The short-term getaway platform offers big long-term potential, but the field is getting crowded.
Over almost the first four months of 2021, the S&P 500 and the tech-heavy Nasdaq Composite have lost 6% and 14%, respectively. Although both indexes have bounced off their lows, the pullback serves as a stark reminder that bull markets not only pause, but can and will have sharp corrections, too.
On the other hand, it also provides savvy investors with an all-too-rare opportunity to buy good companies at great prices. Being able to buy a stock on sale and hold onto it for years, decades even, is how generational wealth is created. Image source: Getty Images. Right now, short-term vacation rental company Airbnb ( ABNB -1.15% ) is a growth stock in the midst of a pandemic recovery like a lot of businesses today, but it (and the rest of the country) are entering a period where economic growth may come to a screeching halt.
The Federal Reserve is ready to raise interest rates to levels not seen in decades in an effort to combat rampant inflation, a move that could send the economy spiraling . In such a scenario, Airbnb’s ability to profitably operate would be severely challenged, which naturally leaves investors wondering whether the vacation rental leader is still a worthwhile investment.
So let’s see whether patience with Airbnb will pay off and allow you to retire not just well off, but as a millionaire. Image source: Getty Images. Travel takes flight once again
Despite years of phenomenal growth, Airbnb has only just turned profitable on a recurring basis. The fourth quarter marked the first time in its history that the vocational rental platform put together back-to-back profitable quarters, and it came at a time of explosive consumer spending after a year-plus of people being cooped up in their own homes.
Being able to get out and travel again was a big boost to the entire hospitality industry , and Airbnb has been swept along on the wave.
Full-year gross booking value of $46.9 billion was nearly double what it was in 2019 before the pandemic struck, while revenue of $6 billion was 74% higher. And while it produced a full-year loss of $352 million, that was nearly half what it was two years prior, and adjusted earnings before interest, taxes, depreciation, and amortization ( EBITDA ) was $1.6 billion, a substantial increase over the $253 million lost on a two-year stack.
It’s clear Airbnb’s business is becoming financially stable, but it’s also benefiting from a unique set of circumstances that may not be repeatable, especially as recessionary pressures loom. Image source: Getty Images. Settling in to a new opportunity
Still, there is a massive market opportunity Airbnb can exploit, both within its current niche as well as in the broader extended-stay market that it is just beginning to tap.
The rental hub notes that the percentage of active listings accepting long-term rentals, meaning stays of 28 days or more, now exceeds 90%, suggesting people are now living in Airbnbs, not just renting them.
Long-term stays have become the company’s fastest-growing business measured by trip length, accounting for 22% of gross nights booked in the fourth quarter, a 16% increase from the fourth quarter of 2019.
Short- and long-term stays are all still just a small sliver of the entire hotel industry, but they are growing much faster than hotels , which is why Marriott ( MAR ) partnered with home rental firm Hostmaker to offer Airbnb-style rentals through its Tribute Portfolio Homes; Choice Hotels ( CHH -2.30% ) began offering private residence, cabin, and resort-style accommodations through its Vacation Rentals business; and Wyndham Hotels ( WH -2.91% ) is directly competing against Airbnb through its own extensive vacation rental business. Image source: Getty Images. A crowded market
But competition is mounting. There’s a good chance you’ve seen Expedia ‘s ( EXPE -0.95% ) Vrbo advertising somewhere lately, and Booking.com ( BKNG -1.14% ) has also upped its marketing efforts to get in front of travelers. What arguably gives them a competitive advantage is they’re not just vacation rental-focused, but also more broadly travel-oriented, potentially casting a wider net for consumers.
Alphabet ‘s ( GOOG -4.26% )( GOOGL -4.15% ) Google also has the ability to further upset the travel marketplace. As the first place people turn to when planning a trip, its presence could more deeply extend that into the home rental business too.
Yet because Airbnb has been so laser-focused on its niche, its name is nearly synonymous with short-term […]
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