Is Airbnb Stock A Buy Going Into The Summer?
Airbnb was one of the most highly-anticipated IPOs of the last few years. But, it ended up going public smack in the middle of a once-in-a-lifetime pandemic. This pandemic stretched on, which made life difficult for this hospitality app. Now, the tide might finally be turning as we are shaping up to go into our first real summer (i.e. not quarantined) since 2019. The general consensus is that people will be chomping at the bit to travel and take a vacation. Does this mean that Airbnb stock is a buy as we head into the summer? Let’s take a look.
What are the Biggest Advantages of Airbnb (NASDAQ: ABNB) Stock?
If you’ve never used it, Airbnb is a service that lets property owners rent out their spaces to travelers. For example, if you own a large house with a spare room then you could rent out your extra room on Airbnb. You could also rent out the entire house if you wanted. Airbnb is very popular among travelers as an alternative to hotels. There are a few big factors that give Airbnb an advantage over traditional hotels.
1.) Controllable Supply
Most hotels have a set number of rooms. When it’s peak season (like Summer 2022 is anticipated to be) they can increase the price they charge per room. However, most hotels can’t add more rooms. Or at least they can’t do it easily. Adding new rooms is expensive, time-consuming and involves a lot of planning. Not for Airbnb, though. Airbnb can add new rooms in minutes.
In theory, Airbnb could easily add thousands of properties all over the globe to its site each day. It just needs to encourage new hosts to sign up. In Q4 2021, Airbnb had 6 million active listings. Management has already stated that adding new hosts to the site is a major priority. Right now, Airbnb needs to expand its supply to meet consumer demand.
The kicker is that Airbnb hosts can still charge more per room during the peak season as hotels do. This helps maximize their (and Airbnb’s) profit.
This controllable supply is by far Airbnb’s biggest advantage. It has allowed Airbnb to profit off another rapidly-growing trend…
2.) Remote Work
CEO Brian Chesky has called the rise of remote work, “the biggest change to travel since commercial flying.” Remote work has untethered a large portion of America’s workforce. These workers are no longer required to live in the city where their job is located. This gives them the freedom to spread out all over the country and world. Airbnb has seen evidence of this firsthand.
People are starting to book Airbnb’s in more rural, less-traveled places. They are also booking Airbnb’s for weeks, months, and even entire seasons at a time. In this sense, people aren’t just traveling to Airbnb’s. They’re living in them.
Right now, it looks like remote work is here to stay. This could be a huge tailwind for Airbnb over the coming years. In the future, younger generations might even factor Airbnb into their life plans. They might buy a house they plan to live in for a few months and then rent out for a few months. Remote work could also influence people’s summer travel plans.
With remote work, the line between “work time” and “vacation time” becomes blurred. People might choose to spend the entire summer working remotely from someplace tropical. This could lead to longer Airbnb stays.
3.) Unique Listings
When travelers visit Airbnb, they can choose from apartments, houses, condos, RVs, lofts, cottages and much more. On the other hand, hotel rooms are all fairly standardized. In Summer 2022, travelers might prefer to use Airbnb due to these unique listings.
These are just three reasons that Airbnb stock might be a buy going into the summer. But, as usual, there are a few risk factors to consider.
What are the Risk Factors of Airbnb Stock?
Lower Than Expected Travel Demand
As we’ve seen before, COVID-19 can reemerge at any point. If this happens again, it could crush Airbnb’s big plans for a blockbuster summer. This would most likely hurt Airbnb stock. If you’re considering buying Airbnb stock for the summer, make sure you keep an eye on any news of COVID-19 variants.
The same could be said for the Russia/Ukraine conflict. Right now, the conflict is consolidated in eastern Europe. However, it could easily escalate and spread at any time. If this happens, it could deter people from traveling and cause them to cancel their summer plans (and Airbnb reservations).
High Fees for Travelers
Increasingly high fees are another major concern for Airbnb stock. One of the things that originally made Airbnb so popular was its cheaper price. Instead of booking a hotel room for $100/night you could get an Airbnb for $50/night. However, lots of Airbnb listings are now professionally managed. This has led to higher fees on the platform. In particular, cleaning fees and service fees.
If you use Airbnb frequently then you’ve probably experienced this type of scenario:
You find an Airbnb that advertises $150/night. Great! That should be $300 for two nights which fits your budget for a weekend trip. You go to reserve the Airbnb. But, when you reach the final checkout, the real price is closer to $600 after taxes, service fees, and a $200 cleaning fee…
Cheaper prices were a staple of Airbnb when it first started. The tradeoff was that you knew you weren’t going to get all the perks of a hotel (free breakfast, room service, professional cleaning, etc.) But, if Airbnb prices start to rival hotel prices then suddenly Airbnb loses its advantage. If the prices are comparable, why would you stay in a stranger’s house when you could just get a hotel room?
This is another factor that could cause travelers to opt for hotels over Airbnbs.
So, is Airbnb Stock a Buy?
As it stands right now, there are certainly plenty of reasons to buy Airbnb stock heading into the summer. Airbnb’s business has been artificially stifled due to the pandemic since it went public. This summer presents the first realistic opportunity for Airbnb to blow away investors’ expectations. It also has several distinct advantages over other companies in the hospitality industry.
With that said, there are still several risk factors to be aware of. Both COVID-19 and the Russia/Ukraine conflict could shift at any time. If they do, it could prompt people to cancel their summer travel plans. There is also the chance that we have an incredible summer travel season, but Airbnb in particular doesn’t profit as much as it should. This could happen due to higher fees that Airbnb hosts charge which encourages travelers to book with hotels.
I hope that you’ve found this article on Airbnb stock to be valuable! Please remember that I’m not a financial advisor and am just offering my own research and commentary. As usual, please base all investment decisions on your own due diligence.
About Teddy Stavetski
A University of Miami grad, Teddy studied marketing and finance while also playing four years on the football team. He’s always had a passion for business and used his experience from a few personal projects to become one of the top-rated business writers on Fiverr.com. When he’s not hammering words onto paper, you can find him hammering notes on the piano or traveling to some place random.