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Airbnb Inc.
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== Industry overview == ''' Addressable Market''' As per the company, the serviceable addressable market (SAM) amounts to $1.5Tn, comprised of a short-term stays market of $1.2Tn (based on the company’s estimate of 6.5bn paid overnight trips) and a ~$300bn market for Experiences (based on global tourist spend on attractions & experiences). Expanding this over the next 10+ years to incorporate growth in population, higher trip frequency, adding longer-term stays, and expanding experience opportunities equates to a TAM of ~$3.4Tn (Short-term stays: $1.8Tn; Experiences: $1.4Tn, Long-term stays: $200bn). Based on Gross Bookings of $37.9bn in 2019, the company’s SAM penetration reached ~2.5%. '''Competition''' Apart from hotels which have been promoting direct channels and focusing on loyalty programs, Airbnb competes primarily with Booking.com and Expedia in the travel accommodation space. As the company has scaled up its operations over the past few years, the number of nights & experiences booked on the platform has reached the levels of Expedia’s (Exhibit 9) in recent times. In terms of booking margin, the delta with Booking.com (Exhibit 10) reflects the scope for uptick in host fees (which currently account for ~3% of overall booking value). However, instead of aggressively increasing host fees, Goldman Sachs Investment Research believes the company is more likely to focus on generating additional revenue by offering ancillary services such as financing, home upkeep, concierge, and other services, in order to support host growth and retention. Airbnb’s gross bookings grew nearly 5x of Booking/Expedia’s between 2Q-4Q19 (Exhibit 11) as the latter faced the twin challenges of Google’s meta search platform and hotel supplier’s direct efforts. With the onset of the pandemic in 2020, Airbnb’s gross bookings have recorded sharp declines, although still lower than the ones recorded by Booking and Expedia. As lockdown restrictions eased across geographies and travel recovered during the summer months of 3Q20, gross bookings at Airbnb declined only by 17%, in sharp contrast to the 45%+ declines experienced by the other online travel agents. Goldman Sachs Investment Research attributes this out-performance to the differentiated inventory offered by Airbnb which under pandemic protocols came to be viewed a safer option to hotels and as an alternative to long-term rentals for people who left cities for less dense alternatives. Even with the online travel agents trying to grow their alternative accommodation business, Goldman Sachs Investment Research believes their stretched balance sheets (2020E net debt of $5.2bn and $2.0bn ex-investments for Expedia & Booking.com, respectively) are likely to limit their ability to invest in this space. '''Traffic''' Comparing traffic across Airbnb and online travel agents such as Booking.com and Expedia highlights Airbnb’s stronger growth in traffic and engagement over the last one year. In-line with the gross bookings data, Airbnb saw higher traffic growth than its peers in the pre-COVID months and recorded fewer declines during 2Q20 when the travel industry was the worst affected. While travel activity recovered to some extent in 3Q, trends have softened in 4Q as per reported data from online travel agents and comScore (Exhibit 12). However, in the scenario of a longer-term recovery in the travel space going forward, Goldman Sachs Investment Research believes, Airbnb’s differentiated inventory and solid brand positions it better than its peers.
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