Airbnb: Sales Share Gains Point to a Strengthening Narrow-Moat Network Advantage

Our view of Airbnb’s ABNB network advantage (source of its narrow moat) has become more optimistic since its December 2020 public offering. Specifically, Airbnb has seen a strong sales recovery in its core alternative accommodations market, and we have less pause that its lack of traditional hotel content poses a competitive challenge. Shares trade at a slight discount to our unchanged $127 fair value estimate.

Airbnb’s 2020, 2021, and 2022 bookings have recovered sharply to 63%, 123%, and 167% of 2019′s level, respectively, nicely outpacing Euromonitor’s short-term rental industry forecast rebound of 62%, 98%, and 120%, respectively. We estimate Airbnb’s rental bookings are about twice the amount of the nearest competitor, narrow-moat Booking Holdings. We are confident that Airbnb will maintain its industry-leading position, as it benefits from some durability of the recent lift in remote working resulting from COVID-19 and ongoing technology enhancements that support its network advantage. For instance, Airbnb added the ability to search for rentals using flexible dates or by category type in 2022, which we think will help platform utilization. Therefore, we model 13.5% annual booking growth for Airbnb during 2023-27, above the 10% lift for the short-term market during that time, according to Euromonitor.

We have also changed our stance that Airbnb’s lack of hotel content places it in a relatively weaker platform position to Expedia and Booking’s more comprehensive networks. In fact, we now believe that Airbnb’s network advantage, which is supported by its communal culture of unique lodging, could be damaged if the company adds branded hotel listings.