Business Summary :

Airbnb is a technology company that fosters a marketplace for home-sharing at a global scale. The peer-to-peer
exchange platform of homes and cultural experiences creates a natural marketplace for guests and hosts. The
company claims that after 13 years with over 4 ​ ​million hosts and 825 million guest arrivals, they have helped
millions of people satisfy a strong human connection. The company has ​ ​three core principles:

• ​Community is based on connection and belonging

• ​Creativity and design are at the center of strategy
• ​Responsibility to all stakeholders that support the natural marketplace

The Airbnb ecosystem is made of up guest and hosts who experience the following features:
• ​Guests: ​54 million active bookers worldwide booked 327 million nights and experiences on the
platform. They can ​ ​experience unique spaces, visit real communities, be hosted with
authenticity, and more importantly rely on a trusted ​ ​platform
• ​Hosts: ​Hosts are represented globally, and benefit from the platform with earned income, connecting
guests to their ​ ​communities, and ultimately sharing skills and passions. 90% of the hosts were
individual hosts, and 79% of those hosts had ​ ​just a single listing. And as of December 31, 2019, 72%
of the nights booked were with individual hosts.

1
Technology Platform: ​The platform is designed to drive organic attraction through ease of use and more
importantly the ability to ​ ​allow millions of strangers to trust one another. They system contains many
components:
• ​Reviews | Secure messaging | Risk scoring | Secure payments | Watchlist and background checks |
Cleanliness | Fraud and ​ ​Scam Prevention | Booking Restrictions | Guest Refund Policy |
• ​Delivers deep business intelligence insights to manage the marketplace from pricing to occupancy
optimization

The company’s mission is ​“to allow people to experience a deeper connection to the communities they visit and
the people who live ​ t​ here. They want you to “travel like a human”.

Industry:

The travel industry is composed of many diverse facets ranging across lodging, transport, and attractions.
According to the U.S. Travel Association in 2019 $1.1 trillion was spent by travelers amounting to $2.6 trillion
in economic output and supporting 15.8 million jobs. To put this in perspective, direct spending by residents and
international travelers in the U.S. spent an average $3.1 billion a day, $128.6 million an hour, $2.1 million a
minute, and $35,700 a second.Globally, travel and tourism’s direct contribution to GDP was around ~$2.9
trillion with a significant portion contributed from the U.S. ​The World Travel and Tourism Council estimated
that travel spend will grow at a 3.5% compounded annual growth rate from 2019 to 2030​.

Traditionally, the travel industry has developed around standardized hotels and selected attractions. However,
with the sudden economic impact of Covid and integration of technology, the industry is experiencing
democratization at an accelerated pace brewing new trends.
​• ​Demand Evolution: ​Domestic and regional destinations are preferred during the Covid times. This consumer
behavior is creating abundant support for the local communities.
• ​Health & Hygiene: ​89% of Americans are more conscious of germs now than before. Many fears contracting
the virus and as result cite cleanliness & health as a critical factor for traveling.
• ​Innovation & Digitization: ​Remote work and will create new destinations for human migration. This will
spur local community growth in terms of spending and digital infrastructure.
• ​Authenticity: ​Travelers are seeking authentic experiences in their destinations. Leisure activities and housing
will need to bring to life the cultural elements of destinations.

Market Opportunity:

The company believes their serviceable addressable market (SAM) is $1.5 trillion.
• ​$1.2 trillion is for short-term stays (* short-term stays = fewer than 28 nights)
o ​Long-term stays represented 14% of nights booked in 2019 and 24% for nine months ending
09/30. This however was ​ ​excluded from the SAM estimate
o ​The company accounts for 20% of the vacation rental industry
• ​$239 billion represents experiences (spend of travelers on attractions, including spas but not casinos)

The total addressable market (TAM) is $3.4 trillion.

• ​$1.8 trillion is for short-term stays, and $210 billion for long-term stays.
• ​$1.4 trillion represents experiences (includes spending of local residents on recreational and cultural
attractions such as sporting ​ ​events, summer camps, etc.)

2
Business is global so the TAM can also be broken out in the following geographies:
• ​$1.5 trillion in Asia Pacific, $1.0 trillion in EMEA, $0.7 trillion in North America, and $0.2 trillion in Latin
America

Business Model Landscape:

Airbnb has created a marketplace where hosts offer guests stays and experiences on their platform. The
company produces revenue ​through service fees charged to hosts and guests net of incentives and refunds. They
also collect lodging taxes that must be paid to the ​respective authorities. Below is an example of the revenue
model:

The following customer landscape is created through Airbnb’s platform:

• ​4 million hosts as of 09/30/2020
o ​55% are women with 86% of hosts located outside the U.S.
• ​7.4 million available listings of homes and experiences (5.6 million are active listings)
o ​Listings (private rooms, entire rooms, luxury villas, treehouses, and experiences) are in 100,000
cities across 200+ countries
• ​In 2019 the company had 54 million active bookers (booked stay or experience) and 247
million guest arrivals ​• ​84% of the revenue in 2019 came from guests stays with existing hosts
who had completed at least on check-in ​• ​69% of the revenue was generated by stays within the
year in 2019 from repeated guests
• ​63% of the revenue was generated by listings outside of the U.S. – ​global business

Competitive Strengths (Moats):

Airbnb has classified a series of core strengths that helped them revolutionize the travel industry.
1. ​Host Community: ​The hosts are ​unique ​and participate in the platform ​organically​. Hosts recruit hosts and
guests often become hosts. In 2019, 23% of new hosts were guests on the platform.

3
2. ​Guest Community: ​69% of the revenue was driven by returning guests. They are actively involved in the
community with 68% ​ ​of them leaving reviews for their stay. Guests come to the platform ​directly​, ​actively
participate​, and​ ​return regularly​.
3. ​Global Brand: ​“Airbnb” has evolved into a noun or verb when one wants to book an experience or travel.
Google trends ​ ​highlighted that Airbnb was searched worldwide more than any other travel brand. 91% of all
traffic to the platform came from​ ​organic channels.
4. ​Global Network: ​The ecosystem on the platform allows hosts and guests to attract each other. This
frictionless interaction has ​created a global web that has broken boundaries and continues to attract new hosts
which in turn attract new guests with new ​ ​experiences.
5. ​Platform with design focus: ​The platform offers unique needs to hosts and guests. Hosts get global demand,
activation, ​merchandising, pricing recommendations, scheduling, integrated payments, community support,
Superhost programs, reviews, ​and feedback. The process is fast, intuitive, and easy. Guests can explore unique
homes and experiences through the web and ​ ​app platform.

Competition/Risks:

The company has highlighted certain competitive and operational risks that m
affect its performance.
1. ​Competition: ​The company has many competitors across certain categories in the
industry.
• ​Online travel agencies such as Booking Holdings,Hotel Chains such as Marriott,Chinese short-term rentals
such as Tujia and Online platforms offering experiences such as Viator.
2. ​Covid/Adverse Effects on Travel Industry: ​With strict lockdowns to mitigate the spread of the virus, the
travel industry,experienced record losses. In the near term this contributed to a decrease in bookings in the most
infected regions. In addition,the company experienced reduction in workforces and restructuring costs
considering the economic situation resulting in $135- $150 million of charges in 2020.
3. ​Regulations/Laws/Rules that limit short-term rental and home sharing: A ​ ffordable housing and
over-tourism are common complaints across some cities. In Europe, 22 majors representing cities (London, and
Barcelona) want to increase regulatory control to the short-term rental option. Restrictions, bans, caps on days
to rent are common reactions from authorities.
​ ompany collects lodging taxes that they distribute to local authorities. The cost of doing
4. ​Tax Liabilities: C
business can certainly change with new tax liabilities currently under play such as ​digital platform
revenue-based taxes ​targeting online sharing/marketplace platforms. This can potentially increase prices for
guests and deter hosts from participating due to costs.
5. ​Large Debt: ​Company has an outstanding debt of ~$2.0 billion as of 09/30/2020.

Team:
The company is still founder based and is composed of the following key members:
- ​Brian Chesky, Co-Founder and CEO: ​Brian is a designer at heart graduating with a Bachelor of Fine Arts
from Rhode Island School of Design.
- ​Joseph Gebbia, Co-Founder and Chairman of Board and Samara: J​ oseph leads Samara, in-house design,
and innovation studio.He has a dual degree in graphic design and industrial design from Rhode Island
School of Design.
- ​Nathan Blecharczyk, Co-Founder and Chief Strategy Officer and Chairman of Airbnb China: ​Nathan
received his Computer ​Science degree from Harvard and held several engineering roles before co-founding
Airbnb
- ​Executive talent beyond the founders spans from engineers at Alphabet (Google) to great
leadership from Disney.
- ​Equity ownership is mainly concentrated in two key groups: Three Founders - 43.8%, Sequoia
Capital – 16.6%,

4
Financial Performance:

The company is aiming to raise ​$1 billion (SEC) ​to ​$3 billion (Analysts) ​in its IPO debut potentially in the end
of November. In the ​previous two private raises the company’s stock ranged between $52.55 - $62.30 to raise
$2 billion. The company has 263k ​outstanding shares as of 09/30/2020 and with the assumed share price from
previous private rounds puts it at a conservative valuation ​of $16 billion. There is speculation that the company
could be worth up to ​$35 billion.

The company has achieved ​$4.8 billion ​in revenue for year 2019, a ​29.7% YoY ​over the ​$3.7 billion ​earned in
2018. As of nine months​ ​ended September 30, 2020 the company achieved ​$2.5 billion ​in 2020 representing a
(-32.4%) decrease YoY from $3.7 billion over ​ ​the same period and currently holds $4.5 billion in cash.
The decline in revenue by ​$1.2 billion ​was primarily driven by a ​(-42%)​ ​decrease in the number of check-ins
during the Covid pandemic.

As of 12/31/2019, and 2018, Airbnb has yet to be profitable with net losses of ​-​$674 million and -$16
million​. In addition, in ​ ​September, the Company received a Draft Notice of Proposed Adjustment from the
IRS which could result in additional income tax ​ ​expense and cash liability of $1.35 billion.

Airbnb however is showing signs of recovery post Covid. In 2019, on average ​81 million quarterly nights
and experiences booked. ​ ​In 2020, Q2 experienced ​28 million booked while Q3 ​increased to ​61.8 million​.
Similarly, Gross Booking Value in 2019 averaged ​ ​$9.5 billion ​a quarter while in 2020 experienced a
significant drop in Q2 to ​$3.2 billion ​and a recovery in Q3 to ​$8.0 billion​.

5
In Q3, guests are showing a resilience and desire to travel as well with shifting trends. Domestic traveling
with shorter distances is ​ ​increasing and specifically across smaller cities and destinations.

Future Plans:
Airbnb plans to continue growth through the following strategies:
1. ​More Hosting: ​Company plans to extend new opportunities regarding long-term stays. The company
plans to also invest in ​ ​providing tools that offer host training and education
2. ​Global Network expansion: ​Penetration is low in India, China, and Latin America. Product will
become more localized to ​ ​attract hosts and guests such as their brand in China, Aibiying ( )
3. ​Design new products and offerings: ​Features that support emerging travel trends such as local travel
and remote working ​ ​are essential ​(Airbnb online experience).

Conclusion :

Airbnb has executed a unique business move: a phase change in a major asset. Residential real estate was
solid, now it’s liquid; owners and renters can sell off access by the room and by the day, so supply and
demand are better-matched than ever before. The business got to breakeven without disrupting growth, and
survived a pandemic that followed a year of stepped-up expenses. Unlike other travel companies, their supply
doesn’t really go away when demand dries up; the Airbnbable real estate still exists when customers are rare,
and can be repurposed for longer stays before the travel market recovers.