August 2, 2021

Airbnb breaks down Wall Street by hitting $ 100 billion in valuation

Six months ago, Airbnb laid off 1,900 employees – a quarter of its workforce – and its valuation fell to $ 18 billion. Friday December 11, one day after its IPO on Wall Street, the world leader in tourist accommodation begins to recruit again and above all, is worth 100 billion dollars! After a crazy first day, its stock closed at $ 144.71, up 113% from its IPO price. A month ago, Airbnb was hoping for a valuation of $ 30 billion. Sensing the markets’ enthusiasm for its IPO, the company had raised its IPO price at the last moment and was aiming at a valuation of $ 47 billion at best – which would have already been spectacular. Here it is with more than double!

Read also: Airbnb goes public: how the tourism champion reinvented himself in the face of the crisis

Wall Street only has eyes for tech

Airbnb had initially planned to market its shares at a price range of $ 44 to $ 50 per unit, a range raised a few days later to $ 56-60, before climbing to $ 68 on Wednesday night. The level of the stock, which trades under the symbol “ABNB”, continued to explode as brokers and bankers tried to gauge investor interest as accurately as possible.

For the occasion, the Nasdaq displayed the platform’s logo and images of its activity on its facade overlooking the mythical Times Square in New York. Once the charges were settled, the company recovered $ 3.4 billion in new money through the transaction.

The success of Airbnb’s IPO comes against the backdrop of a second wave of IPOs in 2020 for tech companies. On Wednesday December 9, a day before Airbnb, another Silicon Valey nugget, DoorDash, debuted on the Nasdaq. The champion of home meal delivery was also a hit: while its introductory price was set at $ 102 per share, which allowed it to raise $ 3.4 billion, the title of the The business started at $ 179 on the New York Stock Exchange, up over 78%, and ended the day at $ 185.

Consecration of a giant

Founded 13 years ago in San Francisco, the company has revolutionized the business travel and tourism industry. Brian Chesky and Joe Gebbia were looking in 2007 for a way to pay their rent and then created a site, called AirBedandBreakfast.com, to offer conference participants to accommodate them on air mattresses. The two friends were joined in 2008 by computer scientist Nathan Blecharczyk and officially formed Airbnb. As a serious financial crisis spreads around the world, the idea of ​​finding cheaper temporary accommodation, or of earning a little money by renting a room, quickly wins over the public.

The rental platform has encountered resistance along the way, several municipalities and hoteliers worrying about seeing private housing turn de facto into hotels, depriving individuals of homes, promoting real estate speculation and creating a shortfall for the traditional hotel sector. But the group now has four million hosts on its counter and more than 825 million customers.

Read also: Airbnb forced to reinvent itself to survive the “coronakrach” of global tourism

Rapid and relevant response to the Covid-19 crisis

The incredible success of Airbnb’s IPO can also and above all be explained by what the company revealed about its resilience and its ability to adapt during the Covid-19 crisis. The platform was hit hard by the sanitary measures imposed in the world in the winter and last spring: its turnover for the first nine months of 2020 plunged 32% over one year. The company had to urgently raise $ 2 billion to deal with the crisis, lay off 25% of its employees, and reduce its investments to almost nothing.

At the same time, anticipating major changes in the expectations of its customers, Airbnb quickly pivoted. From April, the company focused on short-distance rentals in rural areas, allowing city dwellers, as summer approaches, to get some fresh air without risking catching the virus. In the United States, hosts with rural rentals grossed $ 200 million in June alone, a 25% jump from the previous year. And from July to September, the platform earned $ 219 million, returning to growth almost immediately. The other strategic pivot has been to develop long-term rentals, in particular through the development of teleworking for executives in large cities in search of greenery.

By buying shares of the site, investors feel they are banking on the rise of a new giant in its sector, notes Gregori Volokhine, portfolio manager for Meeschaert Financial Services.

“People are currently afraid of going to hotels, public places, there is a real appetite for rentals in individual places,” he told AFP. “And the competition, like (the site) Expedia, is way behind.”

Read also: Airbnb imposes health restrictions in all its rentals

Google, regulation: threats still hover over Airbnb’s head

The euphoria around Airbnb is real, but beware of the backlash. The challenges that await the platform are numerous. Starting with the pandemic. The situation seems out of control in the United States, so much so that Airbnb is already anticipating a sharp decline in the fourth quarter of 2020. If the prospect of the vaccine has restored investor confidence, this glimmer of hope remains fragile: if the vaccine proves to be less effective than expected or if side effects not anticipated due to the rapidity of its development appear, it is the whole world economy that could suffer, and in particular tourism.

Read also: Airbnb: Brussels agrees with French law which imposes more regulation on rentals

In its IPO document presented to shareholders in November, Airbnb does not underestimate the competition either, starting with Expedia and Booking.com, which are adapting to the new standard imposed by Airbnb. But also – and above all? – Google which now displays short-term rentals in its search results … which has an impact on Airbnb’s visibility:

“We believe our SEO and visibility has been affected by the launch of Google Travel and ads for Google Vacation Rentals, reducing our platform’s prominence in organic search results on short trips and our placement on Google “, is it written in the document.

Finally, Airbnb is still under the threat of regulation less and less favorable to the Internet giants. In Europe, Airbnb could be part of the “structuring platforms” subject to the much stricter regulation of the Digital Services Act, which will be revealed next week. And cities around the world have taken or will take measures against the desertification of their tourist districts by limiting the number of tourist nights that an accommodation can offer per year, and by strengthening controls on Airbnb rentals.

Read also: Digital Services Act (2/2): the empires of the Internet giants finally under pressure?