Airbnb has entered the building
Edition 29. The comeback edition. How is that workation going?
After a hiatus, the newsletter is back!
Where was I?
Well, it has been a taxing lockdown, I was recharging my batteries on a ‘workation’ and now I am back!
Where did we leave things?
Right, COVID-19.
Europe is into a new lockdown, record cases are piling up in the US, and states in India are putting up barriers to prevent that dreaded second spike.
Meanwhile, pool parties are taking place in Wuhan while the Chinese economy stages an incredible bounceback.
However, with three different vaccines showing impressive results in trials, the endgame for the pandemic seems to be in sight. Though logistical challenges seem daunting in a country like India which will have to set up the infrastructure from ground up to vaccinate close to a billion adults.
The last couple of weeks saw interesting companies file for an IPO in the US. Working out of a remote location myself, I was extremely interested in reading through Airbnb’s prospectus to understand the new trends in travel. Today I want to look at how COVID-19 has impacted their business and what that might imply for how we travel in the near future.
It is hard to not be impressed by the scale Airbnb has achieved in 12 years since its inception.
4 million hosts (86% outside the US) have 7.4 million listings in ~100,000 cities in 220 countries. They have opened their doors to over 825 million guest arrivals. In 2019 alone, 54 million guests booked ~330 million nights and experiences cumulatively earning the company over $4.8B in revenue and almost breaking even at the EBITDA level. That is an incredible achievement considering the pace at which the company is growing - revenues, for instance, grew by a third from 2018 to 2019.
The one thing that really stands out is the level of customer love. 90% of the guests and 80% of the hosts come to the platform organically.
The S1 is a gem and I recommend reading it. It also contains delicious tidbits about the impact of COVID-19 and how the future of travel might shape up. A few takeaways -
COVID-19 was a massive disruption (shocking!) but people’s love for travel remains unabated and helped pull things back.
COVID-19 was a hammer blow to the hospitality industry. Consider these stats -
Revenues fell year on year in the second quarter by 54% at Wyndham, 72% at Marriott and 77% at Hilton, three of the world’s biggest hotel chains. The online travel agents were hit harder still. Expedia, the world’s biggest online travel agent, saw turnover plunge by 82%. Its arch-rival, Booking.com, did worse still with a drop of 84%.
Airbnb suffered too. Revenue in Q2 2020 was 2/3rds lower than Q2 of 2019, but things pulled back substantially as the year progressed. The revenue at this point is 20% lower than in the corresponding period of 2019 and seems to have stabilized at those levels.
Domestic tourism is replacing international travel. As the quarantine rules render international travel cumbersome, Airbnb witnessed a dramatic boom in domestic bookings. The platform is traditionally geared towards international travel – ~50% of all bookings on Airbnb are for international travel, compared to the broader hospitality industry average of 20%. In September ‘20, ~80% of the bookings were for domestic travel.
Yes, ‘everyone’ is indeed working out of Goa.
On a side note, it is a testament to the Airbnb team that they re-designed their entire platform in a short span to cater to this shifting preference, including listing ‘nearby places’ at the front and center of their homepage.
People are planning trips at distances closer to home and are staying longer. As ‘workation’ takes off, an interesting trend was observed in Airbnb’s business.
While long-term stays (28 nights or more) were 12% of the total nights booked on the platform in October last year, this year the corresponding number was ~22%. Short-term stays have seen a consistent decline since the imposition of global lockdowns starting March and April. However, long-term stays have increased month on month and over the previous year.
The rise of longer stays has also coincided with users booking trips closer to their homes. Bookings <50 miles is the fastest-growing segment for the last two quarters.
So what happens to travel now?
A broader trend underlying the tectonic changes in the travel industry is the collapse of business travel.
The global travel industry had an estimated spend of ~$8T pre-COVID. Business travel contributed $1.6T to this. 12% of the flight tickets are booked for business travel and since they are mostly last-minute bookings, they contribute to ~75% of the total profits, making this a cash cow for the airline industry.
This was a striking chart in the FT
The fallout of this is immense - airlines are in distress (British airways is selling its first-class champagne trolleys, bread baskets, and beddings), car rental companies have folded (I had written about Hertz in a previous edition) and storied hotel chains are adapting.
Mariott has announced new offerings to induce its patrons to work remotely (and stay longer). Hotel chains like Accor are marketing their rooms as workspaces for those whose homes are not suited for remote work. Others are announcing weekly packages allowing patrons to stay for the week and leave their belongings back for the weekend.
For many of you, it is entirely possible that remote work might continue and distributed teammates could come together for shorter stays and meetings in nicer locations. An interesting thread from Linkedin below -
The post had sharp insights from Amit Damani - the founder of Vista rooms - an aggregator of luxury boutique stays in India and South Asia.
Travel for the next couple of years might mean shorter trips closer to home, and blurring of lines between work and vacation as the traditionally stodgy industry innovates rapidly. Interesting times lie ahead as our experience with travel will be rewired.
In other news
Amazon has been on a hiring spree through the pandemic. Such has been their pace that it is not only unrivaled in the history of corporate capitalism but also is comparable to ‘wartime hiring’. A great piece on how that is panning out for the company
Yes, the COVID-19 vaccines are here but scaling their distribution is likely to be a fiendishly hard challenge. This piece explains why.
Will robots take the jobs lost due to the pandemic? It’s complicated but another wave of automation seems to be underway.
That’s all for the week. I will keep this going once every two weeks going forward. What should I write about? Share your thoughts at romitnewsletter@gmail.com or on Twitter, or leave a comment. Stay safe!
Great read
Thanks again for the as usual super summary of an important trend, Romit! I wonder still to what extent we will have “mean reversion”, ie will we go back to 90-95% of the pre-pandemic normal or will it be a structural shift (more like 20-30%) in terms of work related travel etc. My guess is more like 70% on average with massive variations across industries and firms.