After being cooped up at home throughout the covid pandemic, the desire to travel has never been stronger. People are itching to get out and explore the world once again.
For Airbnb, while the pandemic saw bookings for nights and experiences plunge over 70% year-over-year, the company has been able to pull off a dramatic recovery as it rapidly responded to the crisis with significant restructuring and strategic actions. From layoffs and hiring freezes to flexible booking policies and enhanced cleaning protocols, Airbnb wasted little time in taking necessary steps to ensure it had the best chance of emerging as a stronger company and regaining the confidence of travelers around the world.
In addition, when the pandemic hit, the company chose to focus on its most unique feature. It returned to its roots and the everyday people who host their homes and offer experiences, scaling back investments that did not directly support its core business of hosting. This decision has proved critical with people increasingly seeking local stays as the pandemic persisted, providing and distinct advantage that was ultimately a core driver in the company’s recovery.
Today, Airbnb continues as one of the largest travel companies in the world, with over six million listings in over 220 countries. Despite facing challenges from the pandemic, which had catastrophic impacts on competitors within the travel sector, Airbnb has continued to innovate and grow, expanding into new markets and introducing new products and services to continue its growth trajectory.
Born out of a need to make rent payments in San Francisco, Airbnb was founded in 2008 by Brian Chesky, Joe Gebbia, and Nathan Blecharczyk. The trio rented out air mattresses on their apartment floor during a conference and saw an opportunity for a new type of accommodation service. Beginning with the mattresses and couches in living rooms, it quickly grew in popularity as hosts began offering their homes, apartments, and spare rooms.
In 2009, the company raised $600,000 in seed funding, which helped them expand beyond San Francisco. And by 2011, Airbnb had listings in over 8,000 cities worldwide and had raised more than $100 million in funding. The company continued to expand, both geographically, by adding new offices and listing around the world, and by adding new features. The company’s technology has also evolved, with its first mobile app released ten years ago.
As the third wave of the covid pandemic began to ramp up, Airbnb went public in December 2020, raising $3.5 billion in one of the biggest IPOs of the year, valuing the company at $47 billion at the time.
As it has grown in size and popularity, Airbnb has faced increasing regulatory challenges from local governments and hotel associations ranging from concerns about driving up house prices to the need to ban parties in homes rented on the platform. In response, the company has made concerted efforts to work with some local governments and comply with regulations. In other cases such as with China, Russia, and Belarus, it has ceased operations.
Airbnb is currently led by co-founder Brian Chesky as the company’s chief executive officer. Chesky has been instrumental in driving Airbnb’s growth and expansion over the past decade and has guided it to become a community of over four million hosts who have welcomed more than one billion guests. He has even been recognized for his entrepreneurial achievements, including being named one of Time magazine’s 100 most influential people in the world.
Fellow co-founder Nathan Blecharczyk also continues to serve the company as its chief strategy officer. Blecharczyk has led the creation of Airbnb’s engineering, data science, payments, and performance marketing teams. His holistic understanding of the business, public policy, product, data, and Airbnb’s long-term stakeholder interests have seen him oversee several industry-first solutions including the Airbnb City Portal, which addresses the needs of cities relating to short-term rentals, along with the company’s reservation screening technology which is critical in identifying high-risk reservations.
In 15 years, the company has come a long way from mattresses in living rooms to a diverse offering that caters to the needs of various types of travelers including solos, couples, families, and business professionals across the spectrum from budget-conscious backpackers to luxury-seeking jet-setters. Beyond the traditional home-sharing service that allows hosts to rent out their entire home or just a spare room, unique stays now include everything from treehouses, yurts, and castles to provide travelers with a truly one-of-a-kind experience.
While at its core, it remains a platform that connects hosts and guests with authentic accommodations around the world, over the years it has launched several new verticals. Airbnb Experiences has made it possible for travelers to book activities and tours with locals, providing them with an opportunity to explore their destination in a unique and authentic way. The offering has a wide range of experiences available including cooking classes, photography tours, and outdoor adventures.
The addition of Airbnb Plus provided a new tier of accommodations, which offers a collection of high-quality, verified homes that have been inspected and approved by Airbnb. These homes deliver additional amenities and services to guests, such as high-quality linens and personal concierge services.
While in 2018, the company launched Airbnb for Work, which caters specifically to business travelers. This service provides business-friendly accommodations and travel management tools, making it easier for companies to manage their travel expenses and ensure their employees have a comfortable and productive travel experience.
Airbnb’s range of products and services has helped it become a popular alternative to traditional hotels. By providing travelers with unique and authentic experiences, the company has established itself as a leader in the travel industry. Furthermore, it has achieved this with the asset-light flexibility of a software company, coupled with a real-world footprint and scale exceeding the largest international hotel chains. Airbnb has also had the benefit of not incurring enormous labor costs, property maintenance, and heavy capital expenditures required by the traditional incumbents it has managed to disrupt. Despite delivering over 50% more revenue per year, Airbnb’s almost 7000-strong workforce is dwarfed by Marriott International’s more than 130,000 employees.
Airbnb has said it is focusing on three strategic priorities:
– Make hosting mainstream – by continuing to raise awareness around hosting, making it easier to get started, and providing better tools for hosts.
– Perfect the core service – based on feedback from guests and hosts, Airbnb will continue making a large number of upgrades to the service looking ahead, improving community support, making it easier to find the right home, and delivering greater value
– Expand beyond the core – by building a foundation for future products and services that will provide incremental growth for years to come
Efforts to deliver on these priorities are already well underway. In November, Airbnb Setup was introduced to make it easy for people to Airbnb their homes. Prospective hosts can now connect with existing Superhosts for free one-to-one guidance all the way through their first reservation. In addition, new hosts also can choose to have an experienced guest for their first booking and receive specialized support from Airbnb. Since the launch of the company’s “Airbnb It” campaign, the number of visitors to its host landing page has doubled. While the number of new active Hosts recruited with the help of Superhosts increased by more than 20% compared to pre-launch.
Also in 2022, Airbnb Categories were introduced, creating a new way of making millions of unique homes discoverable to guests who would have never known existed otherwise. The service is designed to help guests looking for a unique space to discover one-of-a-kind homes via categories organized into curated collections, with over 50 categories of homes chosen for their style, location, or nearby activities. And with more people taking longer trips than ever before, Airbnb also created Split Stays, an innovative new feature that splits a trip between two different homes. As a result, guests can find an average of 40% more listings when searching for longer stays.
While key in rebuilding the confidence of travelers around the world, AirCover is now providing comprehensive free protection for all guests and hosts across a range of issues. Guarantees now ensure that guests are covered in the event a host needs to cancel a booking, if a guest can’t check into their home, or they find their listing is not as advertised. While for hosts, a comprehensive verification system checks details such as name, address, government ID, and more to confirm the identity of guests. Airbnb will also reimburse for damage caused by guests to their homes and belongings or if a guest gets hurt or their belongings are damaged or stolen. In addition, a 24-hour Safety Line provides priority access to specially-trained safety agents in multiple languages.
Unlike many industry disruptors, Airbnb has also managed to deliver its most profitable performances to date, despite slashing its overall marketing investment as a percentage of revenue and shifting its marketing strategy to be more brand-driven and PR-led, and less dependent on search engine and performance marketing. Airbnb now looks at the role of marketing as one of “education” and not “to buy customers”. With the majority of Airbnb bookings coming from past guests, the strong retention has been a powerful driver of growth. Impressively, despite the shift, the company has still been able to introduce Airbnb to millions of new users since the covid pandemic and when combined with a leaner organizational structure, has positioned it well to navigate the challenges of the current macroeconomic climate.
Airbnb has well and truly emerged from the covid pandemic, delivering another record year in 2022 after revenue of $8.4 billion grew 40% year-over-year, as guest demand remained strong, and all regions saw significant growth with guests once again crossing borders and returning to new cities. The company also benefitted from strong supply growth, ending the year with 6.6 million global active listings, which is over 900,000 more than at the beginning of the year, excluding China. This growth was driven by the global network, where demand drives supply, as well as product innovations that continued to attract new hosts.
The company has also posted its highest-ever adjusted EBITDA ever at almost $3 billion, for more than a 50% year-on-year increase, which the company says demonstrates the continued strength of the business and discipline in managing the cost structure. Net income was $1.9 billion, also making 2022 Airbnb’s first profitable full year.
Looking ahead, management is forecasting to kick off FY23 with total revenue between $1.75 billion to $1.82 billion for the quarter, representing year-over-year growth of between 16% and 21%, after which it anticipates that seasonality in 2023 will be similar to 2022. Consensus estimates have full-year revenue expected at $9.6 billion, delivering double-digit year-over-year growth of 14%. Analysts are also expecting earnings per share to continue its upwards trajectory, increasing 22% year-over-year to $3.42, up from $2.79 in 2022.
The market for home-sharing and travel is highly competitive, with many major players vying for market share. Airbnb’s major competitors include other home-sharing platforms like Vrbo and HomeAway, as well as traditional hotel companies like Marriott and Hilton. Additionally, online travel agencies like Booking.com and Expedia also compete with Airbnb for customers. While new entrants have emerged in the home-sharing market, such as Sonder and Lyric, which offer a more standardized and hotel-like experience. These players compete on factors including everything from pricing, customer experience, brand reputation, and the range and quality of offerings.
The covid pandemic had a significant impact on the industry and has created new market conditions. There is now a greater emphasis on health and safety measures with travelers being more concerned than ever about staying in clean and safe accommodations.
However, despite past noise regarding the transparency of Airbnb’s fees, an issue the company has addressed, Airbnb has a large and loyal customer base and global brand recognition. And when coupled with a focus on providing unique and authentic accommodations and experiences, give it a competitive advantage in the market.
From humble beginnings to a global industry leader, there is no denying Airbnb epitomizes an industry disruptor. Having recovered from the covid pandemic as a more efficient organization and continuing to benefit from more focused marketing and a new suite of innovations to keep new and current guests returning, it appears well-placed to build on its record performances.