Airbnb (NASDAQ:ABNB) is still recovering from the devastating effects on travel caused by the coronavirus pandemic. The online marketplace for lodging and vacation rentals’ revenue cratered last year at the pandemic’s onset as people hunkered down at home out of fear of contracting the virus. Simultaneously, hosts were reluctant to share their homes with guests.
Now, as hundreds of millions of people have been vaccinated against the virus and economies are reopening worldwide, travel is rebounding. It could not have happened a moment too soon for Airbnb.
Adding supply of listings to meet rising demand
As people have felt more comfortable traveling this year, they have increasingly booked stays on Airbnb. Subsequently, in the first quarter, Airbnb reported revenue of $887 million, which was 6% higher than the same period two years ago before the onset of the pandemic. Here’s what the company had to say about the rebound in travel in its Q1 earnings report released late last week: “While conditions aren’t yet normal, they are improving, and we expect a travel rebound unlike anything we have seen before.”
Unsurprisingly, the rebound is being fueled by travel in North America, where vaccination rates in the U.S. are progressing faster than in most parts of the world. That is encouraging for shareholders who hope that similar trends develop in the rest of the world as other countries catch up in vaccinating their populations. The desire for travel is like a coiled spring right now, as many people have held off for more than a year.
That might be why Airbnb management is focusing its energy on increasing the supply of listings on its platform. In February, the company launched its first large-scale ad campaign, and one of the goals is to inspire more people to become hosts. Adding more listings will be crucial for the company to increase revenue for the rest of this year and beyond. All the customer demand in the world will hardly increase sales at Airbnb if people don’t find what they are looking for on its site.
To that end, Airbnb elaborated on its plans to add more hosts:
We have a comprehensive approach to recruiting more Hosts on Airbnb. To build on the momentum of our Made Possible by Hosts campaign, we recently launched an accompanying digital campaign that focuses Made Possible by Hosts on recruiting new Hosts. We’ve taken a targeted approach by investing in high-priority geographies in our largest markets. Since the campaign launched, we’ve seen an increase in traffic of prospective Hosts in these markets.
What this could mean for investors
Airbnb not only raised revenue above pre-pandemic levels, but it was better than what Wall Street analysts were expecting. Airbnb’s first-quarter revenue of $887 million was well above the estimates of $711.44 million.
Although shares rose slightly following the earnings release, Airbnb’s stock is still down 8.1% year to date. In addition, Airbnb is trading at a forward price-to-sales ratio of 18, which is down 33% from earlier in the year when it was trading near 27 times forward sales. Nevertheless, if vaccinations continue to remain effective at combating the spread of the coronavirus and the supply of vaccines expands to reach more people, Airbnb could reap major gains in revenue for the next couple of years.
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