Online vacation rental hub Airbnb(ABNB -0.37%)seems like an unlikely candidate for pandemic success, but its business has shown resilience and growth. Amid COVID-19's infections, cancellations, border closures, and quarantines, and the hassles they've imposed on the travel that Airbnb depends on, the company's ability to even keep pace with the crowd might be a better sign of its strength than you'd think. Here's what you should know as we head into Airbnb's Q4 earnings on February 15.
Number one in diversity and reach
The company is both market disruptor and market leader, with more rooms listed than the top five international hotel chains combined. Airbnb also has an extremely strong brand image. In 2016, YouGov BrandIndex ratings found that Airbnb customers are the strongest advocates of any brand, beating out several other travel brands in the top 10. Word-of-mouth recommendations are one of the most effective forms of advertising, so the dedication Airbnb users have in recommending the service to others is a serious asset.
In 2021, Airbnb launched its largest ad campaign in approximately five years, a sign the company is committed to performing through the pandemic instead of going with the flow. The ad campaign, which was expected to reach 300 million people, was successful in raising Airbnb's YouGov Ad Awareness level to an all time high. YouGov's Ad Awareness metrics, which measure the exposure consumers have to advertisements, have tracked Airbnb since 2014; awareness fell during the pandemic but recovered and surpassed previous levels due to the campaign.
Image source: Getty Images.
The threat of regulation looms
Travel will eventually return to normal, helping Airbnb benefit from pent-up demand. The recovery, according to the company, has already started: For its last earnings, Airbnb had its strongest quarter ever, with revenue and net income at their highest ever levels. Adjusted EBITDA and host earnings also reached records. But Airbnb is looking beyond a standard rebound: "The world is undergoing arevolution in how we live and work. Technologies like Zoom make it possible to work from home. Airbnb makes it possible to work from any home. This newfound flexibility is bringing about a revolution in how we travel. Millionsof people can now take more frequent trips, take longer trips, travel to more locations, and even live anywhere on Airbnb," the company said in its last shareholder letter.
While Airbnb has grown, attention from regulators has grown as well. Like Airbnb, ridesharing companies are popular with people who make money on the platform as side hustles, not professions. Efforts from taxi lobbies made Uber (UBER -1.88%) illegal or unlawful in various places around the world, and Airbnb faces the same threat from regulation. In New York City, one of the world's hottest tourism destinations with some of the world's highest hotel costs, most short-term rentals -- rentals under 30 days -- are illegal. Other destinations have imposed restrictions on such as only allowing properties to be rented a certain amount of time, removing listings from the service, limiting Airbnbs in certain neighborhoods, and requiring licensing.
Airbnb has also drawn criticism for its role in increasing housing prices. “Evidence suggests that the presence of Airbnb raises local housing costs. The largest and best-documented potential cost of Airbnb expansion is the reduced supply of housing as properties shift from serving local residents to serving Airbnb travelers, which hurts local residents by raising housing costs," the Economic Policy Institute said.
Airbnb is also competing with the stocks of other more established lodging websites, such as Booking.com (BKNG 1.59%), and more indirectly with stocks of non-lodging travel websites like Tripadvisor (TRIP -1.76%) that still present an opportunity to buy into the travel segment's recovery. Since its IPO at the end of 2020, Airbnb stock has grown roughly in line with the rest of the market, but the growth was volatile. After its strong performance last quarter, the company has a lot to live up to for its upcoming results.
