What does Airbnb’s IPO mean for travel real estate?
It was a long way to go before Airbnb went public. The rental platform has been one of the last decade’s companies bringing traditional travel and commercial properties up to speed. Partitioned houses and guest rooms have become informal hotels, while apartment rental companies have become Airbnb humps. The COVID-19 pandemic initially dampened the outlook for the company, as it did for traditional hotels. Where the Hiltons and Marriotts have struggled with hard-to-maintain assets and mortgages payable, Airbnb has done relatively well. Ahead of today’s IPO, the company increased its IPO price range and is targeting a value between $ 42 billion and $ 50 billion.
To understand how Airbnb managed to go public with strength despite this year, and what the IPO could mean for travel property and commercial real estate overall, MPA spoke to Jonathan Wasserstrum, CEO of the commercial property platform Square Feet. He explained how Airbnb was able to navigate this year and what Airbnb’s survival through the pandemic could mean for the post-pandemic balance of travel properties.
“Airbnb, I think it was doing a lot better than anyone would have thought six months ago,” said Wasserstrum. “You have done well with many trips nearby. Travel looked different this summer, but people are still traveling and a lot of people have used Airbnb. “
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Even so, the entire travel industry has been hit hard this year, including Airbnb. The company had to make sweeping layoffs in 2020 but appears to have weathered the worst parts of that year intact. Wasserstrum explained that while hotel chains have mortgages to pay and assets to manage, Airbnb is just a platform provider, but fixed costs are easier to manage and reduce.
The type of properties rented on Airbnb also helped the company, as many people started booking long-term stays in remote, scenic locations during the pandemic. Greater availability of work from home meant that booking a 6 month stay in a remote Utah cabin (with world-class WiFi) suddenly became attractive and Airbnb could offer it.
Wasserstrum also pointed out that business travel was arguably the hardest hit side of the travel sector. Much of this traffic flows through traditional hotels, while Airbnb has a larger proportion of leisure travel.
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Wasserstrum expects the IPO to go as forecast, similar to other tech IPOs like Palantir’s earlier this year. He anticipates the offer will be hot and Airbnb’s share price will rise. Airbnb CEO Brian Chesky will hit a major milestone and his team will celebrate, but the story of Airbnb’s strength was made over the last decade and as the pandemic progressed.
For stock market professionals, however, the IPO means that while traditional hotels should continue to struggle, many properties bought or furnished for Airbnb represent stronger investments than would be expected this year.
“For originators and underwriters, this shows that you shouldn’t be afraid of the Airbnb properties that you’ve probably traditionally fought for a mortgage on this year,” Wasserstrum said. “Airbnb isn’t going anywhere to travel. Myself and three friends and significant other are renting a five bedroom house instead of getting five rooms in a Hilton. And when I draw a mortgage for it, I should be familiar with that source of income, which should give me comfort in writing that mortgage amount. “