In this Left Brain Thinking podcast episode, host Chuck Jaffe interviews Janice Quek, senior analyst at Left Brain Research, about Airbnb (ticker ABNB). They discuss how the COVID‑19 pandemic initially hurt Airbnb’s business but also created new demand patterns such as domestic travel, remote‑work‑enabled trips, and online experiences. Janice highlights Airbnb’s competitive strengths: a vast network of 4 million hosts, home‑based authentic stays, strong brand, and powerful network effects that generate word‑of‑mouth growth. They examine the IPO timing during the pandemic, noting early hype followed by a recent pull‑back, and argue that the current price dip may present a buying opportunity. The conversation then shifts to longer‑term growth drivers, including the rise of remote work and digital nomadism, new property use cases like collaborative workspaces, and expanding demand in remote or smaller communities. International expansion post‑pandemic is also seen as a catalyst. Finally, they address the growing involvement of real‑estate developers buying properties for Airbnb listings, concluding that Airbnb will likely protect its core mission of individual hosts to maintain its unique personal‑connection value proposition. The episode ends with standard disclosures and promotional information.
Chapters
Welcome to Left Brain Thinking, where creative investment ideas meet logical analysis. That's the hallmark of Left Brain Investment Research, where the analysts are looking for growth companies with the potential to double in 2 to 3 years and high-yield bonds with the potential for dramatic price appreciation. Today I'm joined by Janice Quek, senior analyst for Left Brain Research based in Singapore, and we're talking about a company that she thinks will benefit not only from the economic reopening but from the change to a new normal. The stock is a subject of a First Focus report. And if you want to find out about those reports or learn about any stock that the firm covers, go to leftbrainir.com. That is the firm's website. They're on Twitter @leftbrainir. Janice Quek, great to chat with you again.
Hi, Chuck. Good to be back.
You've got a stock pick for us today that's dramatically affected by the pandemic, but that also went IPO in the pandemic that should benefit from the rebound from the pandemic, but also from all the changes to the new normal. Let's talk about it.
Today I'm gonna be talking about a company called Airbnb, ticker ABNB. For those who are less familiar with what Airbnb does, it is a platform to connect hosts to guests looking for a property to stay when they travel. So instead of a hotel, you prefer to stay with a local for a more authentic experience, Airbnb has a broad range of options. The platform has about 4 million hosts in about 100,000 cities across the globe. So not surprising, you know, you mentioned a new normal. The pandemic really slowed Airbnb's business down substantially because of the lockdowns and the social distancing measures and recommendations not to travel unnecessarily. After the pandemic started, long periods on social distancing As you can imagine, many people were just very eager to start traveling again. But because international travel was not the best idea, many began to travel domestically, visiting places that you've always wanted to visit but didn't have the time for. That was one aspect of the new normal. There was also increased flexibility that came with working remotely. And since it didn't matter where someone was as long as they could attend Zoom calls or answer emails from a place with internet, Remote workers were also traveling to their destinations on the weekends and working from new locales. And so these factors really drove demand for Airbnb's properties domestically. And at the same time, the company also introduced some new online experience product where hosts can lead a 1-hour interactive activity with guests. So while the pandemic was not great for Airbnb's business, there were some silver linings that helped drive new demand for the company.
I talked to people during the pandemic who had reason to travel and they were making decisions of would they rather do the Airbnb, not necessarily just for is it a more genuine experience, or in some cases could you save money that way, which is how they might have acted before pandemic. But because when somebody's got one room or one unit or what have you, it's pretty easy to sanitize it and keep it healthy. And you're not dealing with a lot of other people like you might at a hotel. You can see that as people get more active, they're going to be making decisions like that. The expectation for you is that it's not just that it's changing the way people travel now in pandemic, but that afterwards it's changed the way people are traveling forever, right?
Right. And besides that, you know, you mentioned that there's only one room for people to sanitize. And so it's much easier to manage, you know, Airbnb competes in the travel and hospitality sector. And as we all know, Airbnb is in a highly competitive and fragmented industries, and hotels and guest inns are your usual competitors. But what really makes Airbnb stand out from the competition? That's a question we would ask ourselves. And one of the things that we really like about Airbnb is that its properties are home-based, and hosts are primarily individuals who many times are present to receive and chat with their guests throughout their stay. And it makes the experience personal and authentic. And Airbnb, their biggest thing is about building connections and unique local experiences with the host in places that their guests visit. And you compare that with other accommodation types that are usually professionally owned and managed, and you don't really have that kind of personal connection with someone living in the area. Another thing I wanted to point out about what makes Airbnb stand out is that guests who have had positive experiences are also often encouraged to become hosts themselves or promote their Airbnb experience, and this creates a network effect for the company. We've seen Airbnb growing tremendously since it started through this sort of organic expansion and word-of-mouth referrals. And we also think that there are another competitive advantage that Airbnb has is that it's one of the pioneers in this niche home-based hospitality sub-industry. It has developed a strong brand name for itself, and it's scaled to one of the largest consumer bases around in the travel and hospitality sector, and really a go-to platform for travelers and those interested in hosting. In fact, one interesting point was that when the pandemic started, the company has suspended many of its marketing campaigns to cut costs, but as the company entered the third quarter of 2020, Their site traffic returned to about 95% of 2019 levels even before it resumed marketing efforts. And we think this reflects the strength and demand for the brand and the business.
This company came out as an IPO at a time when the market was going great guns, but IPOs weren't necessarily taking off. Does the newness, does the fact that it's still out there and still for some people in its IPO phases, does that impact anything for you?
The newness of the IPO itself has brought up some hype in the stocks, and there was a lot of upward price action for a while, and a lot of people were very excited about Airbnb's business. But in recent times, we have seen that there was a little bit of a pullback in the stock price. But what's up ahead for the company? We think there's a long growth runway ahead for the business. The pandemic has reset, and perhaps disrupted traditional paradigms of work. It has forced many businesses to shift to a remote work model, and even as we fully recover from the pandemic, more people will be able to work from home in the future on a more permanent basis. And this is accelerated by the pandemic. And with this sort of arrangement, employees would have the flexibility to live nomadically and traveling to stay at new locations while subletting their current property. You know, the company has noticed that there has been greater interest in properties in more remote locations and smaller communities, whether that is people choosing to live closer to extended families or living in areas they've never had a chance to before. This creates new demand for properties, which in turn encourages more hosts to list on the platform. We've also seen Airbnb finding new use cases for their properties, such as collaborative workspaces and team-building locations. This expands their addressable market and target audience base and generates new sales opportunities, and we would expect the company to continue creating more property categories in the future. And there's also international expansion, right? Because after the pandemic and as things stabilize, as travel overseas recovers, we'll see some of that previous demand returning and new use cases taking root in some of these new geographic regions. So beyond the hype, we think there's a long road potential for Airbnb here. And there was some recent downward price action that I mentioned earlier with the stock because of sector rotation out of high-growth stocks. In the short term, it might be a good time for investors to think about gaining some exposure on Airbnb.
Underlying this business, of course, you've got the homeowners that you think of as doing this, but one of the things that was found throughout Airbnb's development was that you had more real estate development companies that were buying up properties to make them Airbnbs. Does that change the workings going forward? And is that a benefit or a threat to the business?
I think there's a lot of change going on in the real estate industry, like you mentioned earlier, but I think that one thing that Airbnb tries to do is to stay true to its core mission, right? And that is to have individual hosts, individual property owners who own the properties, host people, host their guests to provide that personal connection experience. I think Airbnb tries to protect that mission aggressively because that makes it unique and it's a differentiator for itself in the hospitality and travel industry. So at the end of the day, even if there's some evolution in the real estate market, Airbnb is probably going to stick to its core mission, providing that personal connection to host for guests.
Janice, great stuff. Thanks as always for joining me.
Thank you, Chuck.
Left Brain Thinking is a joint production of Left Brain Investment Research and Money Life with Chuck Jaffe. These conversations are not personalized investment recommendations, but are designed to engage your brain. Please do your diligence before making any financial transaction. I'm your host, Chuck Jaffe, and you can find my weekday show on your favorite podcast app, or you can check it out online at moneylifeshow.com. Thanks to my guest, Janice Quek, senior analyst at Left Brain Investment Research. You can learn more about her, the firm, and its analysis at leftbrainir.com, and they're on Twitter @leftbrainir. Left Brain Thinking is available every Wednesday, and we hope you'll put your left brain thinking cap on each week by subscribing via your favorite podcast app. Until next week, stay safe, everybody.
