How big of a threat to the hospitality industry is Airbnb’s upcoming IPO?
— 10 experts shared their view
Airbnb is expected to complete its much anticipated IPO before the end of 2020 and Wall Street analysts are understandably excited, while hospitality industry experts worry that access to cheaper capital would allow Airbnb to increase its share of the current ultra-weak travel demand at the expense of hotels. This year Airbnb's US adult user base is expected to fall 60.0% to 17.0 million, the first time of negative user growth (eMarketer). No wonder, the company's valuation plummeted by 58% to $18 billion in a desperate coronavirus-driven fundraising in April 2020 from its previous high of $31 billion. Due to increased competition, its market share in the U.S. is expected to decrease to under 70% by 2022 from the current level of nearly 73% (eMarketer). The question is, how big of a threat to the hospitality industry, if at all, is Airbnb's upcoming IPO?
A successful IPO will place Airbnb in a much stronger financial position so they can remove the high cost (at 11% interest) of their recent funding and prepare to operate profitably again. The threat of Airbnb will be felt by hotels that are perceived to be "risky" in terms of Covid-19 transmission prevention, eg. large hotels with busy public areas. Without going into detail on the benefits of Airbnb accommodation vs a hotel, motel or resort - the pandemic has created awareness in the public of social distancing and remaining within a "social bubble" - which plays really well into the majority of Airbnb accommodation offerings (being a private residence, no lobby or elevator packed full of strangers). I believe Airbnb are a threat to many average hotel operators, even without funding from an IPO. A solid Airbnb just means they are here for the long haul and will likely have a detrimental impact on a section of the hotel market. Smart hotel operators offering consistent and predictable high levels of service will not be impacted too negatively by Airbnb, IMHO.