2020 has been a year of historic losses for the travel industry. With pandemic lockdowns halting travel altogether, and people afraid to travel even when not locked down, hotels, airlines, and other hospitality industry staples are desperately struggling to keep their businesses afloat, with one glaring exception. Airbnb’s new IPO filing shows that it is outperforming it’s peers during the pandemic, and posted the smallest loss this year.
What the IPO Reveals
In Airbnb’s Monday filings, the business IPO prospectus shows that Airbnb posted an 18% loss in the third quarter. Third quarter revenue for the company was $1.3 billion. While that would be bad news in an average year, 2020 is anything but average. In it’s second quarter this year, Airbnb posted a 72% revenue loss. Like others in the travel industry, the company appeared to be hemorrhaging money and in dire straits. The company laid off 25% of it’s workers. But then, the market changed.
People Started Vacationing Differently
While other areas of the travel industry continue to bleed freely under lockdown restrictions and fears of COVID-19, Airbnb’s business model was uniquely poised to take advantage of the changes. While some vacationers continue to seek high-end hotels and familiar brands, Airbnb offers an opportunity for people looking to get away – in isolation. With it’s nearly endless network of small town rentals and rural vacation offerings, Airbnb offers the socially distanced rentals that larger chain hotels can’t offer by virtue of how their buildings function.
So when people got tired of staying home, but weren’t ready to risk catching or spreading COVID by traveling in the big hotels, they turned to Airbnb’s alternative options.
Per CNBC, “People weren’t traveling so much to big cities like New York, Chicago and Los Angeles, but starting in the summer, they were looking for cabins by the lake or in the mountains to spend a holiday weekend or as an escape for a month or two of remote work.
‘They decided to get in their cars and travel close to home, often staying in small towns and rural communities,’ Airbnb’s founders wrote in their letter to prospective shareholders in the filing. ‘Our business rebounded faster than anyone expected, and it showed that as the world changes, our model is able to adapt.’
Compare that to online travel giant Booking Holdings, which earlier this month reported that third-quarter revenue dropped 48% as lockdowns and travel restrictions, ‘continue to impact travel in the near-term,’ said CEO Glenn Fogel. Expedia fared even worse, with sales plunging 58% in the period and the prospects of a ‘prolonged and bumpy path to recovery,’ said CEO Peter Kern.
Airlines and hotels are getting crushed. Delta reported a 79% revenue drop in its latest quarter, while United’s sales plunged 78% and Southwest’s plummeted 68%. On the hospitality side, Marriott’s revenue fell 66%, Hilton dropped by 61% and Wyndham Hotels declined by 40%.”
What Does the Future Hold?
Unfortunately, the final quarter of 2020 is bleak for all travel industry businesses, including Airbnb. With COVID-19 numbers soaring to historic highs, deaths on the rise, and many states returning to previous stages of lockdown, the travel industry’s modest recoveries since April lows is in imminent danger. CNBC shares, “Across the board, travel companies have emphasized the industry’s bounce off the lows from March and April, the early months of the pandemic. Christopher Nassetta, Hilton’s CEO, said in the company’s earnings statement this month that, ‘While a full recovery will take time, we are well positioned to capture rising demand and execute on growth opportunities.’
The fourth quarter could be ugly for all of them, including Airbnb. The U.S. is recording close to 150,000 new coronavirus cases each day, more than double the rate from a month ago, and infectious disease experts are advising people to avoid large family gatherings over the Thanksgiving and Christmas holidays. It’s increasingly looking like only a Covid 19 vaccine reaching the masses will return the economy to a more normal state.”
Recently, both Pfizer and Moderna announced advancements on promising vaccines. They could be available to the public in limited supply as early as December, or as late as April. Travel industry businesses hope for the best as Americans prepare to hunker down for a dark winter.