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Airbnb could be 'the most successful IPO of the last several years'

With the coronavirus pandemic raging to the most new daily cases yet in the U.S., this is the worst moment for travel and leisure in a long time. Airbnb has just gone public as ABNB ($ABNB) and started trading on the Nasdaq Thursday at $146 per share, jumping sharply above its IPO price.

Speaking on Yahoo Finance Live recently, NYU marketing professor Scott Galloway explained the opportunity for the company amid the challenges brought by the virus.

“I think Airbnb is going to be one of the most successful IPOs of 2020,” Galloway said.

Galloway said Airbnb has a completely different relationship to web traffic coming from people looking for accommodations than companies like Hilton, Marriott, and Four Seasons — and that the number of people searching Airbnb were “greater than all the other hospitality or airline searches combined.”

POLAND - 2020/10/06: In this photo illustration Airbnb logo displayed on a smartphone. (Photo Illustration by Mateusz Slodkowski/SOPA Images/LightRocket via Getty Images)
POLAND - 2020/10/06: In this photo illustration Airbnb logo displayed on a smartphone. (Photo Illustration by Mateusz Slodkowski/SOPA Images/LightRocket via Getty Images)

On top of that, almost all the traffic – 91% – that Airbnb gets comes organically, meaning the company doesn't have to pay search engines like Google for the visibility, Galloway said – a unique asset.

According to Galloway, that means "this may be the first consumer unicorn to break out of the stranglehold that is Google and Facebook that exacted a toll on all traffic,” he said.

Another reason Galloway is bullish on the company is the fact that Airbnb has "one of the biggest moats in business," which insulates it from similar competition: already having a strong network of supply and demand (hosts and guests), as well as the “biggest brand in hospitality ever.”

The travel and leisure industry has been hit with unemployment, recently at over 16% in October, and revenue has tanked. Marriott, the biggest hotel company, saw a $234 million loss in the second quarter and only saw a profit in Q3 because of enormous cost cutting as revenue fell 66% compared to the year before.

Airbnb’s Q3 revenue fell, but just 18% compared to the prior year. Part of the reason is because Airbnb has been a popular tool for coronavirus vacations, especially in areas within driving distance from major cities. The company has also seen a lot of work-from-an-Airbnb and expects the lines between vacation and work to become further blurred as workplaces embrace flexibility during and post-coronavirus. Still, the crisis affected the company deeply.

Fortunately for the business, though not employees, they “didn’t waste a crisis,” as Galloway put it. The company slashed its costs and was able to turn a profit despite the hardship. "They got in fighting shape," said Galloway. "They cut marketing costs. They cut their staff by 25%. So when you reduce costs and the economy and travel comes back, what you have is a path to profitability that is much wider and much shorter."

For this reason, Galloway says “Airbnb is arguably the most successful tech IPO of the last several years.”


Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumer issues, personal finance, retail, airlines, and more. Follow him on Twitter @ewolffmann.

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