Recently, we hosted Scott Shatford, CEO and co-founder of AirDnA.co, for a fireside chat on the SharesPost Expert Series to dig into Airbnb’s growth. AirDnA provides data and analytics to vacation rental entrepreneurs and investors by tracking the daily performance of more than 2 million listings across 5,000 cities worldwide. Scott personally manages several vacation rental properties and has been an outspoken advocate of the sharing economy.
For those who missed the webinar, we have recapped some of the highlights of our far-ranging conversation. Upon request, the entire webinar replay is available online to SharesPost accredited investors. Click here for a transcript and the presentation.
Airbnb’s demand is experiencing triple-digit growth in the U.S. According to AirDnA’s tracking, there were more than 650,000 Airbnb units in the U.S. at the end of 2016, compared to only 383,000 units in 2015. This indicates a 70 percent growth in Airbnb’s inventory. Scott highlighted the fact that the fastest-growing units are those with more than one bedroom. The number of available nights per unit is also growing. All in all, Airbnb’s supply, when measured by room nights available, is growing at a rate of 117 percent year-on-year. What’s even more impressive is that, per AirDnA’s tracking, the demand on Airbnb’s marketplace – measured by room nights booked – is growing at an even faster clip. Airbnb’s triple-digit growth rates illustrate why sophisticated investors continue to direct capital to this asset category.
International metros are larger and growing faster than American cities. Paris, London, and Rio de Janeiro have more Airbnb units than New York and Los Angeles, and their inventory is growing faster. New York (with 24,000 units) and Los Angeles (with 17,000 units) are Airbnb’s largest markets the U.S., in terms of active units. Orlando and Las Vegas are among the fastest-growing U.S. markets, adding units at a rate of roughly 250 percent and 150 percent, respectively. Interestingly, Scott noted that international markets are where the real action is. There are at least 15 international cities with larger Airbnb inventory than San Francisco, Airbnb’s hometown! Scott attributed this success to three factors: (1) compared to the U.S., international markets have a relatively sparse supply of hotels; (2) compared to the U.S., international markets have relatively less regulation; and (3) there might be a countercyclical driver (certain countries with fast-growing Airbnb cities, such as Barcelona, Rome, and Rio de Janeiro, are experiencing macro-economic slowdown).
We believe listings growth addresses a crucial part of Airbnb’s key long-term risk, as highlighted in our recent blog, “The Case for Airbnb’s $50 Billion IPO in 2018.” The case for Airbnb’s $50 billion or greater valuation in a base-case scenario still heavily depends on Airbnb’s execution over the next 12–18 months, the regulatory environment, and investor sentiment, which will govern the Revenue or EBITDA multiples. Most crucially, however, a $50 billion valuation rests on the assumption that Airbnb will continue to grow its listings and consumer adoption. If Airbnb is successful on both fronts, it would indirectly help the company with operating costs and regulatory hurdles.
Professional property managers are flocking to Airbnb. About 10–15 percent of hosts in the U.S. manage two or more properties. As such, they are regarded as “professional hosts.” On average, these hosts now manage about 30 percent of active listings in the U.S. In cities with heavy tourist traffic, such as Miami and Oahu, Scott’s data shows that professional property managers manage more than 50 percent of active listings. Such professionally managed listings contribute to an estimated 40 percent of bookings on Airbnb in the U.S. Put another way, roughly 40 percent of Airbnb’s revenue today comes from people who are hosting on a full-time basis or as part of a larger property management organization. This trend is an emerging game-changer for the property management business and another unintended and disruptive impact of Airbnb.
Non-urban listings are still a minority but are likely at a tipping point. AirDnA estimates that roughly 33 percent of Airbnb listings are located outside of urban areas. However, this proportion has been steadily growing. It now appears that Airbnb is making a deliberate effort to grow this previously ignored segment of listings. Scott believes that Airbnb is very actively pursuing supply in traditional vacation rental markets, which experience less regulation and opposition from local residents. Airbnb finds this a relatively easy way to grow its supply with minimal PR headaches. Furthermore, this phenomenon appears to be a global one: Airbnb continues to proactively add non-urban listings in Europe as well.
Business travel and short-term rentals are focus areas for Airbnb. For a long time, hotels have cultivated stickiness and repeat usage via loyalty programs. Scott said that Airbnb seems to be partnering with merchants in other travel segments (e.g., rental car companies and airlines) to create joint incentives that resemble third-party loyalty programs. We agree that corporate travel and short-term rentals are significant growth opportunities for Airbnb, particularly since they remain largely untapped by online travel agencies such as Expedia and Priceline. In our recent deep-dive report, “Unlocking Travel’s Final Frontier,” we provide details about six potential incremental revenue growth opportunities for Airbnb. Airbnb’s focus on business travel and short-term rentals, coupled with the rise of professional hosts, have created a new class of professional Airbnb investors who buy properties with the sole purpose of generating rental income via Airbnb. This is yet another example of how Airbnb is reshaping the hospitality industry.
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