A thread on #AirBnB, which will become a great public business because (i) it's the best product in a very large market, (ii) strong fundamentals led by hosts, (iii) a lack of discipline that's dragged on profitability can absolutely be overcome! (1/x)
2/x Why #AirBnB wins with customers (vs #hotels): top 3 purchase criteria are price, selection, and trust. AirBnB has lower prices, is close enough on trust after years of investment. Need to continue investing in selection

#userexperience https://qz.com/779121/airbnb-vs-hotel-cost-comparison-you-can-rent-an-entire-home-on-airbnb-for-the-price-of-a-hotel-room/
You can rent an entire home on Airbnb for the price of a hotel room in the US

And a lot of times Airbnb is even cheaper.

https://qz.com/779121/airbnb-vs-hotel-cost-comparison-you-can-rent-an-entire-home-on-airbnb-for-the-price-of-a-hotel-room/
3/x #airbnb prices should decrease. Why? Host occupancy rates improving but today average ~30%, well below hotels' 60%+. But hosts can still make rent / mortgage at 30%. As occupancy rates improve-> prices go down

#airbnb #hotels

https://www.alltherooms.com/analytics/average-airbnb-occupancy-rates-by-city/ https://www.forbes.com/sites/amydobson/2019/06/24/the-most-profitable-airbnb-locations-in-the-us/#62b9833f2271
The Most Profitable Airbnb Cities In The U.S.

Where the most profitable cities are for Airbnb hosts.

https://www.alltherooms.com/analytics/average-airbnb-occupancy-rates-by-city/
4/x Overall volume/industry will be fine: company has rebounded nicely from COVID. Participates in an extremely large travel market (vacation rentals alone are $87B)

https://www.wsj.com/articles/how-airbnb-pulled-back-from-the-brink-11602520846?mod=e2tw
5/x Profitability has lagged in recent years and it's a fair question on whether AirBnB has strong fundamentals. #AirBnB's burn has actually held up pretty well during COVID, with a $400M loss in Q2. What we see: fundamentals are đź’Ş (cont'd) https://www.bloomberg.com/news/articles/2020-03-12/airbnb-s-loss-nearly-doubles-in-fourth-quarter-before-virus-hit?srnd=technology-vp
Airbnb’s Loss Nearly Doubles in Fourth Quarter, Before Virus

Airbnb Inc.’s losses almost doubled in the fourth quarter of last year, even before the coronavirus pandemic caused global travel to nearly grind to a halt.

https://www.bloomberg.com/news/articles/2020-03-12/airbnb-s-loss-nearly-doubles-in-fourth-quarter-before-virus-hit?srnd=technology-vp
6/x #AirBnB's largest variable expense -- Sales & Marketing costs at ~30%. This is concerning to many. But is this spend for #consumer acquisition? Majority of AirBnB's traffic is direct and ~90% is organic (SimilarWeb). https://twitter.com/modestproposal1/status/1184834411063365632?s=21
7/x More likely, much of S&M is for the supply side (hosts), and this is high ROI spend. You win by having better selection than competitors - and AirBnB needs to continue investing, despite 10M listings (Airdna) to 1.4M rooms for Marriott
8/x Presumably AirBnB has both a large sales force and customer success team for Superhosts (est. ~5% of hosts) to continue signing up new hosts. This is a great investment! And S&M as a % of revenue should decrease over time https://www.airdna.co/blog/airbnb_superhost_status#:~:text=We%20began%20this%20analysis%20by,achieved%20Superhost%20status%20in%202017.
What is Airbnb Superhost Status Really Worth? | AirDNA

How big of a performance boost does an Airbnb Superhost actually receive? Discover the data behind search placement, booking conversions, revenue and more.

https://www.airdna.co/blog/airbnb_superhost_status#:~:text=We%20began%20this%20analysis%20by,achieved%20Superhost%20status%20in%202017
9/x Am also optimistic #AirBnB will continue adding large numbers of #hosts. Why? AirBnB host is now a real occupation -> which unlocks supply. E.g. in Austin, median earnings per month is $3k. And occupancy rates should also improve over time https://www.airdna.co/blog/airbnb-data-how-to-earn-more-with-marketminder
Airbnb Data | Vacation Rental Analytics | AirDNA Data and Analytics

Beginner’s guide to unleashing the power of Airbnb data using the world’s most comprehensive vacation rental data tool, MarketMinder

https://www.airdna.co/blog/airbnb-data-how-to-earn-more-with-marketminder
10/x #AirBnB also has reasonable take rate (~15%) with room to grow. In aggregating majority of demand for hosts, AirBnB has strong competitive position and can increase take rate over time - partic if introducing host advertising model. #commissions #ads http://abovethecrowd.com/2013/04/18/a-rake-too-far-optimal-platformpricing-strategy/
A Rake Too Far: Optimal Platform Pricing Strategy

In a casino, the term “rake” refers to the commission that the house earns for operating a poker game. With each hand, a small percentage of the pot is scraped off by the dealer, which in essence...

http://abovethecrowd.com/2013/04/18/a-rake-too-far-optimal-platformpricing-strategy/
11/x What makes me worried: Unnecessary move into managed marketplace. Acquired #HotelTonight in '19, had moved towards directly managing supply. Yes that's what modern marketplaces are doing, but #AirBnB doesn’t need this for great product #marketplaces https://skift.com/2020/05/05/airbnb-cuts-25-percent-of-workforce-and-downsizes-hotel-investments/
Airbnb Cuts 25 Percent of Workforce and Downsizes Hotel Investments

 A new and more-focused Airbnb is emerging out of the coronavirus crisis. Airbnb announced Tuesday it cut 25 percent of its payroll.

https://skift.com/2020/05/05/airbnb-cuts-25-percent-of-workforce-and-downsizes-hotel-investments/
12/x What else makes me worried: Non-core investments. Yes #AirBnB significantly descoped during COVID-19, incl. Transportation, Studios, Hotels, Lux. But didn't go far enough: high-burn Experiences business still out there without clear #PMF

https://skift.com/wp-content/uploads/2020/05/Aibnb-announcement.pdf
13/x All that said, going public can be really good for a company. #AirBnB will come out as a profitable, disciplined company following the difficult COVID-19 cuts and public company pressure

My full article on subject here: https://www.linkedin.com/pulse/airbnb-become-great-public-host-led-business-brian-cramer
AirBnB will become a great public, host-led business

Plug: I've started using Twitter recently. If you're a user, give me a shout.

https://www.linkedin.com/pulse/airbnb-become-great-public-host-led-business-brian-cramer
You can follow @BC_925.
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