By Group 4 :

Abd El-Rahman Sayed Mohamed Hosni Eslam Samir Elsbaaei Ali Eslam Ali Abdel Rasoul Hussein Mohamed Elsafy
(20121150) (20122061) (19222107) (20121838) (20121165)
Khaled Abdel Megeed
(20121231)
- Describing business model in details
- 5 cascading elements
- ROE for the companies for last 3 years using 3 ways of calculating ROE
- stock price for companies for last 3 years × number of stocks to get the
value of the firm
- SWOT analysis
 Airbnb Case Study
Introduction

Airbnb is an American company founded in San Francisco, California in 2008 by Brian Chesky, Nathan Blecharczyk and
Joy Gebbia as a Startup company that operates an online marketplaces for lodging, primarily homestays for vacation
rentals, and tourism activities. the platform is accessible via website and mobile app.

It allows you to rent apartments (or even entire houses) from people all over the world,
almost everywhere in fact. The platform really revolutionized the world of
accommodations.

However Airbnb is already worth more than 30 billion, it does not own any of the listed
properties; instead, it profits by receiving commission from each booking. Airbnb is a
shortened version of its original name, AirBedandBreakfast.com.

Currently Airbnb is the world leader in accommodations of the “sharing economy”, allows
you to find places to stay directly from individuals in 192 countries.
• A comparison between AirBnB and its main competitors is implemented in
terms of the financial performance.
1. Return of investment (ROI)

Net porofit after taxes

ROI =
Investment

ROI ratio shows the percentage company has earned on its invested capital during a year.

This ratio shows how well a company manages to generate profit on its capital.

When investments make excess returns, the capital is creating value and these returns can
be invested again in the company.
1. Return of investment (ROI)
1. Return of investment (ROI)

• AirBnB have the lowest ROI among the companies.

• COVID-19 had the highest effect on AirBnB.

• AirBnB's ROI achieved to its lowest level in 2020.

• This means that Investors reached to maximum losses with their investment in the company
in 2020.

• However, the situation improved in 2021 and ROI begun to increase.

• The company began to achieve profits in 2021.

• Booking Holdings has the highest ROI compared to the others.

2. Profit Margin (PM)

Net Income
PM =
Net Sales

PM measures how profitable the company is relative to its revenues.

PM shows how many percentages of sales to make profits.

PM is a tool used to evaluate the profitability of different companies with different

production capacities.
2. Profit Margin (PM)
2. Profit Margin (PM)

• AirBnB is the mot company affected by Pandemic ( COVID-19).

• AirBnB make the most loses in 2020.

• AirBnB's losses reached to max. (135.71 % ) in 2020.

• However, AirBnB could make profit in 2021; thus, it could decrease its losses in 2020.

• Booking.com is the most profitable company.

3. Return on Equity (ROE)

Net Income
ROE =
Average Shareholders′ Equity

ROE shows how well the assets are used to create profit.

ROE is a very useful tool for investors.

ROE is used to know how well investors’ equity is utilized and how well the management
of the company is doing their work.

Higher ROE indicates how well the company is able to make profit from equity capital.
3. Return on Equity (ROE)
3. Return on Equity (ROE)
• There are fluctuations in AirBnB's ROE trend during the period from 2018-2021

• AirBnB had the highest ROE in 2019.

• AirBnB's ROE trend changes from positive to negative dramatically in 2020 under COVID-19
effect . This means that:

 The company made more losses in 2020 from equity capital.

 The company failed in 2020 to utilize the investors' equity in the correct wise to make
profits
 The company didn't make in 2020 any return on its shareholders.

 However, the ROE trend began to move upwards in 2021 after the company began to
make profits.
3. Return on Equity (ROE)

• In 2021, AirBnB has the lowest PM and ROI.

• However, AirBnB skipped Hilton in ROE during this period.

• There was an stability in ROE of Booking Holdings during the previous years.
Assets Turnover (ATO)

Revenue
ATO =
Average Total Assets

It is a financial ratio that measures the efficiency of a company's use of its assets in
generating sales revenue or sales income to the company.

The higher the ratio, the better the company utilizes its assets.
Assets Turnover (ATO)
Assets Turnover (ATO)

• In 2020, Total Assets Turnover decreased ( i.e. the better utilization of Assets in this year
compared to 2018 and 2019).

• However, AirBnB was still the best company in utilization of its Assets.

• In 2021, the utilization of Assets began to improve than in 2020.

• In 2021, AirBnB still had the best utilization of Assets among companies.
1. Working Capital Turnover

Net Sales
WCT =
Average working Capital

Working capital turnover shows how company utilizes its working capital to make revenue.

The higher the ratio, the better the company utilizes its short-term assets and liabilities.

If the ratio is low, it may mean that company may have too much bad debt or obsolete inventory.
1. Working Capital Turnover
1. Working Capital Turnover

• AirBnB and Booking.com are the best companies in utilization of short-term assets and liabilities
during the previous years.

• WCT of the companies deceased in 2020 under the impact of COVID-19.

• Booking.com is the best position among the companies in terms of Liquidity in 2021 (it has lowest
Debts and Obligations).

• Hilton had more Debt & Obligations (had a worst utilization of short-term assets and liabilities)
compared to the other companies in 2021.
2. Current Ratio

Current Assets
Current Ratio =
Current Liabilities

• This ratio shows the company’s ability to meet its short-term obligations within a year.

• This ratio indicate how the company can maximize its current assets to pay its current debt
and other obligations.
2. Current Ratio
2. Current Ratio

• For AirBnB,
 The current ratio trends increased.

 The company did not have any problems in paying its current liabilities during the previous
years.
 Liquidity Situation of AirBnB and Booking Holding are the best in 2021.

• In most of companies, Current ratio trend moves downward in 2021 except of AirBnB.

• This means, there are many of stockholders and investors buy stocks from the company and start
pouring cash to the company.
3. Debt-to-Equity Ratio

Total Liabilities
Debt/Equity =
Total Shareholders′ Equity

This ratio shows the company’s leverage.

This ratio tells what is the degree of financing operations with debt and what is the degree of
financing operations with own capital.
3. Debt-to-Equity Ratio
3. Debt-to-Equity Ratio
• For AirBnB:

 In 2020, the value increased, this means that the company resorted to debts to solve its financial
problems (shortage).

 Financial leverage increased in 2020.

 Financial situation of the company is not good in 2020 and the company may be suffer from the
risk of liquidity.

 However, Financial situation of the company improved in 2021 after IPO and Leverage began
to decrease.

• Hilton had the highest leverage and it has the worst financial situation among the companies.
4. Equity Multiplier

Total Assets
Equity Multiplier =
Total Shareholders ′ Equity

This ratio shows the company’s leverage.

It is a risk indicator that measures the portion of a company’s assets that is financed by
stockholder's equity rather than by debt.
4. Equity Multiplier
4. Equity Multiplier

• For Airbnb:

 In 2020, the value increased, this means that the company resorted to debts to solve its
financial problems (shortage).

In 2021, this value began to decrease again after IPO.

• Negative shareholders' equity for Hilton could be a warning sign that a company is in financial
distress.

• This could mean that a company has spent its retained earnings and any funds from its stock
issuance on reinvesting in the company by purchasing costly property, plant, and equipment
5. Interest Coverage

Earning before Interest and Taxes

Interest Coverage =
Interest Expenses

This ratio shows the company’s ability to pay interest on the outstanding debt.

This ratio determines the relation of firm’s current earnings to its current interest by measuring
how many times the earnings cover the interest.
5. Interest Coverage
5. Interest Coverage
• AirbnB's Interest Coverage increases in 2021.

• AirBnB began to make profits in 2021.

• AirBnB still can not cover the interest expenses in 2021, in spite of the improvement in its
performance.

• Booking.com has the best performance among the companies.

• Hilton could not cover its interest expenses during the previous years.

• Hilton had the worst performance among the companies in 2021.

AirBnB:

Balance Sheet of AirBnB during the period from 2017 to 2020:

AirBnB:

Note:
• The main financing source in AirBnB is Stockholders' Equity (which accounts for 54% of financing sources).

• The main financial use in AirBnB is Current Assets (Cash & Cash Equivalents consume most of the financing (66% of
financial use)).

• Short-term sources (35%) could not cover short-term uses (100%). Thus, there is a 65% shortage in short-term sources

• Thus, the company should cover this shortage.

• There are two options for the company: either selling their long-term sources (i.e. selling some companies' shares) or
borrowing long-term loans.
Booking Holding:

Balance Sheet of Booking Holding during the period from 2021 to 2021:
Booking
Holding :

Note:
• The main financing source in Booking.com is Current Liabilities (Payables And Accrued Expenses which accounts for
around 39% of financing sources).

• The main financial use in Booking.com is Non-Current Liabilities (Long Term Debt And Capital Lease Obligations
consume most of the financing (47.8% of financial use)).

• Short-term sources (69%) cover short-term uses (23%). Thus, there is a 46% surplus in short-term sources.
Hilton:

Balance Sheet of Hilton during the period from 2021 to 2021:

Hilton:

Note:
• The main financing source in Hilton is Cash & Cash Equivalents (which accounts for 39% of financing sources).

• The main financial use in Hilton is Non-current Liabilities (Long Term Debt And Capital Lease Obligations consume most
of the financing (71.5% of financial use)).

• Short-term sources (74.2%) cover short-term uses (0%). Thus, there is a 74.2% surplus in short-term sources.

• However, Hilton suffer from high leverage.

Royal Caribbean:

Balance Sheet of Royal Caribbean during the period from 2021 to 2021:
Royal
Caribbean:

Note:
• The main financing source in Royal Caribbean is Current Liabilities (Current Deferred (Revenue) Liabilities which accounts
for 29.7% of financing sources).

• The main financial use in Royal Caribbean is Equity (which consumes most of the financing (88% of financial use)).

• Short-term sources (83%) cover short-term uses (0%). Thus, there is a 74.2% surplus in short-term sources.
 Statistics
Values 2017 2018 2019 2020 2021
Stock Value (USD) 146.8 155.09
Annual revenue (billion USD) 2.6 3.6 4.7 3.4 3.7
Net Income (billion USD) -0.07 -0.017 -0.674 -4.585 -0.352
Earning per Share -0.27 -0.07 -2.59 -16.12 -1.3
Company Value (billion USD) 31 38 35 75 113
Airbnb listings (no.) 4,000,000.00 6,000,000.00 7,000,000.00 5,600,000.00 7,000,000.00
Airbnb bookings 115,000,000.00 140,000,000.00 272,000,000.00 193,000,000.00
AIRBNB CASE STUDY
 AIRBNB SWOT ANALYSIS
S.N Internal Factors S/W External Factors O/T
1 It has unmatched brand strength in the vacation rental industry. + Continue upselling the travel experience. +
More people working from home post-COVID-19 presents long-
2 It has a leadership position in its service category + +
term apartment-like rental opportunities.
3 It offers a cheaper alternative to hotels. + Expansion of its services +
4 It gives travelers choices of places to stay across the globe. + Continued global expansion +
5 Airbnb offers travelers unique travel experiences. + It could increase the power of its mobile app. +
6 It has a new hospitality cash collection model that is lucrative. + It can tailor its marketing to increase its market penetration. +
7 It has a strong and consistent core executive team. + The list of competitors is notable -
People want to work there because it fosters a “commitment” There is uncertainty regarding the current and future legal
8 + -
culture of belonging and love among its employees. framework.
It is now a public company with access to cheaper funding for
9 + It faces lawsuits (welcome to the business world). -
expansion.
It has a strong gross margin for a young company still investing in Airbnb has inherent physical safety issues with its business model,
10 + -
product development, sales and marketing. which increase its legal exposure
11 It offers a venue for more than just vacation stays + Hotels are catching up to Airbnb’s millennial appeal. -
12 It makes the most of its marketing presence +
13 It offers customer rewards and specials. +
Airbnb faces developing regulations and legal issues as the law
14 -
catches up to its platform.
15 Lack of quality control for hosts -
Simplicity of business model makes it easy for other market -
16
entrants to copy.
17 Some hosts charge high prices. -
18 There is a lack of a cohesive marketing plan. -
Searching online for accommodations will usually not bring up -
 SWOT Analysis
Strength Rank Weakness Rank

It has unmatched brand strength in the vacation rental Airbnb faces developing regulations and legal issues as the
4 5
industry. law catches up to its platform.
It has a leadership position in its service category 4 Lack of quality control for hosts 5
Simplicity of business model makes it easy for other market
It offers a cheaper alternative to hotels. 4 5
entrants to copy.
It gives travelers choices of places to stay across the globe. 4 Some hosts charge high prices. 4
Airbnb offers travelers unique travel experiences. 3 There is a lack of a cohesive marketing plan. 4
It has a new hospitality cash collection model that is 3
It has a strong and consistent core executive team. 3
People want to work there because it fosters a
3
“commitment” culture of belonging and love among its
It is now a public company with access to cheaper funding 4
It has a strong gross margin for a young company still
4
investing in product development, sales and marketing.
It offers a venue for more than just vacation stays 4
It makes the most of its marketing presence 3
It offers customer rewards and specials. 3
Total Strength Score 46 Total Weakness Score 23
Opportunity Rank Threat Rank
Continue upselling the travel experience. 3 There is uncertainty regarding the current and future legal
4
Continued global expansion 4 framework.
Expansion of its services 4 The list of competitors is notable 3
More people working from home post-COVID-19 presents
4 It faces lawsuits (welcome to the business world). 4
long-term apartment-like rental opportunities.
Airbnb has inherent physical safety issues with its business
It could increase the power of its mobile app. 4 5
model, which increase its legal exposure
It can tailor its marketing to increase its market penetration. 4 Hotels are catching up to Airbnb’s millennial appeal. 5

Total Opportunity Score 23 Total Threat Score 21