22 October 2020

No Mercy / No Malice: “AirbnBaller”

There are good companies that are overvalued (Tesla, Snowflake), good businesses whose emissions are bad for society (Facebook, Twitter), and firms that are just a menace (Uber). There are also firms that are all three (Palantir). However, occasionally there is a firm that is so gangster even I can’t help but see the glass as half empty, vs. empty. The most valuable private firm in America is Airbnb.

I believe this time next year, Airbnb will be the most valuable hospitality firm in the world and one of the world’s 10 strongest brands.


Ride hailing requires local supply (drivers) and demand (hailers). Hotels need local supply (hotel rooms) and regional demand (guests). But a global hotel brand requires both local supply and global demand, as guests are from all over the world. Airbnb has global supply, boasting more than 7 million listings worldwide — more than Marriott International, Hilton Worldwide, InterContinental Hotels Group, Wyndham Hotel Group, and Hyatt Hotels, combined. More impressive, and singular, Airbnb is the only hospitality brand that has the global awareness to generate unrivaled demand.

In 2021, there will be more Airbnb users in the U.S. than people in California.

Scott Galloway

I am highly skeptical about this prediction, and I think it relies on several flawed assumptions and hasty conclusions. Airbnb may have a great global brand, but its supply is just as ‘local’ as the hotels it competes with – it’s not like you can substitute rooms in the city you plan on visiting with accommodation in a different random location. This supply is outside its immediate control to a large extent, as the listed properties are owned by private persons, not the company itself. If the owners decide to rent through other intermediaries, Airbnb has no way to prevent them, to my knowledge. The article conveniently ignores occupancy rates, which could skew the numbers below in favor of hotels. Another threat here are local regulations, which may reduce the available properties substantially, or force higher prices, more in line with hotel listings.

Number of Airbnb accomodations vs hotel guestrooms

As for demand… Scott simply assumes Airbnb is a safer choice for pandemic-aware travelers. On some level it may be true, as you interact with far less people when staying in a private home. On the other hand… Hotels have more funds at their disposal to enact protective measures, and more leverage on staff to abide by stricter rules. What sort of guarantee do I have that some random person listing an apartment on Airbnb is doing the same, as opposed to skipping on disinfectant to keep more cash for himself? Two months ago, Airbnb formally banned parties at Airbnb listings to adhere to social distancing rules – even so, the issue is not the policy, but if and how will the company enforce it. Many hotels offer breakfast and possibly lunch and dinner as well – until now that was just convenient, but during the pandemic it saves guests a daily trip to another restaurant, reducing their exposure to strangers.

With the pandemic coming back into full force for the autumn season and countries in Europe enacting new restrictions, I do not expect travel to rebound anytime soon – so Airbnb’s revenues will remain anemic and unpredictable. Paradoxically hotels have some advantages here, as they have more diverse revenue sources from restaurants and spas, renting meeting rooms, and recurring business travelers. These activities are suffering for the time being, and business travel will likely recover even slower than leisure travel, but over the long term, once the threat of infection subsides, we can expect companies to hold more events and rent conference rooms for in-person interactions, especially those companies who switched entirely to work-from-home and abandoned their office lease contracts.

The weakest point for Airbnb though… it is still unprofitable! You cannot build a booming business just by cutting costs and staff. But I guess they have the resources to partner with an overhyped former Apple designer to work on the next generation of Airbnb products and services… Maybe they plan on launching a new speaker and install it in all their locations.

Post a Comment