Letting the Air Out of Online Travel’s IPO Bloat

Online Travel This Week

It’s no secret that venture capitalist and private equity valuations of travel startups can be vastly inflated, although Covid and lockdowns contribute to volatile market conditions.

Skift examined a crop of eight newly public short-term rental, travel tech, and rideshare companies that went public in 2021. (See the chart below.) Although many managed to pad their coffers in conjunction with 2021 stock market debuts, taking in net proceeds to fund ongoing operations or expansion dreams, their previous private valuations seem to have been grossly overstated in many cases.

For example, in April Grab, the Singapore-headquartered rideshare, delivery and fintech superapp, announced it would go public in a SPAC deal at a $40 billion valuation. Grab’s debut was delayed but it started trading on Nasdaq on December 2, and as of last week’s its market cap was relatively big, but a mere $24.4 billion.

Clear Secure, the biometrics and airport security company, was to go public in a $4.5 billion initial public offering. It indeed started trading June 30 on the New York Stock Exchange, and when the tickers ended last week’s session, Clear Secure’s market cap was just $1.7 billion.

It’s a similar scenario for Vacasa, the mostly U.S. property management company that started trading as a public company on Nasdaq December 7. In July, Vacasa announced it would go public in a SPAC deal at a $4.5 billion valuation. But stock market investors valued the company through a different lens: As of last week, Vacasa’s market cap stood at $3.6 billion.

These drop-offs for Grab (-47.8 percent), Clear Secure (-32 percent), and Vacasa (-26.7 percent) from their opening prices on their first day of trading through last week can be viewed in the chart below.

This is not to say they are weak companies, or that they will not one day achieve those lofty valuations. Some of these companies’ prospects call for playing the long game. I’m betting on Grab, for example, over the long term because of its superapp strategy, untapped market, and the strength of its board and management.

Still, the hype so far — and it may change — from private investors about these companies’ stock market debuts did not live up to the reality.

Online Travel, Short-Term Rental and Travel Tech Stock Market Debuts 2021

Note: * Market caps are estimates shown in U.S. dollars

** Stock price gains or losses shown as of market close January 7, 2022

Source: Yahoo Finance and Skift

To put it in context, while the share prices of Grab and Vacasa were plummeting on Nasdaq, as well as Clear Secure’s diminution on the New York Stock Exchange, over the last 12 months the Nasdaq has risen 14.2 percent, and the New York Stock Exchange was up 15.4 percent.

“Lots of IPOs have done badly so far, trying to attain unrealistic valuations,” said Richard Clarke of Bernstein, a research outfit. “Clearly the main trend is private rentals, a share gainer during Covid, and it’s natural that seed investors will try and capitalize on the positive sentiment there, especially if ADRs (average daily rates) are going to start moderating.”

Among short-term rental companies, while property manager Vacasa and German vacation rental metasearch firm HomeToGo (-21.7 percent), have seen their valuations dive, Australia’s Alloggio has ridden the resurgent vacation rental wave with a 16.1 percent stock price gain as of last week since its coming out party on the stock market November 29.

Many of these companies’ testosterone-filled run-ups to public company status came with ongoing red ink, and therefore investors’ enthusiasm has waned. Oftentimes patience for the long game gives way to a feeling of what have you done for me lately.

“The one trend I would note is that these companies are still unprofitable and likely in investment mode for some time,” said Dan Wasiolek, a Morningstar analyst. “The market appears to have moved away from unprofitable names that are being valued more on sales than earnings multiples the last few weeks, perhaps driven by a Fed communication that is sending yield rates higher.”

Of course an ample swath of these stock market debuts were outside of the U.S. Alloggio and SiteMinder trade in Australia, HomeToGo showed up in Germany, and RateGain sells its shares in India — all of which signifies the global strength of emerging travel startups.

The mostly downbeat performance of online travel-related IPOs and SPACs in 2021 can’t be welcome news for those waiting in the wings in 2021, including India’s hotel booking site and operator Oyo, and and U.S. entrants quasi hotel company Sonder, hotel-booking site Hotelplanner, and car-sharing marketplace Turo.

Of the bunch, at least Sonder lowered its hoped for valuation to $1.9 billion, from $2.2 billion, in late October, but it won’t mean too much until its shares trade on Nasdaq in the blazing sunshine.

Correction: Using market cap data and the presumed underlying share count from Yahoo Finance, we greatly undervalued Vacasa’s market cap: As of January 7, 2022 it should have been $3.6 billion and not $1.7 billion as the initial version of this column stated.

In Brief

The District of Columbia Limits Short-Term Rentals

Washington, D.C., the capital of the U.S. took steps to place limits on short-term rentals from Airbnb, Vrbo and others. Licenses will be required, and rentals will be limited to a maximum of 90 days annually if the host is not present during the rental. DCist Daily

Last Mile Transit Apps Dominate 2021 Downloads

Google Maps, the navigation, travel and local business app, was the most downloaded app globally in 2021, followed by ridesharing app Uber. The tally by Apptop did not reflect adequate data from China. Skift

Ecuador Implements New Travel Agency Regulations

In seeking to stem financial fraud and challenged customer experiences, Ecuador established new regulations for travel agencies and tour operators, including mandating physical offices and certain educational requirements among workforces. Skift

BookBarbados.com Seeks to Facilitate Home-Grown Ecommerce

Why cede all of the territory to Booking.com, Expedia and Despegar? A new Barbados-based online travel site, BookBarbados.com, seeks to be a home-cooked alternative to some of the globe’s major online travel players. The idea is to make some money and benefit local businesses. Skift