As the shared economy crept onto the scene, it disrupted traditional industries with much aplomb. But who would have envisaged a pandemic raining on their parade?
The shared economy has a poetic ring to it, but basically refers to a constellation of companies that use the internet as their primary interface with consumers as they sell or rent services. It is also described as a peer-to-peer (P2P) based economic model of acquiring, providing or sharing access to goods and services.
The umbrella is huge - mobility sharing (Uber, Ola, Lyft, SideCar), bike sharing (started in Lyon before getting popular in the U.S., Liquid is an example) vacation rental and room sharing (Airbnb, VRBO), and co-working (WeWork). SnapGoods, DogVacay, Relay Rides, TaskRabbit, Getaround, LendingClub, and so on and so forth are some other players.
When Airbnb’s CEO and co-founder Brian Chesky spoke of the need to retrench 25% of his workforce and minced no words in a CNBC interaction, it sounded like a death knell.
It took us 12 years to build Airbnb, and we lost almost everything in four to six weeks. Tourism as we knew it is over. I don't want to say that the journey is over, but rather that the model we knew has died and will not return.
"People will want the assurance of properly maintained, clean space," Jonathan Manser, CEO of The Manser Practice, told Dezeen, when envisaging the post-pandemic hotel. This increased focused on cleanliness will have consequences on rental services like Airbnb.
Chesky explained his stance and renewed focused more articulately in a letter to his employees.
We don’t know exactly when travel will return. When travel does return, it will look different.
While we know Airbnb’s business will fully recover, the changes it will undergo are not temporary or short-lived.
Travel in this new world will look different, and we need to evolve Airbnb accordingly. People will want options that are closer to home, safer, and more affordable. But people will also yearn for something that feels like it’s been taken away from them — human connection. This crisis has sharpened our focus to get back to our roots, back to the basics, back to what is truly special about Airbnb — everyday people who host their homes and offer experiences.
This means that we will need to reduce our investment in activities that do not directly support the core of our host community. We are pausing our efforts in Transportation and Airbnb Studios, and we have to scale back our investments in Hotels and Lux.
Airbnb’s valuation has been cut dramatically, but it could emerge as a preferred vacation option to hotels in a post-Covid world, if it plays it right.
ANDREW WILLIS, content editor for Morningstar.ca, shares his view.
Like it did with WeWork, COVID crashed the party on communal spaces this year, crushing demand for home-sharing right as AirBnb is expected to go public.
That doesn’t mean Airbnb has the same fate as WeWork. While working from home may have become a new norm, vacations aren’t changing. Senior equity analyst Dan Wasiolek sees travel demand fully recovering, as it did after past crises like the Great Financial Crisis, or 9/11.
(Exactly two years ago (July 2018), Wasiolek pegged Airbnb’s market capitalization between $53 billion ($180 per share) and $65 billion ($221 per share), using a peer-based as well as a discounted cash flow-derived exit multiple approach. This was 70%-110% higher than the $31 billion the company fetched at its funding round in July 2017. Read it here.)
When it comes to the Airbnb IPO, though, there could be less enthusiasm, at least initially. Uncertainties around COVID-19 have reduced investor appetite for IPOs broadly, and stocks in the travel industry have been hit. In response, Airbnb’s market expansion plans into other revenue streams, like hotels, have reportedly been put on hold.
But there are other forces within the company to consider. The IPO goal may at least in part be due to employee stock options expiring this year – and that’s a tough deadline to miss.
And things could easily change yet AGAIN by the end of this year. We’re already seeing U.S. vacation rentals posting year-over-year growth, since May! Investors might not be interested in the travel sector right now – but just wait until they get back from holidays.
