Airbnb [ABNB] is an online marketplace that lets people rent out their homes, flats, or rooms. It’s considered part of the sharing economy, alongside Lyft [LYFT] and Uber [UBER].
This spotlight will discuss how ABNB stock has been impacted by a slowdown in travel demand in 2024. It will also highlight how the company is looking to expand its product portfolio beyond its core rental offering to drive future revenue growth, increase the number of people using the platform, and stave off competition from Booking.com [BKNG] and Expedia [EXPE].
Airbnb Looks Beyond Its Marketplace Offering
Airbnb is reportedly considering adding luxury services to its guest offering next year. Speaking to Bloomberg on the sidelines of the Olympics, Chief Business Officer Dave Stephenson said that future amenities are likely to include personal chefs, mid-week cleanings and massages.
While these amenities may be nice-to-haves rather than necessities, they are part of Airbnb’s plan to expand its offering beyond being a marketplace for short-term rentals.
Back in May, Airbnb unveiled Icons, a new category of experiences tied to films, such as the floating house in the Pixar film Up.
“Icons mark an important next step in helping people understand that Airbnb offers more than just travel accommodations,” said CEO Brian Chesky on the Q1 earnings call, adding that the category’s launch had generated more press attention than the company’s IPO.
The question for Airbnb is whether these iconic experiences can help to fuel growth.
ABNB Stock’s Mediocre Performance in 2024
ABNB stock has struggled in 2024, down 5.8% through 2 August. For comparison, BKNG stock is down 5.7%, while EXPE stock is down 23.9%.
According to Stockcircle, no institutional investors who have filed their 13Fs for Q2 bought or sold ABNB shares in the three months to the end of June. Six bought $121.5m worth in Q1, while five sold $21.2m worth.
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How Airbnb, Booking.com and Expedia Compare
While Airbnb’s share price fall does not appear unique in the travel booking sector, the main reason behind it could be the weak guidance offered on the Q1 earnings call in May.
The company warned that travel demand could be soft in the three months to Q2, ahead of peak summer season. Q2 results, released on Tuesday, should reveal more.
Nights and experiences, a key metric measuring the number of bookings, were at 132.6 million in Q1, up 9.5% year-over-year. Bookings were up by 21% and 19% in Asia Pacific and Latin America, respectively. Revenue was $2.1bn, up 18% from $1.8bn a year ago.
Booking.com reported Q2 results last week and said its “business continued to perform well with room nights, revenue and operating income exceeding our prior expectations”. Expedia reports on Thursday.
| ABNB Stock | BKNG Stock | EXPE Stock | |
|---|---|---|---|
| Market Cap | $81.41bn | $111.57bn | $15.3bn |
| P/S Ratio | 8.2 | 5.20 | 1.29 |
Estimated Sales Growth (Current Fiscal Year) | 21.6% | 8% | 7.4% |
| Estimated Sales Growth (Next Fiscal Year) | 11.6% | 8.5% | 7.8% |
While Airbnb’s revenue is projected to expand faster than Booking.com's and Expedia's combined revenue, unexpected tailwinds could weigh on Airbnb’s growth, making the stock less attractive.
ABNB: The Investment Case
The Bull Case for Airbnb
When Q2 results are published, investors should listen for any commentary on Airbnb’s artificial intelligence (AI) plans.
The company implemented large language models across its services and launched an AI-powered virtual property tour at the end of last year. The company also recently acquired GamePlanner.AI, a start-up established by a cofounder of Apple’s [AAPL] Siri voice assistant.
No details have been revealed about how Airbnb and GamePlanner.AI will work together, but Airbnb CFO Ellie Mertz told Bloomberg last week the company is aiming for a fuller-service approach. “We’d like to be more in the business of trip planning as opposed to just booking your trip where you know where you want to go and what you want to do. AI could play a huge role there in terms of helping us be a better trip concierge,” said Mertz.
The Bear Case for Airbnb
A near-term question for ABNB stock — and the whole travel industry, for that matter — is what will happen to the US economy. If it slips into a recession, travel demand could be tempered.
There is also the issue of regulation: a number of major cities are cracking down on short-term rentals, amid concerns that the rising number of listed properties is pushing up rents and limiting housing options for residents.
Last year, New York City started enforcing a law that bars property owners from renting out their homes for fewer than 30 days, which Airbnb has described as “a de facto ban.” In June, Barcelona announced an outright ban on short-term rentals, set to come into effect on 1 January 2029.
If more cities follow Barcelona’s lead and decide that a full crackdown on short-term rentals is needed, then it could affect how people travel, which, in turn, could impact Airbnb’s bookings in the long term.
Conclusion
While Airbnb is currently the go-to for finding short-term rentals, leveraging AI may help the company become more than a booking platform. This will be crucial as its competitors, including Booking.com and Expedia, attempt to grow their share of the short-term rental market.
For now, Tuesday’s quarterly results should give an indication both of how the company has been faring, and of what near-term travel demand outlook looks like.
Disclaimer Past performance is not a reliable indicator of future results.
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