Airbnb is pressing ahead with its stock market listing with the company filing its S-1 form at the US Securities and Exchange Commission and a planned IPO date before the end of 2020. Will it be another unprofitable dog of a tech unicorn or a GOAT (Go Out And Travel) favourite in 2021?

The company reports it made a profit of $219 million in the third quarter, on $1.34 billion in revenue. In a filing on Monday, November 16th, management explained this was down fractionally from the $227 million in profit during the same quarter last year, which was its only profitable quarter in 2019, coming on $1.65 billion in revenue.

However, the onset of lockdowns due to the pandemic made for a very challenging first half of 2020 for Airbnb as it chalked up net losses of $916 million on revenue of $1.18 billion.

The company, which plans to list on the Nasdaq under the ticker ABNB, provided detailed customer and revenue figures. Here’s a snapshot of the key metrics and financials.

Pandemic booking trends

Gross nights and experiences booked

• Material contraction on a year-over-year basis, with a low in April 2020, down 72% year over year.
• From April through June 2020, the company saw a steady rebound in gross nights and experiences booked before cancellations and alterations, which were down 21% in June relative to the same period in the prior year.
• From July through September 2020, gross nights and experiences booked have been stable, down approximately 20% relative to the same period in the prior year.

Cancellations and alterations

• Dramatic increase after the COVID-19 outbreak, as guests were either unable to travel or uncomfortable doing so.
• While the number of nights and experiences cancelled in January 2020 was 13% of the gross nights and experiences booked that month, the number of nights and experiences cancelled in March and April 2020 exceeded the number of gross nights and experiences booked during those months.
• From April to September 2020, cancellations and alterations as a percentage of gross nights and experiences booked initially declined significantly and then have remained relatively stable for the past several months.

Nights and Experiences Booked

• Negative in March and April 2020.
• By May 2020, gross nights and experiences booked had begun to recover, while cancellations and alterations began to fall, resulting in a return to positive Nights and Experiences Booked from May to September 2020.
• From July through September 2020, Nights and Experiences Booked have been stable, down 28% relative to the same period in the prior year.

Airbnb define Nights and Experiences Booked as net of cancellations and alterations.

Gross daily rate

• Represents GBV per Night and Experiences Booked, all before cancellations and alterations. This measure is a useful proxy for the average daily rate (ADR) trend over this period; because the net metrics reflect elevated cancellations and were negative in March and April 2020, the net daily rate was not meaningful for those periods.
• The year-over-year increase in gross daily rate from May to September 2020 was driven by faster recovery in North America and Europe, the Middle East, and Africa (EMEA) during this period, which have historically higher daily rates than Latin America and Asia Pacific.
• The gross daily rate was also impacted by a mix shift toward entire home listings in non-urban destinations, which have higher daily rates.

Gross Booking Value before cancellations and alterations

• Followed a similar trend to gross nights and experiences booked, materially declining on a year-over-year basis between March and May 2020.
• GBV before cancellations and alterations recovered in June 2020, growing 1% year-over-year driven by the increase in gross daily rate.
• From July through September 2020, GBV before cancellations and alterations has been stable, down less than 10% compared to the same periods in the prior year.

Gross Booking Value

• Declined and rebounded as a result of the trends described above.
• In September 2020, GBV was down 17% on a year-over-year basis, less than the 28% decline in Nights and Experiences Booked due to the growth in gross daily rate.
• GBV reflects bookings made in a period for future nights or experiences and is a leading indicator for revenue, which is recognized during the period that stays and experiences occur.

Airbnb define Gross Booking Value as net cancellations and alterations.

Financials

What we have learned from the filing

• Revenue growth was declining before the pandemic – from around 80% in 2016 to just 32% in 2019.

Management conceded: “Our revenue growth has slowed in recent periods and there is no assurance that historic growth rates will return. Our year-over-year growth rate in revenue decreased in 2019 as compared to 2018 and also decreased in 2018 as compared to 2017.”

• Regulation is becoming more of a headache as cities clamp down on short-term lets.

Management say: “Laws, regulations, and rules that affect the short-term rental and home sharing business may limit the ability or willingness of hosts to share their spaces over our platform and expose our hosts or us to significant penalties, which could have a material adverse effect on our business, results of operations, and financial condition.

“We are subject to a wide variety of complex, evolving, and sometimes inconsistent and ambiguous laws and regulations that may adversely impact our operations and discourage hosts and guests from using our platform.”

• It’s never been profitable

“We have incurred net losses in each year since inception, and we may not be able to achieve profitability. We incurred net losses of $70.0 million, $16.9 million, $674.3 million, and $696.9 million for the years ended December 31, 2017, 2018, and 2019, and nine months ended September 30, 2020, respectively. Our accumulated deficit was $1.4 billion and $2.1 billion as of December 31, 2019 and September 30, 2020,” the filing states.

• It’s not doing as badly as peers – other booking sites have fared worse – the pandemic has made the Airbnb private getaway more appealing than staying in a hotel/resort. However, Experiences have not done as well as hoped – there is no breakout of the figures for this despite launching four years ago.

But…the outlook is much stronger for 2021 now that vaccines are coming. Airbnb could benefit from the GOAT trade.

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