Jalpa Bhoolia and Chantal Marx
Founded in 2008 as Airbed & Breakfast by Brian Chesky, Joe Gebbia and Nathan Blecharczyk, Airbnb has disrupted the hotel industry through making a safe and convenient platform available on which people can rent out their properties to the public. More recently the offering has also expanded to traditional hotels and travel experiences.
Airbnb has since grown to over five million hosts who have welcomed over 1.5 billion guest arrivals in almost every country across the globe. The consumer appeal of Airbnb centres around the concept of authenticity. Travellers can stay in neighbourhoods where people reside, live locals' daily experiences, and spend time with locals in the regions in which they travel.
Short-term rental sector overview
The short-term rental market has experienced incredible growth in the last decade, driven by changing consumer preferences, advancements in technology, and evolving travel patterns. The global shift toward more personalised and flexible travel experiences has amplified the appeal of short-term rentals, offering unique accommodations that cater to diverse traveller needs.
The market's growth trajectory has been bolstered by the transformation of digital platforms such as Airbnb, Vrbo, and Booking.com, which have democratised access to these properties. The pandemic-fuelled transition to remote working and flexible living arrangements further accelerated the popularity of the short-term rental market, with many professionals choosing a "work-from-anywhere" lifestyle. Countries like Bali, Canary Islands and Tulum have become hotspots for digital nomads with a notable uptick in longer stays.
As the travel industry continues to recover beyond pre-pandemic levels, the short-term rental industry will still drive diverse accommodation options while an increase in tourist arrivals also incentivises innovation - we see Airbnb leveraging technology to expand beyond its current ecosystem.
According to Grand View Research, the global short-term vacation rental market size was approximately $134.5 billion in 2024 and is anticipated to grow at a compound annual growth rate (CAGR) of 11.4% between 2025 to 2030. Per Precedence Research, Europe led the global vacation rental market with the largest market share of 34% in 2024. Europe's tourism sector is led by prominent industry players and bolstered by the region's widespread appeal to tourists and advanced infrastructure. The surge in tourism activity has propelled the market forward, with major destinations like Germany, the United Kingdom, and Spain expected to dominate the European market.
Checking out the competition
While Airbnb is a dominant market player, Booking Holdings and Expedia are notable players in this space as well. Booking Holdings has over 29 million listings worldwide, across hotels, homes, apartments and other unique stays. Airbnb holds over seven million listings in more than 220 countries, while VRBO (through Expedia) has over two million listings globally.
Airbnb seems to have an advantage over its competitors through its established and proven track record in the short-term vacation-rental space. It is easier to list an entire property or a single room on Airbnb while it is reported that listings on Booking holdings can be quite difficult and hosting fees are more expensive. Airbnb has a keen focus on caring for its hosts, harbouring a healthy relationship between guests and hosts, while Booking Holdings is often associated with a hotel-like booking structure with guests expecting such amenities even when homestays are booked. Overall, Airbnb's reputational advantage and ease of use allows it to maintain an advantage over competitors.
Financial performance and prospects
Adjusted earnings per share came in at $0.73 cents (4Q23: $0.55 loss), well ahead of market forecasts (Bloomberg: $0.57). Revenue increased 12% y/y to $2.5 billion, also ahead of expectations (Bloomberg: $2.4 billion), primarily driven by the growth of nights stayed on the platform.
Nights and Experiences Booked was up 12% y/y with growth across all regions. Growth continued to be driven in part by the app strategy, with nights booked on the app increasing 22% y/y. App bookings accounted for 60% of total nights booked, up from 55% in the prior year. A notable acceleration in the number of first-time bookers on the platform was also recorded. Globally, there was an acceleration in growth across all regions, with Asia Pacific and Latin America again leading the way.
Of particular note has been Airbnb's ability to improve margins and generate strong cash flow - this was something that the market was worried about when the company first listed in December 2020.
On the earnings call, management placed emphasis on technological changes it is rolling out, citing that 2025 marks the start of Airbnb's next chapter. While the post-pandemic growth surge has tapered, it was very exciting to hear that management plans to i.nvest towards launching and scaling new businesses, which will be introduced in May, that goes to expand beyond Airbnb's current closed ecosystem and could set the company on a fresh growth trajectory
Investment Case Summary
Risks
Consensus considerations
Valuation
bnb is trading on 35.1 times forward PE, higher than its longer-term average rating (30.2 times) and at a significant and larger-than-usual premium to peers.
We concede; however, that current estimates for earnings this year seems a little light and many analysts have not yet adjusted their estimates following the 28% beat on the bottom line seen in 4Q24.
