ABNB - AirBnB

[Broeb22]

Well AirBnB's S-1 is out...I'm not going to provide detailed analysis, well, because I'm just not that smart, but it goes without saying that this will likely be a monster IPO, though not as big as it could have been.

 

https://www.sec.gov/Archives/edgar/data/1559720/000119312520294801/d81668ds1.htm

[Gregmal]

Yea I really want to get some of this and regret having passed on private shares a couple years ago. Hopefully $30B is near where its trades, but I'd probably wager opening trades are $50-60B valuation, maybe more.

[Spekulatius]

I am surprised this doesn’t print money - where does all this expense go? It isn’t even stock based compensation (~$100M in 2019). $1B in R&D in 2019....

[winjitsu]

I am surprised this doesn’t print money - where does all this expense go? It isn’t even stock based compensation (~$100M in 2019). $1B in R&D in 2019....

 

On the flip side, it's FCF positive ($500m FCF on ~$3.6bn in sales in 2018), seems to always carry some meaningful amount of tax float, grew 30% in nights and experiences booked 2018->2019. This is with some FCF negative investments like Experiences (Klook competitor which I think will be pretty big when done right), Luxury, and whatever units they shut down recently.

 

[Broeb22]

I am surprised this doesn’t print money - where does all this expense go? It isn’t even stock based compensation (~$100M in 2019). $1B in R&D in 2019....

 

My thoughts exactly. I went back to look at Booking.com at this size and they were printing money at ~40% margins at a similar revenue.

 

This is the part I struggle with regarding Silicon Valley companies. They promise a bright future but will most or even some of them ever get there? I don’t know what else AirBnB can do beyond building out Experiences, which will only ever be a fraction of the size of their core lodging business anyways.

 

The one thing does stand out is they will likely burn a couple billion more before this pandemic is over, so unlike many Silicon Valley IPOs they will likely need this cash which could make the price more volatile and provide some opportunities along the way.

[bizaro86]

US resident hosts (who had a hosting account before Nov 1st) can put in for a reserved allocation.

[CorpRaider]

WTF is all that Opex for?  "Investing through the income statement" in R&D/software ip?  Doesn't smell like a marketplace.

[Spekulatius]

ABNB last round was at a $30.9B valuation apparently - is this really worth much more? I would guess that it goes to a higher valuation, due to strong brand recognition, but the business metrics don’t look all that impressive.

 

They do seem to pay a huge “tax” to Google ; I assume a lot of operating and marketing expense may just be that.

[TwoCitiesCapital]

"Where does all the money go?"

 

My guess would be fighting lawsuits in local districts like NYC - and that's not the only city that is hostile to them.

 

When I was in NYC as a host, there was a ton of marketing spend, a ton of lawsuits, and a ton of employees acting as "community liaisons" to keep hosts aware of what was going on.

 

Secondly, constantly redeveloping stuff on the back-end to ensure they, and their hosts, remain in compliance with local regulations in popular cities which can change on a dime.

[Guest roark33]

I haven't looked at the financials yet, but I knew an early person in their finance department and she said one of their biggest cost was merchant processing fees.  Not sure if that is still true

[rkbabang]

I haven't looked at the financials yet, but I knew an early person in their finance department and she said one of their biggest cost was merchant processing fees.  Not sure if that is still true

 

That doesn't sound right.  Every business that accepts cards pays those.

[Broeb22]

"Where does all the money go?"

 

My guess would be fighting lawsuits in local districts like NYC - and that's not the only city that is hostile to them.

 

When I was in NYC as a host, there was a ton of marketing spend, a ton of lawsuits, and a ton of employees acting as "community liaisons" to keep hosts aware of what was going on.

 

Secondly, constantly redeveloping stuff on the back-end to ensure they, and their hosts, remain in compliance with local regulations in popular cities which can change on a dime.

 

Good points TwoCities. I might push back on the significance of those items relative to a $5 billion revenue company (except marketing), but these are legitimate yet hopefully transitory. You would think with the way most eCommerce companies avoid getting on the phone with a customer like the plague that these community liaison types would not exist significantly long-term.

 

 

[bizaro86]

"Where does all the money go?"

 

My guess would be fighting lawsuits in local districts like NYC - and that's not the only city that is hostile to them.

 

When I was in NYC as a host, there was a ton of marketing spend, a ton of lawsuits, and a ton of employees acting as "community liaisons" to keep hosts aware of what was going on.

 

Secondly, constantly redeveloping stuff on the back-end to ensure they, and their hosts, remain in compliance with local regulations in popular cities which can change on a dime.

 

Good points TwoCities. I might push back on the significance of those items relative to a $5 billion revenue company (except marketing), but these are legitimate yet hopefully transitory. You would think with the way most eCommerce companies avoid getting on the phone with a customer like the plague that these community liaison types would not exist significantly long-term.

 

I'm an airbnb host and they call me all the time.

 

They call me because someone wants to cancel outside of my cancelation policy. They call me because they want me to contact a politician about some law. They call me just to check in. They call me to promote a new feature.

[Broeb22]

"Where does all the money go?"

 

My guess would be fighting lawsuits in local districts like NYC - and that's not the only city that is hostile to them.

 

When I was in NYC as a host, there was a ton of marketing spend, a ton of lawsuits, and a ton of employees acting as "community liaisons" to keep hosts aware of what was going on.

 

Secondly, constantly redeveloping stuff on the back-end to ensure they, and their hosts, remain in compliance with local regulations in popular cities which can change on a dime.

 

Good points TwoCities. I might push back on the significance of those items relative to a $5 billion revenue company (except marketing), but these are legitimate yet hopefully transitory. You would think with the way most eCommerce companies avoid getting on the phone with a customer like the plague that these community liaison types would not exist significantly long-term.

 

I'm an airbnb host and they call me all the time.

 

They call me because someone wants to cancel outside of my cancelation policy. They call me because they want me to contact a politician about some law. They call me just to check in. They call me to promote a new feature.

 

Do you find this annoying to be called "all the time"?

[Liberty]

Byrne Hobart always writes thoughtful stuff. He has a free newsletter edition about AirBNB:

 

https://diff.substack.com/p/understanding-airbnb

[bizaro86]

"Where does all the money go?"

 

My guess would be fighting lawsuits in local districts like NYC - and that's not the only city that is hostile to them.

 

When I was in NYC as a host, there was a ton of marketing spend, a ton of lawsuits, and a ton of employees acting as "community liaisons" to keep hosts aware of what was going on.

 

Secondly, constantly redeveloping stuff on the back-end to ensure they, and their hosts, remain in compliance with local regulations in popular cities which can change on a dime.

 

Good points TwoCities. I might push back on the significance of those items relative to a $5 billion revenue company (except marketing), but these are legitimate yet hopefully transitory. You would think with the way most eCommerce companies avoid getting on the phone with a customer like the plague that these community liaison types would not exist significantly long-term.

 

I'm an airbnb host and they call me all the time.

 

They call me because someone wants to cancel outside of my cancelation policy. They call me because they want me to contact a politician about some law. They call me just to check in. They call me to promote a new feature.

 

Do you find this annoying to be called "all the time"?

 

Yes.

[rkbabang]

"Where does all the money go?"

 

My guess would be fighting lawsuits in local districts like NYC - and that's not the only city that is hostile to them.

 

When I was in NYC as a host, there was a ton of marketing spend, a ton of lawsuits, and a ton of employees acting as "community liaisons" to keep hosts aware of what was going on.

 

Secondly, constantly redeveloping stuff on the back-end to ensure they, and their hosts, remain in compliance with local regulations in popular cities which can change on a dime.

 

Good points TwoCities. I might push back on the significance of those items relative to a $5 billion revenue company (except marketing), but these are legitimate yet hopefully transitory. You would think with the way most eCommerce companies avoid getting on the phone with a customer like the plague that these community liaison types would not exist significantly long-term.

 

I'm an airbnb host and they call me all the time.

 

They call me because someone wants to cancel outside of my cancelation policy. They call me because they want me to contact a politician about some law. They call me just to check in. They call me to promote a new feature.

 

Do you find this annoying to be called "all the time"?

 

Yes.

 

I haven't had this experience at all.  I've had to call them from time to time, but they have never called me.  When guests have cancelled last minute, the guests have told us and we have called airbnb.  Most cancellations have been done through the web interface though.  And they have never called about lobbying a politician, maybe there hasn't been any legislation in New Hampshire that they have been worried about.

 

[Seth Lowry]

So I think AirBnB self dis-intermediates itself over time. This is how I use AirBnb...

 

Step 1) Log into platform, search for home, look at ratings (extract trust)

Step 2) Lookup who the property manager is within the ad

Step 3) Google the property manger or contact directly

 

Boom - 15% fees saved and usually the property manager is happier to deal with customer directly and manage the relationship rather than have airbnb do it ($$ savings and future marketing lists)

 

I think this catches on over time, especially as Airbnb price gouges renters and owners and plays games with page rank etc.

 

Best case - limits pricing power

worst case - disintermediation similar to OTAs

 

 

[Guest roark33]

Very few people do this, Marriott, etc have been trying to get their customers to do this for decades...yet Priceline is still worth, check notes, more than MAR.. ....

 

So I think AirBnB self dis-intermediates itself over time. This is how I use AirBnb...

 

Step 1) Log into platform, search for home, look at ratings (extract trust)

Step 2) Lookup who the property manager is within the ad

Step 3) Google the property manger or contact directly

 

Boom - 15% fees saved and usually the property manager is happier to deal with customer directly and manage the relationship rather than have airbnb do it ($$ savings and future marketing lists)

 

I think this catches on over time, especially as Airbnb price gouges renters and owners and plays games with page rank etc.

 

Best case - limits pricing power

worst case - disintermediation similar to OTAs

[rkbabang]

So I think AirBnB self dis-intermediates itself over time. This is how I use AirBnb...

 

Step 1) Log into platform, search for home, look at ratings (extract trust)

Step 2) Lookup who the property manager is within the ad

Step 3) Google the property manger or contact directly

 

Boom - 15% fees saved and usually the property manager is happier to deal with customer directly and manage the relationship rather than have airbnb do it ($$ savings and future marketing lists)

 

I think this catches on over time, especially as Airbnb price gouges renters and owners and plays games with page rank etc.

 

Best case - limits pricing power

worst case - disintermediation similar to OTAs

 

I've learned to ignore people who do this.  One airbnb offers protections for hosts with insurance policies and dispute resolution.  And two I've found the people who do this to be annoying and want much steeper discounts than what I save.  Not worth the trouble.  And at the end I don't get an airbnb review to help my business.  I've actually raised my prices by more than $100/night this year from what I was charging in 2019 and found that I still get just as many booking and the people treat the house better and are easier to deal with.

[Gregmal]

Oh yea, there is definitely some truth to the above. People that are incredibly cheap are also typically very demanding and just a hassle to deal with. A friend of mine worked as a stockbroker right out of college for awhile, and told me one of the first things they are taught is that if a potential customer asks more questions about cost/commission/fees than the actual product, just tell him to go to Scwhab and move on. Not worth the headache. Much like the people who ask their waiter a million questions, end up ordering minimally, and then tip 15% on the pre tax amount, while asking for a to-go box for the leftovers...

[no_free_lunch]

There is certainly something to the brand, its the 1st service I use when vacationing.  However I can't work with the valuation.

 

What I would want to know.. what do the tec he guys think?  Is airbnb a big innovator?  Is management focused on finance metrics or on changing the world?  In this case for these valuations I want the latter.

[CorpRaider]

I view this behavior as a very real threat like for beach houses where the local mgmt company already has scale and basically all of the airbnb features but cheaper.  Like I've used airbnb or vrbo to find out who the big rental managers are in that beach (or mountain) town and then go directly to their site to book the house.  Maybe that's more of a threat to vrbo than airbnb.

[alpha]

I view this behavior as a very real threat like for beach houses where the local mgmt company already has scale and basically all of the airbnb features but cheaper.  Like I've used airbnb or vrbo to find out who the big rental managers are in that beach (or mountain) town and then go directly to their site to book the house.  Maybe that's more of a threat to vrbo than airbnb.

 

I have also done this frequently, however it takes additional time and I don't think the number of users doing this would ever be high enough to make a dent in their revenues. Additionally I have had issues with the local management companies tacking on hidden fees, delaying deposit returns etc... with Airbnb you don't have to worry about any of those issues.

[lnofeisone]

I view this behavior as a very real threat like for beach houses where the local mgmt company already has scale and basically all of the airbnb features but cheaper.  Like I've used airbnb or vrbo to find out who the big rental managers are in that beach (or mountain) town and then go directly to their site to book the house.  Maybe that's more of a threat to vrbo than airbnb.

 

I would also break this out by international, local (for me local would be the US), leisure, and work.

For the US - leisure:

I have definitely done this for mountain and beach houses. My two rules of thumbs are: 1) there should be a management company with reviews handling it (and the reviews have to be decent) and 2) the price difference should be substantial (last time we did this, the price difference was something like $100/day for a 10-day stay). Everything else, I go via AirBnB.

 

For international - leisure:

I haven't done this and really don't want to risk being stranded in another country without the language. I prefer the protection of AirBnB.

 

For local/international work - if I go airbnb route (over hotel), I'm not checking for an alternative to save $  :P.