Airbnb proved to be more nimble in 2021 than many of its competitors, and is leading the grand online travel experiment in reducing over-reliance on Google.
Airbnb’s performance in 2021, after emerging as a public company at the tail end of the previous year, was the most important story in online travel.
This wasn’t primarily about stock performance, which as of this writing has Airbnb’s share price up 21 percent year to date at around $169 per share. Expedia Group’s share price jumped even higher than Airbnb’s in terms of percentage increase at 39 percent while the Nasdaq composite rose some 19 percent. Airbnb’s market cap eclipsed that of Booking Holdings, $107 billion versus $97 billion on December 22, for instance.
It’s tough to compare erstwhile peers such as Airbnb, Expedia Group, Booking Holdings and Trip.com Group because they are so different from one another. Airbnb plays primarily in the short-term rental arena while the others engage in that and just about everything else in travel.
But Airbnb’s performance, particularly in the third quarter — officials labeled that period its best ever — stood out in the short-term rental/online travel sectors.
Airbnb’s record revenue of $2.2 billion in that quarter, was 36 percent greater than in the same period in pre-pandemic 2019, and that mark did not come through a big acquisition but by leading the short-term rental surge. Its net income rose 280 percent to $834 million, likewise a record for the company.
In fact, in Skift Research’s scorecard of global online travel agencies, Senior Research Analyst Seth Borko found that Airbnb largely outperformed the pack. Focusing on short-term rentals, it was the only booking site to recover to 2019 levels, had the highest market cap, spent the second lowest on marketing as a percent of revenue (28 percent), and had the highest proportion of direct traffic “by far” at 68 percent, he concluded.
That is one of the most important dynamics of Airbnb’s 2021 — no company has reported earnings for the final three months of the calendar year yet, obviously — is that the company is growing without being overly reliant on marketing through Google paid search.
That dependency on Google has been an achilles heel in online travel. Even Booking Holdings, which built itself into an online travel powerhouse based in part on its skill in efficiently spending ad dollars with Google, has publicly stated over the last few years that it needs to build its brand to a greater degree in order to attract more direct traffic.
As Airbnb Chief Financial Officer David Stephenson said in early November during the company’s third quarter earnings call: “We’ve increased our relative marketing rate this year, just given the fact that the business has been going quite well. And so, on a relative basis, our marketing expenses as a percentage of revenue are down from levels we had in 2019. And we should anticipate that it will be in this kind of range for the foreseeable future.”
Airbnb is taking advantage of its broad brand recognition, and getting a ton of direct traffic and bookings.
For example, in November, according to Similarweb, Airbnb attracted 67 percent of its U.S. desktop traffic directly compared with 51 percent for the smaller Vrbo, which claimed to be gaining market share, especially in the U.S.
For all of its faults and challenges, Airbnb has shown itself to be more nimble than many of its peers. It transitioned to emphasize long-term stays light years faster than Booking.com, for example, while Expedia has been busy trimming brands, consolidating its various loyalty programs, and otherwise reorganizing operations.
It can be argued that Airbnb has been more adept at adapting to the pandemic traveler mindset as it quickly adapted to digital nomads and implemented a flexible search feature for the hundreds of millions of travelers who visit its platform with no destination or travel dates in mind other than knowing they deeply want to get out on the road.
Airbnb has a house full of challenges ahead, including a persistent party house problem, a global backlash against the company’s adverse impact on affordable housing and at times local businesses, and the issue of whether the company can keep growing without paying more homage to Google. Airbnb may have a difficult time finding ample numbers of hosts to meet demand, and there is the looming question on how short-term rentals will fare when Covid-induced lockdowns and other travel restrictions substantially decrease.
But in 2021, despite a flurry of blank check mergers and initial public offerings taking place, Airbnb dominated a lot of the discourse in short-term rentals and online travel.
Photo credit: Airbnb's journey in 2021 was a closely watched online travel narrative. Pictured, an Airbnb host greets guests in Mexico City in 2018. Airbnb