Skift Take

Does anyone remember when Travelocity was the leading U.S. online travel agency? We're thinking about that because a milestone may have taken place in the first quarter when Airbnb attracted more room nights booked than did Expedia. What it does clearly show is that the online travel pecking order is very much in flux.

It’s time to retire the notion of an Expedia-Booking Holdings online travel duopoly in the United States, or even a triumvirate, including Ctrip, globally.

Airbnb’s first quarter financial results, which the Wall Street Journal recently reported, show that with $9.4 billion in gross bookings, there is clearly now a quartet of online travel leaders. (For a look at Airbnb’s first quarter financials compared with leading online travel players around the world, see the chart below.)

If, in fact, the report about Airbnb’s financials is true, then the homesharing company notched considerably more booked room nights than did Expedia, 91 million for Airbnb versus 80.8 million for Expedia, in the first three months of 2019. That’s a differential of 10.2 million room nights in favor of Airbnb over Expedia. The Wall Street Journal cited multiple people familiar with Airbnb’s finances as the source for the first quarter numbers.

Booking Holdings, however, with its mix of hotels and alternative accommodations outpaced all competitors with 217 million room nights in the first quarter.

It isn’t known whether the first quarter was the initial time Airbnb bested Expedia in room nights. Airbnb declined to comment on its financials, and Expedia didn’t respond to a request for comment.

When it comes to gross bookings, Airbnb ($9.4 billion) is well behind Expedia Group ($29.4 billion) and Booking Holdings ($25.4 billion). But gross bookings also include Expedia and Booking’s airline and cruise sales, for example, which are two products that Airbnb doesn’t sell.

Q1 2019 Online Travel Agency Financials

Gross Bookings Revenue Revenue Growth Cash Room Nights
Airbnb $9.4B N/A 30+ percent $3.5B 91M
Booking $25.4B $2.8B (-3 percent) $2.3B 217M
Ctrip N/A $1.2B 21 percent $3.3B N/A
Despegar $1.2B $133.1M (-10 percent) $311.6M N/A
Expedia $29.4B $2.6B 4 percent $3.7B 80.8M
MakeMyTrip* $1.4B $120.2M (-23.8 percent) $187.6M 12.13M
TripAdvisor N/A $376 million (-1 percent) $771M N/A

* MakeMyTrip’s March 31 quarter was its fiscal fourth quarter 2019
Source: The Wall Street Journal and public company financial filings

Following are some takeaways from what we know about Airbnb’s financials:

Strong Revenue Growth Despite Regulatory Issues

Despite Airbnb’s considerable regulatory issues in places such as New York City, San Francisco, Barcelona, Paris, and Singapore, for example, Airbnb’s revenue growth of more than 30 percent in the first quarter far outpaced that of Ctrip (21 percent), Expedia Group (4 percent), and Booking Holdings (-3 percent).

What we don’t know from that 30-plus percent revenue growth number for privately held Airbnb is whether or not that represented decelerated growth compared with the first quarter of 2018. There have been some reports that Airbnb’s growth is slowing either because of the law of large numbers, or regulatory hassles around the globe.

It is difficult to determine Airbnb’s revenue based on its $9.4 billion in gross bookings because Airbnb recognizes revenue when guests check in for their stays, and not when the property is booked. So, for example, Airbnb may have generated revenue in the first quarter for bookings made in the third or fourth quarters of 2018, and may not recognize revenue on some of that $9.4 billion in first quarter gross bookings until July or September. That means the $9.4 billion in gross bookings isn’t a reliable base number from which to compute Airbnb’s revenue, which the Wall Street Journal didn’t report.

In 2018, according to Bloomberg, Airbnb claimed to have scored $93 million in profits based on $2.6 billion in revenue. The fact that seemingly IPO-bound Airbnb was profitable last year puts it in stark contrast with other recent high-profile tech public offerings, such as that of Uber, which has been accumulating red ink.

Even if Airbnb hypothetically generated $1 billion or even $2 billion in revenue in the first quarter, that wouldn’t mean it would be as profitable as Booking Holdings or Expedia Group in part because the latter two online travel companies still skew toward hotels.

“Not all revenue numbers are created equal,” said one investor. “A low average daily rate with a lower margin and high customer service cost looks radically different than a high ADR with high take rate, and low customer service cost.”

The same holds true when considering room nights. Expedia might be earning considerably more revenue per room night on average than Airbnb because of the higher commissions Expedia might generate from a hotel bookings when compared with apartments, and Airbnb is relatively speaking just at the beginning of its process of adding hotels to its home and apartment portfolio.

Lots of Cash makes staying private an option

If the stock markets and global economy tank in 2020, then Airbnb won’t necessarily have to execute its much-anticipated initial public offering because it has plenty of cash on hand — $3.5 billion in the first quarter. That’s more cash on hand than all of the online travel agencies we looked at except Expedia, which hoarded $3.7 billion in cash in the first quarter.

Airbnb, which has raised $4.4 billion in funding at a $31 billion valuation, may have derived that $3.5 billion in cash in several ways, including from investor funding, bookings transacted in the first three months of the year although the stay will take place in subsequent quarters, and from debt financing.

Airbnb can choose to use that cash for future operations, including marketing, and making acquisitions. Airbnb’s biggest rival today might be Booking Holdings, which had less cash in the kitty in the first quarter, $3.5 billion for Airbnb versus $2.3 billion for Booking.

Airbnb Brand and Marketing Advantage?

By all accounts, Airbnb, which reportedly was EBITDA (earnings before interest, taxes, depreciation, and amortization) positive in the first quarter, spends considerably less on marketing than does Booking, Expedia or Ctrip. That could be one factor in its surplus of cash.

On the other hand, in the first quarter Expedia spent $1.5 billion on selling and marketing, and Booking chipped in nearly $1.2 billion on performance and brand marketing. A lot of that spend ends up enriching Google in buys for keywords to lure travelers to online travel agency websites.

Airbnb seemingly has a brand advantage with travelers compared with its rivals. Rather than spending vast sums with Google or on other digital or brand marketing, Airbnb’s direct traffic in July was 60.35 percent of its overall desktop traffic, while Expedia drew 42.81 percent, according to SimilarWeb.

That’s why many online travel companies such as Booking Holdings, which increased its brand marketing 61.3 percent in the first quarter to $163 million, are focusing on trying to draw direct traffic and repeat customers to their websites. Airbnb appears to have the upper-hand in that regard.

Waiting for More Transparency

The Wall Street Journal report on Airbnb’s first quarter financial report was an important, if incomplete look. There was no revenue or profit numbers, or details on expenses, including marketing costs. If the company goes public next year then there will be a lot more clarity about Airbnb’s momentum or lack thereof.

Meanwhile, what’s clear is that Airbnb has solidified its position as a fourth major player in online travel globally. And, if you include Google, which doesn’t disclose much about its travel advertising businesses, then that would make for a handful of leading global competitors.

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Tags: airbnb, booking holdings,, ctrip, earnings, expedia, hotels, marketing

Photo credit: Airbnb booked more room nights in the first quarter of 2019 than did Expedia. Pictured is an RV that has been listed on Airbnb in Los Angeles. Airbnb

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