Airbnb stock, one of the US hotel stocks, has captured the attention of growth stock investors since its Nasdaq launch in December 2020. From the price of its initial public offering, $68 per share, Airbnb stock soared as much as 223%, hitting an all-time high of 219.94 on Feb. 11, 2021. 

2020 and 2021 were hit by the pandemic, but 2022 is a different story. COVID cases have gone down, quarantine rules are relaxed and travel is back to normal as seen by huge delays and crowds at the Airports in US and Europe during the Summer Season. This was visible in the earnings of Airbnb stock as well. If your question is “can I invest in US stocks from India”, read further about the earnings of the hospitality industry in the US.

Earnings Highlights 

• Revenues: The revenues have increased by 73% as compared to that of 2019, and by 58% from that of Q2 2021 – summing up to a total amount of $2.1 billion. This demonstrates the continued progress and demand of the company. 
• Gross Booking Value or GBV: There has been significantly strong progress in Nights and Experiences Booked added with continuous higher ADR or Average Daily Rates, thus driving a total GBV amount of $17 billion in Q2 2022. 
• Gross Nights Booked: There has been strong growth in Q2 2022 in the Nights and Experiences Booked, exceeding pre-pandemic levels, a total of 103.7M – this has been driven largely by EMEA, Latin America, and North America. 
• Earnings Per Share: AirBnb has seen an EPS of $0.56 against $0.43 expected by analysts, as per Refinitiv. 

Source: ipropertymanagement.com

What is Airbnb and how does it work? 

Airbnb stands for Air Bed and Breakfast. In 2007, roommates Joe Gebbia and Brian Chesky needed some money and they took advantage of a San Francisco design conference, as people had booked all the local hotels, so they decided to buy three air mattresses and rent them out. They also started a website called AirBedandBreakfast.com and charged about $80 per night for a guest to sleep on an air mattress. Eventually, they took this idea to a larger scale and became the company we know today.

After the 2008 launch, the two founders added another former roommate Nathan Blecharczyk to the operations, shortened the name to Airbnb and expanded their offerings to private rooms, houses, apartments and more. In order to fund this venture, the three of them created special presidential-themed breakfast cereals and sold 800 of these cereal boxes at $40 each in just two months. They used this $30,000 in profits from the cereal box sales to start the Airbnb that we know today. After its IPO it now competes with other US HOTEL Stocks.

What makes Airbnb different from others?

• Key competitive advantage for Airbnb

As tourism has increased over the past year, Airbnb has seen a dramatic resurgence in its business, and Airbnb stock has grown. The business said that more nights and activities were booked on the site than ever in the first quarter. The almost infinite supply of accommodations on Airbnb’s network is one benefit (currently a total amount of around 7 million). In the long run, this might help the business’ growing demands and outperform other travel-related equities.

• Attractive Business Model

The innovative business strategy of the San Francisco-based company is to permit home and condo owners to convert their facilities into short-term rentals. It give good competition to US hotel stocks, but there are several competitors for the idea. Even major hotel chains provide comparable facilities added with the usual stay options. Portfolio manager Jason Thomson at O’Neil Capital Management mentioned that the Airbnb product is particularly alluring to millennials because they desire to travel in large groups and make last-minute plans. on the Feb. 23 broadcast of IBD Live on Zoom. Major hotel brands have taken notice of this, too.

The total number of nights and experiences booked on Airbnb’s platform was 102.1 million in the first quarter of 2022, exceeding pre-pandemic levels. The results were driven by activities in EMEA (Europe, Middle East, and Africa), North America, and Latin America. To reach $17.2 billion, gross booking value increased 67% year over year (over 71% ignoring currency fluctuations). The second quarter’s results showed a moderate but consistent increase in the number of overall nights and experiences booked from quarter to quarter to 103.7 million, up 25% year over year. The gross booking value increased 27% over the previous year and reached $17 billion. With a net income of $379 million, the second quarter of the company’s history was the most profitable ever.

• Increasing Institutional Ownership

1527 institutional shareholders and owners of Airbnb have submitted 13D/G or 13F filings to the Securities Exchange Commission. Total shares held by these institutions are 310,924,099 shares. The institutional ownership structure of Airbnb displays the current stakes that institutions and funds currently hold in the business as well as the most recent changes to position sizing. Individual investors, hedge funds, mutual funds, and institutions are all examples of major shareholders. According to Schedule 13D, the investor currently owns (or previously owned) over 5% of the business and wants to aggressively pursue a shift in the company’s strategy. Schedule 13G shows an investment that is more than 5% passive.

• Distinct features of Airbnb properties

When you look at Airbnb properties in contrast to hotels, you would see how people go for Airbnb, and there are several reasons why. Apart from the fact that Airbnb in most cases allows you to opt a property is comparatively more affordable and provides you a larger space than hotel rooms (considering the fact that Airbnb offers the entire property at your disposal in most cases), here are the distinct features of its properties that are a win-win: 

• Airbnb properties in most cases come with a kitchen. Therefore, apart from having access to a large space at a cheaper rate, you can also save money by eating in. It would also give you a chance to go grocery shopping in the local markets, thus exploring more of the local life of the place you visit. 
• By opting to stay in an Airbnb, you would get to take a closer look at local life by simply spending your time at a local’s home. You get to look at the layouts, the materials that have been used to construct and decorate the house, the furnishing, and every other detail that is specific to the region you are visiting. 
• Airbnb hosts are known for their politeness, and the guidance that they offer during your stay. Instead of the touristy experiences that you may gather through the itinerary that a hotel would offer you keeping in mind their partnerships with tourist sites or restaurants, Airbnb hosts tend to tell you all about their personal experiences. If you are lucky, your Airbnb host would help you explore the local streets by telling you about what and all they value the most about the place where they have been living for several years. 

Airbnb back in black with 379 million USD in profits

Source: businessofapps.com

Compared to net losses totaling $68 million during Q2 2021 and $297 million during Q2 2019 (pre-pandemic), The second quarter of 2022 saw a net income of $379 million. Despite this cost in Q2 2022, Airbnb nevertheless saw a sizable improvement in Q2 2022 as opposed to both preceding quarters due to significantly increased revenue. Net profit margin improved massively from Q2 2019 & Q2 2021. Revenge tourism caused by the pandemic has affected the tourism industry in a big way as shown in the data above. Does this data make you consider investing in US stocks?

Looking at the Hospitality Industry in US Stocks: Airbnb Vs. Booking.com Vs. Expedia 

Market Share

Due to apparent increases in local rent prices, several large cities have consistently opposed Airbnb as it has grown. Several cities, including Barcelona, Amsterdam, Paris, Venice, and San Francisco, have passed laws especially aimed at the Airbnb-popularized short-term rental sector. Airbnb’s service was expanded to include experiences in 2016, allowing hosts to use the app to sell tickets or tours to events. The corporation had intended to start an airline, but the coronavirus epidemic has permanently postponed those ambitions. 

One of the platforms that the COVID-19 has impacted the most is Airbnb. New reservations were down 85% at the height of the pandemic, while app usage has progressively increased as nations have loosened travel restrictions. 

As the market for short-term rentals collapsed in March 2020, many Airbnb hosts in big cities turned to long-term rental accommodations as a way to preserve a consistent (though lower) income. Recently, Airbnb introduced monthly stays, which are identical to regular rentals but do not require the customary year long lease. This move was aimed at keeping hosts on the platform. 

Airbnb had intended to go public in early 2020, but because of COVID-19, it postponed that until December 2020. However, after experiencing a 31% revenue decline in 2020 as a result of the coronavirus pandemic slowing down tourism, Airbnb enjoyed a surge in revenue of 73% in 2021.

Pros of Airbnb 

• It does not include hotels and exclusively concentrates on private properties.
• Airbnb enables hosts to list their homes and share experiences, whereas Expedia buys hotel rooms at wholesale prices and sells them to customers. Airbnb provides a more personal experience.
• Bookings.com has been a website for hotels, and resorts. Whereas Airbnb provides a guest a more authentic experience “home away from home”. 
• One can list a single bed in one room with two beds or rent out a full mansion through the organization, which offers a very flexible service.
• Every room that is available can be listed separately by property owners. Whenever it comes to increasing exposure, saves a tonne of time.
• It is a very reasonably priced rental service. You just need to register and post an ad if you have a property and wish to list that on Airbnb. All of these are free. The standard booking cost is 3%.
• You are allowed to set the rules you want for your visitors, and if they don’t abide by them, you may cancel their reservation without incurring any fees.
• You are permitted to request the visitor’s ID card for additional security purposes.
• Customer service for Airbnb is accessible via live chat, phone, and email and is open around the clock.

Cons of Airbnb

• If you put any of your properties up for rent on Airbnb, you’ll need to be online all the time to see if anyone wishes to reserve it as the website only allows 24 hours for owners to confirm requests. The booking request would expire if you don’t do that, costing you a client.
• Listings may be suspended as a result of low ratings. You run the risk of being suspended if you don’t provide all the necessities that your visitors require, like towels, soaps and toilet paper. The drawback associated with this is that ratings are frequently quite subjective.
• The full amount must be paid in full at the time of booking, but you won’t get the money straight away because Airbnb withholds it as a security precaution for a full day.
• You can’t be guaranteed that you’ll get full coverage if any of your guests cause damage to your home, especially if something is stolen.
• Since Airbnb also charges an additional fee, the total price that guests see on the platform is greater than the price you set. Therefore, this can be a hassle for certain visitors.

Financial figures as on August 2022 of top US Hospitality Stocks

Profitability in 2022:

Risks

Some of the key risk factors for the company may include:

• Though a fast-growing company, Airbnb has incurred net losses since its inception, and due to the global disruptions, while profitability has been achieved sustainably, maintaining the profitability is a risk.
• Competitive pricing and innovative offerings from its competitors in the hospitality industry in the US may result in a lowering in revenue.

Conclusion

Among all the US hospitality stocks, Airbnb with an asset-light strategy and improved performance, and changing travel preferences, is the best bet. The pent-up demand for travel and leisure has driven Airbnb’s bookings and earnings. If you are wondering How you can invest in US stocks from India, Stockal is the best partner to assist you.