Airbnb Is Now Worth More Than Hilton And Marriott Combined

On its first day of trading on Thursday, Airbnb ABNB opened at $146 per share, which is a massive pop from its original share price of $68 from Wednesday night. The company finished Thursday's trading at $144.71, making a market cap of about $86.5 billion, which is more than double the valuation Airbnb had just one day ago. This puts Airbnb in line with the travel giant Booking.com BKNG which has a market cap of around $86 billion. Moreover, this market cap exceeds the combined market caps of big hotel chains Marriott International, Inc. MAR and Hilton Worldwide Holdings Inc. HLT. Marriott's market cap is more than $42 billion, while Hilton stands at $29 billion.

IPO craze during the pandemic

Airbnb decided to go public at a time when its industry is fighting to stay above water as COVID-19 put the travel to a halt. Of course, Airbnb was not immune to the global health crisis. The company's revenues decreased last quarter to $1.34 billion, which is a drop of almost 19% compared to the same quarter last year. However, due to the significant cost cuts, like the 25% decrease in its workforce, the company managed to turn a profit of $219 million. But there is another reason why Airbnb is dealing with the crisis better than the rest of the traditional hotel industry and it is that more and more people are eager to spend a day or two away from the city. So, while the demand for apartments in many popular cities around the world was getting lower and lower, the demand for houses in the countryside was soaring. Airbnb can respond very well to this type of the demand as that is where the company's main strength is. Combined with the relatively low operating costs, these factors placed Airbnb in a much better position than any other hotel chain. Plus, the company has no costs if the property is not booked as the loss falls on property owners.

The story

It all started in 2007 when Airbnb's Chief Executive Officer Brian Chesky had some financial difficulties. Without employment, paying rent was not an easy task and it required a way to earn some extra cash. That's when Chesky and his roommate, the co-founder of Airbnb, Joe Gebbia identified an opportunity. Visitors of the local design conference, close to Chesky's and Gebbia's apartment, had trouble finding a place to stay, as most of the city's hotel room capacities were full. So, Chesky and Gebbia placed three air beds in the living room, which they rented to the people participating in a conference. They also added the free of charge breakfast, which later led to the company's name, Airbnb, standing for "AirBed aNd Breakfast".

Where do we go from here?

12 years after it was founded, Airbnb became the largest "middleman" of private accommodation renting. Since its inception, the company made a turnover of over $110 billion. More than four million owners across 220 countries now regularly offer and rent their properties through Airbnb. Besides accommodation, the platform offers reservations, excursions, and some joint activities with the hosts. For its services, Airbnb gets an impressive 15% agency fee. The company's business model has been the target of criticism, as the platform is being blamed for housing shortages and rising rents in many cities across the globe. Some cities have even introduced strict regulations on the conditions for renting private apartments through Airbnb. This is all specified in the company's stock exchange prospectus. Having in mind its majestic IPO debut, investors seem to be more than ok with this risk.

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