates are at their lowest since the pandemic started, and immunity might have reached a tipping point. Americans also largely seem ready to put the pandemic behind them.
The reopening could be a bonanza for industries that were hit hard by the health crisis, including live entertainment and travel. And one company that seems poised to win is Airbnb (ABNB 6.87%), the global leader in home-sharing.
Airbnb has outperformed its peers during the pandemic as the flexibility of its model gave an advantage over hotel chains, which can't easily adapt to changing travel conditions. After a dip in 2020, demand on Airbnb recovered rapidly, but for different kinds of visits, like in rural areas outside of cities and long-term stays. Hotels, on the other hand, are mostly concentrated in cities and, lacking kitchens, aren't meant to accommodate long-term guests.
A rising tide lifts all boats, and several industry watchers are predicting a record summer season, including Expedia CEO Peter Kern. But there are a number of reasons why Airbnb looks to be the best reopening stock to bet on here.
A differentiated platform
Russia's invasion of Ukraine was just the latest reminder of how Airbnb stands out from other travel platforms. The company acted quickly to rally hosts to accommodate Ukrainian refugees, setting a goal of hosting 100,000 refugees. Users also embraced the travel marketplace as an easy way to donate money to Ukrainian hosts.
While there are other home-sharing platforms like Expedia's VRBO, HomeToGo, FlipKey, and apartment listings on sites like Booking.com, Airbnb is unique because most of its listings are hosted by individuals rather than by professional rental companies. Though not all listings are from individual hosts, the experience it offers is different from competing platforms.
Airbnb's embrace of experiences is another differentiating factor. In addition to offering accommodations, the company adds experiences like cooking classes, walking tours, or a photography session. These experiences help complement the community-building mission of Airbnb, and the website could see strong demand this summer as travelers look for ways to make new connections and have new experiences as the pandemic fades.
A business model that's ramping up
To address the challenges of the pandemic, the company laid off a quarter of its employee base early in the crisis. This has helped ramp up profitability. In 2021, Airbnb reported $1.6 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA) on $6 billion in revenue, equivalent to a 27% EBITDA margin.
With the continuing success of its online marketplace, Airbnb should see margins continue to expand as it grows since the marginal cost for each additional booking is minimal.
The rise of remote work will also support the company's growth and help it take market share from hotels. Remote work allows employees to travel throughout the year, and some will certainly take advantage of that freedom with a long-term stay at an Airbnb where they can enjoy amenities like a kitchen and an office that they couldn't get from a hotel.
Remote work could even encourage more people to become hosts because listing your apartment on Airbnb is a great way to fund your own vacations. The decline of COVID-19 could also encourage potential Airbnb hosts who may have been hesitant to have strangers in their homes because of the pandemic.
A booming travel year
Lastly, there are a number of signs pointing to a boom in the travel market, and Airbnb is uniquely positioned to take advantage of the recovery with accommodations at a wide range of price points and locations, and listings all over the world.
AirDNA, an analytics platform for short-term rentals, said that demand for such rentals in February reached record levels, and average daily rental rates are also on the rise as inflation in the real estate industry gets passed along to the customer, benefiting Airbnb.
The home-sharing leader even benefits from rising interest rates as it collects interest on the money it holds in between bookings and stays.
With its competitive advantages, macroeconomic tailwinds, and a highly profitable business model, Airbnb looks poised for a banner year as the travel market reopens.