The word is out. Airbnb is set to go public. What are the implications for vacation rental teams?
Airbnb’s recent announcement to go public during the pandemic may come as a surprise for some. Why now, and what are the implications for vacation rental operators and brands?
The Backstory
The homesharing platform had a record year in 2019, with billions in cash reserves prior to March. Then, COVID-19 put a sudden stop to the global travel industry. The company reported a $400 million loss in the second quarter of 2020 (April-June).
The Summer turned out to have something of a silver lining, however. With cities pitted at the front lines in the fight against COVID-19, homes in non-urban destinations (both single-family and apartment-style rentals) have been absorbing travel demand from weary city dwellers.
The acceleration of virtual work has also allowed families to switch up their city apartments for vacation rentals. Length of stay for homestyle accommodations has also increased as a result, due to less pressure to return to the office.
In July, consumer spending at the company was 22% higher than the year before, according to e-commerce research company Edison Trends. Airbnb is not the only online travel company that has clawed back on the coattails of the vacation rentals industry. Expedia Group’s Vrbo has also benefited from an increase in direct traffic. Booking.com’s valuation is also trending higher from a record low.
Now, Airbnb wants to cash in and go public in what will likely be the most anticipated technology IPO of 2020. Still, some wonder why a travel company would want to go public during a pandemic. The reasons are driven by market and internal company dynamics.
Here are three core reasons why Airbnb is going public now:
1) Travel demand has shifted away from city hotels towards homes and vacation rentals during the pandemic. 2) The company also wants to refinance debt and to cash out early investors. 3) The post-pandemic stock market rally is also incentivizing the company to get out there ASAP.
Why Vacation Rental Managers Should Care
There are direct and indirect reasons. Airbnb has traditionally focused on city destinations on the supply side. This means that Airbnb will need to play catch-up and go to where the demand is – i.e. vacation rentals.
Vrbo and booking.com held a stronger position in beach, sun, and ski destinations. Many vacation rental operators are now also increasingly focused on building their own brands and direct marketing (with the help of Google), rather than third-party distribution.
Competition and the urgency to scale in non-urban markets will likely push the company to build closer relations with those vacation rental managers that managed to survive and stay afloat.
How will Airbnb do that?
While we can only speculate at this point, there is reason to believe that Airbnb might play favorites with those hosts that have the inventory they need to stay competitive in this changing travel market.
In 2019, Airbnb CEO Brian Chesky said, “we would like our most loyal hosts to be shareholders”. Buying shares in an IPO for retail investors can be tough. Most of us need to wait until the stock starts trading publicly. Who will be those loyal hosts Brian is referring to?
With company financials in public view, Airbnb will also need to openly share to investors and analysts how they are competing and how the company is transitioning from a homesharing platform to more of a vacation rental platform.
Offering shares to hosts, favorable rates on commissions, and technology upgrades catering to the needs of vacation rental managers – are among some of the levers Chesky and team might pull to win favor.
In conclusion, this could be the time for vacation rental owners to scale. Demand for homestyle accommodations in non-urban areas will also likely grow beyond Labor Day. A recent pulse survey by MMGY suggests that there is significant pent-up travel demand as a result of COVID.
The continuation of remote work means that guests will likely stay longer than usual. This could change guest relations and the type and level of customer care that vacation rental managers will need to deliver.
Above all, catering to the changing needs of guests signals an opportunity to bank on more room nights, extra ancillary revenue, and savings on guest services.
