Abstract
Airbnb is today the most popular global online accommodation community. The platform matches travelers seeking authentic experiences with hosts offering unique, inspiring accommodations around the world. Therefore, Airbnb is in its origin a double-sided service platform for home-sharing. The company also became a synonym for the overall sharing economy. But, as the company’s strategy intends to stretch out from an accommodation to a holistic experience platform, the company might even be in a transition stage to a multi-sided platform. Chapter 5 first describes Airbnb’s revolution within the global hospitality industry by introducing its double-sided accommodation rentals platform. Additionally, its tailored 10C Business Design is compared with those of international hotel groups, highlighting the advantages of its asset-light platform architecture. Thereafter, the rentals platform feverish awaited, and spectacular initial public offering (IPO) will be described. With a pop of 114% on its opening share price in day one trading, its IPO became one of the most successful in corporate America’s recent history, giving the rentals platform a market capitalization north of $80 billion. The evaluation of Airbnb’s eight platform value drivers highlights the potential shift from a double-sided accommodation to a multi-sided experience platform. The final financial valuation introduces the picture-of-the-future scenario “the age of connecting and belonging,” before evaluating the accommodation platform with the Reverse DCF approach.
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Notes
- 1.
Following the definition of platform patterns within Chap. 1
- 2.
Chua et al. (2019) describe Airbnb’s value proposition as enhancing a simple sharing of personal properties or belongings.
- 3.
Botsman et al. (2010) define the term “sharing economy” broadly as an ecosystem that rests on sharing underused assets or services for free or for a fee directly from individuals. Sharing is therefore a peer-to-peer approach in which assets or services are shared between private individuals, either free or for a fee, typically enabled by the web.
- 4.
According to data from Financial Times and Transparent, a research firm focusing on short-term rentals (Financial Times, 2020a)
- 5.
A holacracy organization might be described as an organizational archetype that replaces traditional hierarchical organizational architectures and management styles by self-management of fluid teams, as decision power is widely dispersed throughout the organization teams and individual team members are empowered (Holacracy, 2020). Nevertheless, the alignment with the company’s ultimate purpose and strategic direction has to be assured. A very nuanced article on the strengths but also challenges of firms applying holacracy organizational principles to fulfill on the ultimate goals of reliability and adaptability of organizational designs might be found in the Harvard Business Review article from Bernstein et al. (2016).
- 6.
The departments by itself have further layers below the Vice Presidents like directors, product managers, and support staff.
- 7.
Especially $2.8 billion of stock-based compensation expenses (Airbnb, 2021c)
- 8.
Hosts pay a 3% transaction fee if they select a flexible cancellation policy, 4% for a moderate, and 5% for a strict cancellation policy.
- 9.
Additionally, Q4 2020 net income was impacted by a mar-to-market adjustment of $872 m referencing to the recognition of an increased value of its warrants issued in line with its long-term loan agreement entered into in April 2020 and triggered due to Airbnb’s share price increase (Airbnb, 2021c).
- 10.
Excluding stock-based compensation and stock-settlement obligations
- 11.
Airbnb’s condensed consolidated statements of operations from its latest financial statement 2020 have been used. The adjusted statements have been reverse engineered based on Airbnb’s provided information on stock-based compensation expenses.
- 12.
Including a green shoe option of 5 m additional shares increasing the $2.5bn intended proceeds to the described $2.75bn. Airbnb’s shares are vested with different voting rights, where class A shares own one voting right, class B shares 20, and class C as well as H no voting rights (Airbnb, 2021b, pp. Exhibit 4.1: 1–2). As it is the case for most Silicon Valley unicorns, especially founders and early bakers will hold foremost B shares, having control over the company even in case of owning less than 50% of outstanding shares.
- 13.
On a fully diluted basis incorporating also employee stock options and restricted shares, the market capitalization would have been equal to $33bn.
- 14.
Generation Z that follows Millennials will also be the major force in the tourism market by 2040.
- 15.
Hilton Worldwide Holdings Inc. realized pre-pandemic an operating profit margin of 18%, calculated on the financials provided in its 2019 10-K SEC report. The company outperformed its contenders InterContinental Hotels Group PLC with 14% or Marriott International Inc. with 9%, where the computations are once more based on the respective 10-K SEC reports for 2019.
- 16.
Facebook’s Invested Capital is inflated by its goodwill of $19 billion for its acquisitions and a quite significant investment in PP&E, with a $46 billion total, according to the social media giant’s latest 10-K SEC report.
- 17.
Airbnb’s average daily rates (ADRs) for rentals are up by 35% in Q1 2021 compared with the prior year, and numbers of nights booked in rural areas increased by 50%, whereas urban bookings are down by 65% (Financial Times, 2021).
- 18.
Airbnb’s significant losses carried forward have been modelled by postponing tax-related payments till tax provisions have been fully depleted. A global/US tax rate of 25% was ultimately assumed.
- 19.
For the detailed working capital calculation, from Airbnb’s 10-K report operating cash, pre-payments, and other current assets, accounts payables, and taxes payables as part of the balance sheet position accrued expenses and other liabilities were classified as working capital items.
- 20.
In this book, the focus was to present briefly the picture-of-the-future “the age of connecting and belonging.” Alternative scenarios developed for stress testing the Airbnb valuation have been “slowbalization,” mirroring the impact of a more regionalized world on the global hospitality industry, and “roaring 2020s,” mimicking a significant rebound of the tourism markets beyond the base-line scenario in the next 3 years due to potential significant pent-up demand and available cash resources saved and accumulated during the pandemic by households.
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Feix, T. (2021). Airbnb: From Double-Sided Accommodation to Multi-sided Experience Platform?. In: Valuing Digital Business Designs and Platforms. Future of Business and Finance. Springer, Cham. https://doi.org/10.1007/978-3-030-83632-0_5
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