“While we expected positive results for Airbnb, we were surprised by how well Airbnb fared in a number of key metrics that we see as bullish for the company’s long-term prospects,” the team, led by Kevin Kopelman, said after looking at the results of its survey of 1,400 U.S. hotel and short-term rental consumers in the first quarter, in which they specifically targeted Airbnb users.
“The results gave us increased confidence in Airbnb’s growth trajectory,” the analysts said. Cowen is now projecting Airbnb “room nights” to increase from around 79 million this year to 500 million in the next five—and one billion in 2025.
Here are a few of the reasons for their optimism.
People keep coming back. Earlier this year, Goldman Sachs Group Inc. conducted a survey of U.S. consumers and found that more and more of the people who use Airbnb don’t end up going back to hotels [Edit: Actually, the survey revealed that hotels are still the preference of all consumers]. Cowen’s survey returned similar results: More than 75 percent of participants who used Airbnb three-to-five years ago have come back to the platform during this past year. One reason may be that the survey also showed Airbnb users were nine times as likely to be more satisfied with Airbnb than with their hotel stay when it comes to leisure travel, which is the bulk of Airbnb usage.
Users often recommend it to friends. Word of mouth is not only a major driver of growth for startups, but it’s also free. According to Cowen’s findings, more than 80 percent of users were either “very likely” or “likely” to recommend it to a friend, while only 8 percent were “unlikely” or “very unlikely” to do so.
A lot of people still haven’t used it—but want to. Only about half of the survey respondents have heard of Airbnb, and fewer than 10 percent have actually used it. “This suggests Airbnb could grow two to three times over time from increased brand awareness alone,” Cowen says. Respondents were also very open to trying the platform. “Among the 26 percent of survey respondents who knew and understood what Airbnb was, but had not yet stayed in an Airbnb, 82 percent said they would be willing to try Airbnb in the future—in fact, 66 percent of those 82 percent said they planned to try Airbnb in the next year.”
It won’t destroy the hotel industry. “Growth,” the big buzzword in Silicon Valley, has been quite astonishing at Airbnb. Cowen points out that in 2012, the platform expanded by more than 300 percent, and while that trend has slowed recently, the analysts still expect Airbnb “to become many times larger than it is today and become one of the largest two to three players in the global lodging industry.” But Airbnb is not gobbling up customers that would otherwise go to hotels. Cowen estimates that about half of Airbnb room nights “come directly at the expense of hotels.” Slowing growth rates, “at a time when it has circa 2 percent market share of global core paid room nights, should therefore allay fears that Airbnb is on track to have a catastrophic impact on the traditional hotel industry.”
While Cowen does point to regulatory battles as a continued headwind for the company, it believes the positives far outweigh the negatives. “We believe the high willingness to try Airbnb shows that positive word-of-mouth and positive press on Airbnb are significantly outweighing skepticism and negative press surrounding Airbnb’s legal/regulatory battles or the occasional ‘Airbnb stay gone wrong’ article,” they conclude.
©2016 Bloomberg L.P.
This article was written by Julie VerHage from Bloomberg and was legally licensed through the NewsCred publisher network.