[imagesource: Reuters]

For a period of time, if you could stump up the 10% needed for a deposit, it looked like Airbnb would create property moguls across Cape Town.

Travel was booming, owners needed maybe 15 nights a month of bookings to cover the bond, and companies that handled Airbnb bookings on behalf of new hosts sprung up.

Fast forward to a COVID-19-wrecked 2020, and rental properties are flooding the market, with shrewd tenants in many parts of the country looking at ways to renegotiate leases.

South Africa is not alone on that front, obviously, and Airbnb’s recent filing for an initial public offering makes the global impact of the devastation wrought by the pandemic very clear.

The IPO filings show the company made losses of $700 million on revenues of $2,5 billion in the first nine months of this year, but digging deeper reveals other areas of concern.

For some of the key takeaways, we go to the Financial Times, starting with how Airbnb’s growth was actually slowing pre-pandemic:

In 2016, Airbnb increased revenues by 80 per cent from the year prior to nearly $1.7bn, while producing positive free cash flows. Months later, investors injected $1bn in new equity that valued the company at $31bn…

But by 2019, Airbnb was experiencing its third straight year of slowing growth, with revenues increasing 32 per cent from the previous year. By comparison, the ride-hailing company Uber boosted revenues at a rate of 42 per cent in the final full year before its IPO in 2019.

After years of heavy spending, the company is now looking at cost-cutting measures, including reduced spending on marketing and new hires.

Last year, the filings show that it spent $5,3 billion to make $4,8 billion in revenues.

Then there’s also Airbnb Experiences, launched last year and pairing local guides with tourists, which hasn’t taken off:

In the filing, however, the performance of Experiences, which claims to have a potential market size of $1.4tn, has been wrapped together with its figures for nights booked in homes…

Airbnb cites an inability to “grow new offerings and tiers, such as Airbnb Experiences” as a risk factor. It will be made more difficult by marketing cuts. While the company can boast that 91 per cent of its traffic arrives organically — helped by its status as the verb for booking a room — this is not the case for Experiences.

Looming large in the distance is the fact that increased regulation in certain cities looks likely, with some already having passed limits on the number of nights that a host can offer per year.

In London, that’s capped at 90, and in Paris, 120, with Airbnb calling compliance with these intricate laws “burdensome”, adding that it puts off users as a knock-on effect.

Read the rest of that FT report here.

One positive revealed by the IPO filing is that travel in close proximity to where a person has remained strong, no doubt boosted by how large swathes of the world are unable to fly, or travel too far from their homes.

Below via Business Day:

Short-distance stays, what Airbnb describes as a stay within 80km of where a guest lives, have shown extreme resilience, according to its filing. Bookings within an 800km radius of a guest’s home have started to recover, too, it said…

“Domestic travel quickly rebounded on Airbnb around the world as millions of guests took trips closer to home,” it said. “Stays of longer than a few days started increasing as work-from-home became work-from-any-home on Airbnb.”

The elasticity of Airbnb’s supply and its ability to quickly pivot to domestic travel has allowed it to fare better than its rivals.

Given what’s happened this year, the IPO filing was always going to reveal some worrying numbers.

I fear less for the business, which is estimated to be worth around $18 billion by some, and more for the people on the ground who have lost their primary source of income, or are now unable to come close to covering bond repayments.

[sources:ft&businessday]