Airbnb, which is reportedly seeking a significantly higher valuation than originally expected for its initial public offering (IPO), wrote in a recent filing that the company has only captured a tiny piece of what it sees as a $3.4 trillion total addressable market.
“We believe that the COVID-19 pandemic reinforced that travel is an enduring human desire, even in the face of challenges,” the company wrote in its S-1 filing with the U.S. Securities and Exchange Commission. “People have increasingly sought travel options closer to home during COVID-19, and Airbnb’s offerings are well suited to adapt to this changing dynamic.”
The Wall Street Journal cited unnamed sources Monday (Nov. 30) as saying Airbnb currently expects to see a $30 billion to $33 billion valuation on its upcoming IPO, up from an original expectation of just $30 billion.
The higher valuation comes even as Airbnb continues to weather a global pandemic that’s slammed the travel business. For instance, Airbnb said in its S-1 that its revenues fell to $2.5 billion during 2020’s first nine months, down from $3.7 billion in the same 2019 period.
Still, the company disclosed in the filing that it sees the firm’s serviceable addressable market — a measure of total potential business in its current core areas — as $1.5 trillion. That includes $1.2 trillion for short-term stays and $239 billion for experiences.
Airbnb added that its total addressable market — a broader measure of all potential business in current or future core areas — is a massive $3.4 trillion. That included $1.8 trillion for short-term stays, $210 billion for long-term stays and $1.4 trillion for “experiences,” Airbnb’s COVID-era initiative to host paid online events like cooking classes or tours of exotic cities.
“While the current travel market remains unpredictable, we believe estimates made prior to the COVID-19 pandemic to be the best representation of our long-term travel opportunity,” Airbnb wrote.
The company added that although a second COVID-19 wave is hurting revenues, “there are several areas of our business that have shown resilience, notably, domestic travel, short-distance travel, travel outside of our top 20 cities and long-term stays.”
Airbnb also said the global economic downturn should help it attract more host properties for rental. Additionally, Airbnb said it raised $2 billion of credit through loans early on in the pandemic, and generated $520.1 million of free cash during the year’s first nine months.
However, the firm said it has plenty of other challenges beyond COVID-19. For instance, the company noted that it has more than a dozen major competitors, from large travel sites like Booking Holdings to Expedia Group to search engines such as Google and Baidu.
It also counts major hotel chains like Marriott and Wyndham as competition, along with meta-search sites like Craigslist and Chinese short-term rental firms like Tujia and Meituan B&B.
But Airbnb argued in its filing that it “we believe we compete favorably based on multiple factors, including the differentiated breadth and depth of stays and experiences offered on Airbnb, our global scale and geographic reach, the strength and loyalty of our host and guest community [and] our brand.”
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