When it comes to travel there are many options for places to stay. Traditionally, hotels had a monopoly on this aspect of travel but that has changed and it's largely because of Airbnb (ABNB -1.60%). From the company's humble beginnings renting out a room and an air mattress, Airbnb has become a go-to for many travelers, disrupting the hotel industry in the process.
From an investing standpoint, the results have been less impressive. Since its debut on the public markets, Airbnb is down 19% while the S&P 500 has risen 54%. The last two earnings reports disappointed Wall Street and sent the stock plummeting. However, a deeper look into the business reveals some exciting growth opportunities that investors would be wise to consider. If these opportunities work out, it could lead to much better returns for investors.
The top 1,000 events in the world
It may not have been top of mind for the millions of people who tuned in to watch the Paris Olympics, but all those spectators needed places to stay while at the games. A city like Paris and its surrounding areas don't have the hotel capacity to accommodate the massive influx of visitors, so Airbnb played a crucial role in supplying housing. Airbnb's CEO Brian Chesky even met with the French president to collaborate on this initiative.
Large events are not new for Airbnb -- that was the reason the company was founded. The origin story of renting out an air mattress in a bedroom was to provide cheap housing for event attendees. Airbnb is now targeting the top 1,000 events in the world as a growth opportunity. In addition to making attendees aware of Airbnb, the company can use these events as an opportunity to increase the number of hosts on the platform.
NASDAQ: ABNB
Key Data Points
A lot of people don't want to rent out their homes continually, but might consider it for a few days or weeks when a big event comes to town. If those one-time hosts end up liking the experience and the extra income, they could become regular hosts, which is great for Airbnb.
Another interesting initiative that management mentioned on the recent earnings call was a co-hosting marketplace. The idea is that some people might have a home to rent but not the desire or time to be a host. Others may have the interest and time to put into hosting but don't have the home. In October, the company will launch this new service to unlock new inventory.
A travel concierge
When using Airbnb, most travelers have a destination and a time frame in mind. By searching the location and dates of travel, a list of potential inventory appears for users to browse through. However, the advent and rapid improvement of generative artificial intelligence (AI) provides a new opportunity for Airbnb.
Imagine that instead of the traditional search, users could have a conversation with Airbnb's AI. Over time, the AI could learn about the user and their preferences, unlocking better and more personalized search results. This idea of a travel concierge is something that Airbnb is working on, but management was clear that it was not imminent. Regardless, it's something worth keeping an eye on.
Relaunching experiences
One of Airbnb's key performance metrics is its nights and experiences booked. In the most recent quarter, the second quarter of 2024, Airbnb had 125 million nights and experiences booked. This was up 9% year over year. Interestingly, the experiences part of the business is not nearly as well known by Airbnb users and management wants to change that.
With an upcoming relaunch of the experiences business, the company hopes to raise awareness and grow its inventory of unique and affordable experiences that can only be found on Airbnb. By making experiences easier to search and promoting them with video trailers, management hopes its impending relaunch can boost this important part of its business.
The bottom line for investors
Airbnb is a brand that is well known and is continually gaining market share. Growth has slowed over the past year, but it seems that is because of the overall travel environment rather than anything specific to Airbnb. The company is continually innovating, adding new features, and responding to user feedback. If these new growth opportunities can take hold, it could unlock even more revenue, hosts, and guests.
