Business of Design

How Airbnb Navigated The Coronavirus Pandemic To Valuing its IPO at $100 Billion

How does a travel company go public during a pandemic? While COVID-19 restrictions shut off international and business travel, those at home still want to get a way, albeit within a closer distance from their place of residence.

The Download: In March, when Covid-19 halted the travel industry, Airbnb CEO Brian Chesky questioned whether the home-share company would survive. Now, nine months later, the company completed this year’s biggest initial public offering with shares traded at $149.24 each, valuing the company at nearly $100 billion—more than rival Booking Holdings.

On the first day of trading, the company’s shares skyrocketed opening at $146 each, 115 percent above its initial IPO price of $68. “People got in cars and started booking Airbnbs within 300 miles, and booking longer-term stays as well,” Chesky said. While Airbnb’s revenue was only down 18 percent in the third quarter, Marriott and Expedia experienced almost 60 percent declines. “This crisis revealed just how adaptable our model is.”

The Outlook: Airbnb is in a unique position to take advantage of the shifting model of traveling. With low interest rates and fiscal stimulus boosting parts of the economy, investors are chasing riskier bets, driving valuations of invaluable startups to absurdly unrealistic levels. Millennials are trading more now with Robinhood, a stock trading app that has flooded the market with millions of traders thirsty to get a piece of the pie. James Gellert, CEO of Rapid Ratings, a financial analysis provider, explained that the “absurd” valuations illustrate “the extreme exuberance and unprecedented liquidity in the market.”

In Their Own Words: “On the guest side, there are a lot of opportunities. For example, last year 14 percent of our business was for stays over 28 days,” Chesky says. “That’s now growing more than 50 percent. Traveling and living are starting to blur together in this world of flexibility. People aren’t just going to the same 20 cities. They aren’t just traveling for business and staying for two nights. They’re actually starting to live all over the world and they’re doing it on Airbnb. And that opens the door to so many possibilities in these services and offerings that we can now do because people really want to feel grounded in where they’re living.”

Surface Says: Valued at $100 billion or not, we’re all buying into Airbnb somehow. For now, the prospect of an overnight stay at FAO Schwarz has us living out our Big fantasies of playing “Heart and Soul” and “Chopsticks” on a giant piano.

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