The Bearish Outlook for Airbnb — and Why It’s Wrong: Analyst

Skift Take

Bernstein emphasizes a non-standard measure, customer growth rather than room night growth, to assess Airbnb versus rivals. That’s because Airbnb has more multi-bedroom properties than it did pre-Covid. That’s out-of-the-box thinking.

Dennis Schaal

If you are bearish about Airbnb because its room night growth has slowed considerably and rivals such as Booking.com have narrowed the gap, then your downbeat assessment of Airbnb would be wrong.

That’s the message in a Bernstein research note released Friday, which concludes: “Airbnb is not over earning and is well set for future growth.”

Bernstein lays out the following bear analysis so it can show why this is the “the wrong conclusion.”

A Bearish Airbnb Outlook

Bears are downbeat on Airbnb — erroneously in Bernstein’s opinion — because:

• Airbnb’s room nights climbed merely 8% on a compound annual growth rate since 2019, and the company relied on 9% per year price increases to produce strong revenue growth.

• Prior to Covid, Airbnb relied on increased volumes rather than higher prices. But the consensus is that volume growth estimates (12%) are too optimistic, and that prices will “correct back more than expected,” Bernstein said as part of its summation of the “bear” argument.

• Airbnb’s average prices are 40% higher today relative to 2019, leading bears to conclude that Airbnb has lost its edge as a hotel alternative when guests are shopping for bargains.

• Booking.com, which offers both hotels and short-term rentals, has closed the room night growth gap against Airbnb. That’s because Airbnb grew its room nights at an 8.2% CAGR in the 2019-2023 period compared with 5.6% at Booking. In contrast, in an earlier period, 2017-2019, Airbnb’s room nights grew 32.6% while Booking’s jumped 12%.

Bullish on Airbnb

However, these are some of the reasons why Bernstein dismisses the bear arguments and is more bullish on Airbnb:

• Airbnb has outperformed the global lodging industry at 8.7% annually in room growth in the 2019-2023 period compared with the lodging industry’s 2% decline.
• Airbnb’s pricing growth is partly responsible for what some point to as sluggish room night growth, especially compared with the pre-Covid years. “If pricing had been lower, then room night growth would have been higher,” Bernstein wrote. Airbnb’s gross bookings increased 17% on a CAGR basis in the 2019-2023 period, outpacing the global lodging market by 14%.
• Airbnb isn’t the same company it was in 2019; properties on average are “far bigger” than in 2019 as Airbnb had added more multi-bedroom listings. “If Airbnb reported on a per-customer basis — it would show 10.4% volume growth, well ahead of all peers …”

“Airbnb has outperformed on volume and will continue to do so,” Bernstein concludes.

The research shows that while Airbnb expanded its customer base 10.4% per year while Booking.com and Expedia combined grew customers only about 3%, and the market as a whole was relatively flat.

“This is because hotel supply has been constrained and the more elastic Airbnb supply has filled the demand/supply gap,” the research note stated. “This dynamic continues in future years and will see Airbnb continue to grow faster than the wider lodging market.”