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Airbnb IPO: Everything you Need to Know

In this article, we cover what they do, how they make money, their plans for the future, and much more.

Caleb Dismuke

Airbnb is a global marketplace that gives people access to a world of unique homes and previously inaccessible or undiscovered experiences.


  • They have over 4 million hosts from 220 countries and 100,000 cities.
  • 86% of its hosts are located outside of the United States.
  • 825 million guests have stayed in an Airbnb.
  • Hosts have earned more than $110 billion.
Ticker ABNB
Headquarters San Francisco, CA
CEO Brian Chesky
Founders Brian Chesky, Joe Gebbia, Nathan Blecharczyk
Year Founded 2008
IPO Date 12-10-2020
Industry Travel and Lodging
Revenue (as of 9-30-20) $2.5 billion
# of Employees 5,465

Their Business Model

They make money by taking a cut (%) of each transaction.

Their revenue consists of service fees, net of incentives and refunds, charged to hosts and guests.

Currently, they have two products: lodging and experiences. They take a small cut every time a guest books a stay or experience.

An transaction example:

Price/night set by host $100.00
Less: Host fees $3.00
Total paid to host $97.00
Price/night set by host $100.00
Guest fees $12.00
Lodging taxes $4.00
Total collected from guest (gross GBV) 116.00
Total service fees (collected at booking and
recognized as revenue upon check-in)

GBV (gross booking value) is the dollar value of each booking on their platform during a specified period. The amount includes host earnings, service fees, cleaning fees, and taxes, net of alterations and cancellations.

In 2019, their GBV was $38 billion.

  • $31.3 billion went to the hosts.
  • $5.3 billion went to Airbnb.
  • $1.4 billion went to taxes.

Industry Opportunity

They break their market opportunity into SAM and TAM. For a detailed analysis, go to page 201 in their S-1.

  • SAM (serviceable addressable market)-What they believe they can address today.
    • Their estimate of SAM is $1.5 trillion. This includes $1.2 trillion for short-term stays and $239 billion for experiences.
  • TAM (total addressable market)-What they believe they can address over the long-term.
    • Their estimate for TAM is $3.4 trillion. This includes $1.8 trillion for short-term stays, $210 billion for long-term stays, and $1.4 trillion for experiences.

Take all estimates for SAM and TAM with a grain of salt. They’re just that, estimates. Instead, focus on how well they’re hitting and exceeding their key metrics, which we’ll discuss below.

Key Financials and Operating Metrics (KPIs)

This section is updated quarterly. Last update: 12/10/2020.

Financial highlights:

  • In 2019, 84% of their revenue came from stays with existing hosts who had completed at least one guest check-in on or before December 31, 2018.
  • During 2019, 69% of their revenue was from repeat guests.
  • In 2019, they had $38 billion in gross booking value (GBV). That’s a 29% increase from 2018’s GBV of $29.4 billion.
  • In 2019, they had $4.8 billion in revenue. That’s a 32% increase from 2018’s revenue of $3.7 billion.
  • For the nine months ended September 30, 2020, its GBV was $18 billion, down 39% year over year. Its revenue was $2.5 billion, down 32% year over year (obviously, this was due to COVID-19. They expect to exceed their 2019 numbers in the decade ahead)
  • They generated $520.1 million of free cash flow (FCF) from January 1st, 2011, through December 31, 2019.
  • In 2019, net cash from operations was $227.7 million, and FCF was $97.3 million, compared to net cash from operations of $595.6 million and FCF of $504.9 million in 2018.

Results of operations

$ in thousands Nine Months Ended September 30, 2020 Year Ended 2019
Revenue $2,518,935 $4,805,239
Cost of revenue $666,295 $1,196,313
Gross profit $1,852,640 $3,608,926
Gross profit margin 74% 75%
Operating expenses $3,008,902 $5,306,782
Income (loss) from operations ($1,156,262) ($1,697,856)
Operating margin N/A N/A
Free cash flow (FCF) ($520,111) $97,275

Key performance indicators (KPIs)

Airbnb tracks two metrics to measure the performance of its business: number of nights and experiences booked and gross booking value (GBV).

  • Number of nights and experiences booked is the total number of nights booked for stays, and the total number of seats booked for experiences, net of cancellations.
  • Gross booking value (GBV) is the dollar value of each booking on their platform during a specified period. The amount includes host earnings, service fees, cleaning fees, and taxes, net of cancellations.

What's Their Competitive Advantage?

They list six things:

  • Unique host community. The majority of their 5.6 million active listings are only available on Airbnb.
  • Engaged guest community. Guest come directly to their platform to book their stays.
    • In 2019, over 68% of guests left reviews.
    • In 2019, 69% of their revenue was from repeat guests.
  • Globally recognized brand.
  • Custom-built platform.
  • Design-driven approach.

But their biggest competitive advantage is this:

91% of all their traffic comes from direct and unpaid channels. The fact that people begin their search on Airbnb is crucial.

Avoiding Google and the middlemen (OTAs) is key to maintaining their moat and pricing power.

Their advantage is similar to Amazon’s, where over 63% of consumers start their product searches on Amazon.

Who are its Competitors?

  • Online travel agencies (OTAs) like Booking Holdings and Expedia.
  • Search engines like Google and Baidu.
  • Hotel chains like Marriott, Hilton, and other boutique and independent hotels.
  • Other companies that offer homes and condos for booking like VRBO.

Some of its competitors are copying parts of their business. Marriott recently released Homes & Villas. It’s a curated offering of professionally-managed, high-end properties.

Their Long-Term Growth Strategy

  • Unlock more hosting. To continue growing at a healthy clip, they have to expand the size of their hosting community.
  • Grow and engage their guests’ community. They need to both attract new guests and get previous guests to rebook more often.
  • Invest in the brand. They want to educate new hosts and new guests on the benefits and uniqueness of Airbnb.
  • Expand its global network. They want to expand into markets where their penetration is currently lower — places like India, China, Latin America, and Southeast Asia.
  • Innovate their platform. They need to invest in its platform to make the experience better for both hosts and guests.
  • Design new products. They want to design new technologies to expand what hosts can offer guests.

Airbnb's History

The Latest News

Airbnb skyrockets 115% in public market debut
Airbnb opened at $146 per share on its first day of trading on Thursday, more than doubling the $68 per share price set for its IPO the day before.

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