Airbnb’s adaptable business model and cost-cutting measures revives hopes of a 2020 IPO

Globaldata Travel and Tourism 17th June 2020 (Last Updated June 17th, 2020 16:17)

Airbnb’s adaptable business model and cost-cutting measures revives hopes of a 2020 IPO

A few months ago, the chance of Airbnb’s planned IPO going ahead in 2020 was slim to none. As the Covid-19 pandemic swiftly ground domestic and international travel to an abrupt halt, travellers cancelled their bookings en masse and a large segment of the company’s host community looked to list their properties elsewhere. Similar to large-scale hotels, Airbnb also places some degree of dependence on MICE tourism, which was the first type of tourism to be banished and may be the last type to return across the world.

However, Airbnb’s recent performance means that its planned IPO is once again a realistic possibility. One of the first forms of tourism that has returned is close proximity to domestic travel. Airbnb’s nimble business model has allowed it to react quickly to this sudden change in traveller demand and it has reaped the rewards. There were more nights booked for travel to Airbnb listings in the US between 17 May and 6 June than there were during the same time period a year earlier. The ability of the platform to adapt in real time to macro-economic factors such as Covid-19 is a key differentiator that has allowed the company to consume more of the returning demand in comparison to its competitors.

The company recently launched an initiative to support economic growth through domestic tourism. Called ‘Go Near’, it aims to target close proximity to domestic travel. Airbnb will work with governments and tourist agencies to help restore travel in a responsible way that benefits local citizens and small businesses economically. Potential concerns regarding hygiene and sanitation in Airbnb properties do not seem to be as problematic as once thought. The fact that guests actually have more control over cleanliness may put the company at an advantage over hotels. Many guests may prefer to clean to their own standards once they arrive at their accommodation.

The proactive attitude shown by the company is also evident internally. Like many other travel companies, Airbnb has had to streamline its business to optimise efficiency due to the impact created by Covid-19. Laying off a quarter of its workforce has allowed Airbnb to pursue a more efficient cost structure by ending more costly ventures in order to focus on its core operations.

Despite these positive signals, any IPO or direct listing should not be a rushed decision. Future risks such as the second spike in global Covid-19 infections, as well as an increasing amount of cities clamping down on short-term rental regulations imply that Airbnb’s road to recovery may not be entirely smooth.