Airbnb fans should check out old-school rival Expedia

Travel stocks soared at the beginning of November as positive third-quarter earnings offered a resounding sign that people are on the move again. Shares of Airbnb and Expedia are both up well over 30% this year, but they offer very different value propositions. After paring down its ancillary operations last year, Airbnb remains a one-trick pony in home sharing. Expedia, which doesn’t break out financials for its Vrbo home-sharing business, says that business is having a record year.

Lately, the narrow focus has served Airbnb very well. The home-sharing company said it posted its best quarter ever for the period ended Sept. 30, with gross booking value up 23% versus the same period of 2019 and revenue up 36% on the same basis. Expedia said more than half of Vrbo’s customers this year are new to the platform—a signal that interest in alternative accommodations remains high. But the company’s overall business still lagged behind 2019 levels in the third quarter, with total revenue down 12% versus the same period two years ago.

The pandemic certainly seems to have sped up the adoption cycle for home sharing, bringing new interest into the sector that should stick. That doesn’t mean those new customers will never opt for a hotel again, though. Sales for Marriott International bottomed out in the second quarter of 2020, down 72% year over year, according to FactSet, but third-quarter 2021 sales were just 25% below comparable 2019 levels. Revenue for Wyndham Hotels & Resorts in the third quarter was down just 17% from the same period in 2019. And data from STR shows occupancy levels for U.S. hotels at least are down just 13% as of the week ended Nov. 6 from the comparable period in 2019.

Airbnb talks a lot about long-term stays, which continue to be popular. The company said in its third-quarter shareholder letter that stays of 28 days or more accounted for 20% of gross nights booked. Few hotels see that kind of duration. According to AB Bernstein’s Richard Clarke, 82% of stays at even extended-stay hotels are typically shorter than seven nights.

But how realistic are frequent long-term stays in the future? Even if remote work sticks, other obligations will keep long vacations and “bleisure" trips, blending work and leisure, to a minimum. Last year, 40% of all families lived with their own children, according to the U.S. Census Bureau. That means that for three-quarters of the year, those families’ travel plans are at the mercy of school schedules, whether or not the adults are expected back at the office.

In an interview, Airbnb’s Mr. Chesky said he doesn’t expect post-pandemic life to change dramatically for everyone. But if only 10% of families gain a lot more flexibility, it could bring a profound change to the industry, he said.

The spoils of such a significant shift would be limited by Airbnb’s ability to meaningfully grow supply to handle the added volume. Airbnb has almost six million active global listings, but most are only available a fraction of the year. That pales in comparison with the global supply of hotel rooms, totaling over 19.5 million, according to STR. Airbnb noted continued supply growth in the third quarter, but data from AirDNA shows active hosts and active listings have declined on the platform since August. Overall, the data show that as of October, Airbnb has grown active listings just 5% and active hosts just 2% since January 2020.

Investors playing the travel rebound might want to hedge their bets with an old-school operator like Expedia.

 

This story has been published from a wire agency feed without modifications to the text