Airbnb: A disrupter in the hospitality industry.
- Glenn
- Jun 25, 2022
- 17 min read
Updated: Feb 28
Airbnb is a global leader in short-term rentals, offering a platform that connects hosts and guests across more than 220 countries and regions. With a strong brand, an asset-light business model, and a growing presence in global travel, Airbnb has redefined the way people book accommodations. The company continues to expand through improvements to its core service, international market penetration, and new offerings beyond rentals. The question remains: Should this travel disruptor have a place in your portfolio?
This is not a financial advice. I am not a financial advisor and I only do these post in order to do my own analysis and elaborate about my decisions, especially for my copiers and followers. If you consider investing in any of the ideas I present, you should do your own research or contact a professional financial advisor, as all investing comes with a risk of losing money. You are also more than welcome to copy me.
For full disclosure, I should start by mentioning that at the time of writing this analysis, I do not own any shares in Airbnb. If you would like to see the stocks in my portfolio or copy my portfolio, you can do so on eToro, You can find instructions on how to do this here. I don't own any stocks in competitors of Airbnb either. Thus, I have no personal stake in Airbnb. If you want to purchase shares (or fractional shares) of Airbnb, you can do so through eToro. eToro is a highly user-friendly platform that allows you to get started with investing with as little as $50.
The Business
Airbnb was founded in 2008 in San Francisco by Brian Chesky and Joe Gebbia, later joined by Nathan Blecharczyk. What began as a simple idea - renting out an air mattress in a living room - has since evolved into a global marketplace for short-term rentals and experiences. Today, Airbnb connects hosts and guests in nearly every country, offering unique accommodations and local experiences. Unlike traditional hospitality companies, Airbnb does not own any properties. Instead, it operates a two-sided platform, earning revenue through commission fees on bookings charged to both hosts and guests. This asset-light model enables Airbnb to scale efficiently while capitalizing on global travel trends and the growing preference for alternative accommodations. Airbnb has established a powerful brand moat, as its management has noted: "Airbnb is a noun and a verb that is used all over the world." This widespread recognition underscores its dominance in the short-term rental market. Its competitive edge is further reinforced by network effects, global scale, differentiated inventory, and a strong trust infrastructure. With over five million hosts and two billion guest arrivals, Airbnb benefits from a vast supply of listings and a large user base. More listings attract more guests, and more guests encourage more hosts to join, creating a self-reinforcing cycle. One of Airbnb’s key differentiators is its ability to offer stays and experiences that are difficult to replicate. From urban apartments to remote cabins and even castles, the platform caters to travelers seeking accommodations beyond traditional hotel rooms. A critical component of Airbnb’s moat is its system of trust, which includes guest and host reviews, identity verification, fraud detection, and AirCover protection. These safeguards help mitigate risks and increase confidence in the platform.
Management
Brian Chesky serves as the CEO of Airbnb, a company he co-founded in 2008 alongside Joe Gebbia and Nathan Blecharczyk. Unlike many CEOs with backgrounds in business or finance, Chesky studied architecture and industrial design, a unique perspective that has influenced Airbnb’s focus on user experience and design-driven innovation. As the company’s largest individual shareholder, he remains deeply invested in Airbnb’s long-term success. Chesky has been recognized for his leadership, ranking among Fortune Magazine’s Top 20 World's Greatest Leaders, and placing in the top 5% of similarly sized companies in employee ratings on Comparably. In 2016, he was named an Ambassador of Global Entrepreneurship by President Obama, further highlighting his influence beyond Airbnb. He is often described as both bold and humble, a leader who values direct engagement with his community. In the early days of Airbnb, he took advice to heart and personally visited every host on the platform, a hands-on approach that shaped the company’s commitment to trust and belonging. Chesky believes in continuous learning and the importance of making bold decisions. His commitment to philanthropy is also notable, as he has joined The Giving Pledge, an initiative led by Bill Gates and Warren Buffett, in which billionaires commit to donating the majority of their wealth to charitable causes. His leadership style is marked by enthusiasm and authenticity, which is evident in Airbnb’s earnings calls, where his passion for the company’s mission shines through. I believe Brian Chesky is an exceptional modern leader. His high employee rating, dedication to Airbnb’s success, and commitment to philanthropy reflect strong character. With a significant personal stake in the company and a proven track record of turning an idea into a global marketplace, he is well-positioned to continue leading Airbnb into the future.
The Numbers
The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. Since Airbnb went public in December 2020, we only have data from 2021 onward. Despite this limited timeframe, Airbnb has delivered strong results, achieving a ROIC above 10% in three out of the four years and exceeding 20% in two of those years - an impressive feat. Management has expressed confidence in maintaining high margins on future investments, indicating that they expect strong ROIC performance to continue. The increase from 2023 to 2024 was driven by growth in nights booked, a rise in the average daily rate, market share gains, and new offerings. These factors are expected to persist in the near future, supporting continued strong returns. Given these trends, I believe Airbnb will maintain a high ROIC in the foreseeable future.

The following numbers represent the book value + dividend. In my previous format, this was referred to as the equity growth rate. It was the most important of the four growth rates I used in my analyses, which is why I will continue to use it in the future. As you are accustomed to seeing numbers in percentage form, I have decided to provide both the actual numbers and the year-over-year percentage growth. Since Airbnb went public in December 2020, we only have data from 2021 onward. Despite this limited timeframe, Airbnb has consistently increased its equity each year, which is very encouraging. While the year-over-year growth rate has been somewhat volatile, this is not a major concern as long as equity continues to rise annually. The overall trend remains positive, reinforcing Airbnb’s ability to generate value over time.

Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins offer a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. Since Airbnb made its IPO in December 2020, we only have data from 2021 onward. Despite this limited history, the company has generated positive free cash flow every year since going public, which is impressive. Moreover, Airbnb has grown its free cash flow each year, culminating in a record-high free cash flow in 2024. The company has also consistently maintained a high levered free cash flow margin, which suggests that it will continue achieving margins around 40% - a remarkable figure. Management has outlined its capital allocation strategy, which consists of three priorities: first, investing in core operations; second, pursuing M&A opportunities where relevant; and third, returning capital to shareholders. Given Airbnb’s strong balance sheet and industry-leading free cash flow margins, management believes the company has the financial capacity to execute all three. This should benefit investors, as Airbnb has historically achieved a high return on its investments. Notably, 2024 marked the first year in which Airbnb reduced its share count rather than diluting shareholders - an encouraging trend that should continue as free cash flow grows. The free cash flow yield suggests that Airbnb is trading at an attractive valuation. However, we will revisit valuation later in the analysis.

Debt
Another important aspect to investigate is the level of debt, specifically whether a business has a manageable debt load that can be paid off within a period of three years. We assess this by dividing total long-term debt by earnings. After calculating Airbnb’s debt levels, I found that the company has no debt. As a result, debt is not a concern when considering an investment in Airbnb.
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Risks
Regulations present a significant risk to Airbnb’s business model, as cities and governments worldwide have increasingly imposed restrictions on short-term rentals. One of the main concerns driving these regulations is housing affordability. In highly desirable urban areas, short-term rentals have been linked to rising property prices, as investors purchase homes specifically to list them on Airbnb rather than for long-term residency. This reduces housing availability for local residents, prompting governments to introduce measures aimed at stabilizing housing markets. Several major cities, including New York, Barcelona, Lisbon, Florence, and Amsterdam, have implemented strict regulations or outright bans on short-term rentals. The impact of these restrictions varies, but early data suggests they may help cool housing prices in some markets. Other cities, such as London, Paris, Tokyo, and Vancouver, have taken a more measured approach, requiring hosts to live in the homes they rent out or capping the number of nights a property can be listed each year. These policies create uncertainty for Airbnb, as additional cities and countries may adopt similar measures, making it more difficult for hosts to list their properties and reducing the overall supply on the platform. Legal battles over short-term rental regulations have already played out, with Airbnb unsuccessfully suing New York City in 2023 over its crackdown. While the company has historically opposed many of these laws, it has since shifted its stance and is now advocating for EU-wide regulations that would create a more consistent framework across member states. However, lobbying efforts from hotels, real estate groups, and neighborhood associations continue to push for stricter restrictions in various jurisdictions.
Competition poses a significant risk to Airbnb as it operates in a highly competitive environment, facing pressure from multiple directions. The company must attract both hosts and guests in a market where alternatives are widely available, and the competitive landscape is constantly evolving. One of the main challenges for Airbnb is competition for hosts. Property owners looking to list their homes or experiences have various options, including online travel agencies such as Booking Holdings, which owns Booking.com, Expedia Group, and regional platforms like Trip.com. Additionally, hotel chains, property management companies, and alternative rental services provide competing platforms. Many hosts cross-list their properties on multiple platforms to maximize occupancy, making it difficult for Airbnb to retain exclusive listings. If hosts find better returns, lower fees, or stronger customer support elsewhere, they may shift their listings away from Airbnb, reducing the platform’s supply. On the guest side, Airbnb faces competition from hotels, serviced apartments, online travel agencies, and emerging travel platforms. Pricing plays a key role—if Airbnb’s total cost, including fees, is perceived as higher than hotels or competing platforms, guests may choose alternative accommodations. Another major competitive risk comes from search engines and technology companies. Google, for example, has its own travel search tools that can influence search traffic and promote its own listings, potentially reducing Airbnb’s visibility. The growing influence of AI-powered travel search engines and “super apps” that bundle travel services with other offerings could also impact Airbnb’s ability to acquire new users cost-effectively. If major technology companies prioritize their own travel services in search results or limit Airbnb’s app distribution, it could significantly affect Airbnb’s ability to attract both hosts and guests.
Macroeconomic conditions pose a significant risk to Airbnb’s business, as its financial performance is closely tied to the strength of the travel and hospitality industries. Since travel is largely discretionary, any downturn in consumer confidence or spending power can directly impact Airbnb’s growth, bookings, and overall revenue. Economic downturns, inflation, currency fluctuations, and financial market volatility all influence travel demand. When consumers face higher living costs, rising unemployment, or increasing debt burdens, they often cut back on non-essential expenses such as leisure travel. Given that a substantial portion of Airbnb’s business is driven by leisure travelers, a slowdown in discretionary spending could lead to fewer bookings, increased cancellations, and lower revenue per listing. Historical downturns have shown that travel demand tends to decline during periods of economic uncertainty, making Airbnb particularly vulnerable to macroeconomic headwinds. Beyond traditional economic cycles, global events such as pandemics, wars, political instability, and natural disasters can also disrupt travel demand. The COVID-19 pandemic, for instance, had a severe impact on Airbnb’s business as international travel came to a halt and consumers canceled trips. While Airbnb has shown resilience by adapting to changing travel patterns, future public health crises, extreme weather events, or geopolitical tensions could once again lead to sharp declines in bookings. Additionally, growing concerns about climate change and environmental sustainability could result in new travel restrictions or regulatory challenges that may affect Airbnb’s ability to operate in certain regions. Ultimately, Airbnb’s business is highly sensitive to economic and geopolitical trends. Any prolonged downturn in consumer spending, government-imposed travel restrictions, or external disruptions could materially affect its financial performance.
Reasons to invest
Airbnb’s focus on improving its core service is a compelling reason to invest in the company, as these enhancements drive higher customer satisfaction, increase bookings, and strengthen its competitive position. Over the past few years, Airbnb has rolled out more than 535 features and upgrades aimed at improving both the guest and host experience, reinforcing the platform’s usability, affordability, and reliability. One of Airbnb’s key strengths is its commitment to usability improvements, making it easier for guests to find and book the right stay. The company has introduced enhanced search functionality, personalized recommendations, detailed maps, and a streamlined checkout process, all of which have contributed to higher conversion rates. Given that Airbnb attracts nearly 5 billion unique visitors annually, even minor improvements in conversion translate into meaningful revenue gains. For example, optimizing the checkout process alone has led to a significant increase in completed bookings. Another major area of focus is affordability, ensuring that Airbnb remains an attractive alternative to hotels. The company has made it easier for guests to compare total costs by introducing total price displays that include all fees upfront. This transparency has helped drive higher-value bookings while maintaining Airbnb’s price competitiveness against traditional hotels. Airbnb has also introduced monthly and weekly discounts, price tips, and search tips for hosts, allowing them to optimize pricing and attract more guests. As a result, while hotel prices increased year-over-year in 2024, comparable Airbnb listings declined, demonstrating the platform’s ability to offer better value to travelers. A major growth opportunity for Airbnb lies in converting traditional hotel guests into Airbnb users. Currently, for every person who books an Airbnb, about nine people book a hotel. Airbnb estimates that it facilitates around 500 million booked nights per year, meaning that if it can capture just one of those hotel guests, it could double its bookings to 1 billion room nights annually. To achieve this, Airbnb is focused on improving service reliability and affordability to make the platform a more compelling choice for travelers who would otherwise choose a hotel.
Airbnb’s growth in global markets represents a compelling investment opportunity as the company expands beyond its core regions and strengthens its presence in underpenetrated areas. Despite operating in over 220 countries and regions, 70% of its gross booking value comes from just five core markets - the United States, the United Kingdom, Canada, France, and Australia. This concentration highlights a massive untapped opportunity in international markets, where Airbnb is actively investing to drive long-term growth. One of Airbnb’s key strategies is targeting markets outside its core five, where penetration remains low but demand for alternative accommodations is rising. The company’s investments in these markets have already shown results - by the end of 2024, Airbnb’s expansion markets grew at more than twice the rate of its core markets. A notable example of Airbnb’s success in an expansion market is Brazil, where strategic investments in brand marketing and awareness campaigns over the past two years have significantly increased Airbnb’s scale. Brazil’s strong domestic travel market and demand for alternative accommodations have made it an attractive growth region, and Airbnb’s ability to penetrate this market demonstrates its potential to replicate similar success in other geographies. However, not all markets grow at the same pace. Japan presents a longer-term opportunity, as Airbnb is still in the early stages of expanding its presence there. While Japan is one of the world’s largest travel markets, many local travelers previously did not see Airbnb as relevant to their needs. To address this, Airbnb launched a localized strategy, refining its app and website to highlight amenities preferred by Japanese guests, featuring reviews from local travelers, and curating listings that cater to Japan’s popular weekend travel culture. As Airbnb continues to expand internationally, closing the penetration gap in underdeveloped markets could be a major growth driver for the company.
Airbnb’s plan to launch and scale new offerings is a compelling reason to invest in the company, as it signals a shift beyond its core short-term rental business toward becoming a broader travel and living platform. Management has emphasized that Airbnb is entering its next chapter, leveraging its brand strength, customer base, and platform infrastructure to expand into adjacent services that enhance both guest and host experiences. This strategic expansion could increase user engagement, drive recurring usage, and unlock new revenue streams. The company intends to layer in new offerings each year, systematically building out its platform in a way that strengthens its core business. A key aspect of Airbnb’s strategy is that it will not introduce separate apps or brands but will instead integrate all new services within the Airbnb app, similar to how Amazon expanded beyond books into other categories. The goal is to make Airbnb a one-stop platform for travel and living needs, where accommodations are just one part of a broader ecosystem. This approach allows for efficient scaling, reduces friction for users, and enables new services to reinforce engagement with Airbnb’s core offering. Airbnb plans to start with offerings closely adjacent to travel, focusing on services that enhance a guest’s stay, such as experiences, host services, and local integrations. This could include activities, transportation, dining recommendations, and concierge-like services that complement a booking. By expanding beyond accommodations, Airbnb can create more opportunities for users to engage with its platform, increasing usage frequency and strengthening customer loyalty. One of Airbnb’s long-term objectives is to make the platform more frequently used. While the company currently sees engagement from 1.6 billion devices annually, most users only book once or twice a year. By introducing services relevant beyond travel, Airbnb aims to increase touchpoints with users, potentially leading to weekly or even daily engagement. Other future opportunities include advertising services, which management sees as a billion-dollar opportunity, though it is not an immediate priority.
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Valuation
Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators for free.
The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an EPS of 4,11, which is from the year 2024. I have selected a projected future EPS growth rate of 15%. Finbox expects EPS to grow by 15,1% over the next five years.. Additionally, I have selected a projected future P/E ratio of 30, which is double the growth rate. This decision is based on Airbnb's historically higher price-to-earnings (P/E) ratio. Finally, our minimum acceptable rate of return has already been established at 15%. After performing the calculations, we determined the sticker price (also known as fair value or intrinsic value) to be $123,30. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy Airbnb at a price of $61,65 (or lower, obviously) if we use the Margin of Safety price.
The second calculation is known as the Ten Cap price. The rate of return that a company owner (or stockholder) receives on the purchase price of the company essentially represents its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow last year was 4.518, and capital expenditures were 34. I attempted to analyze their annual report to calculate the percentage of capital expenditures allocated to maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 24 in our calculations. The tax provision was 683. We have 624,8 outstanding shares. Hence, the calculation will be as follows: (4.518 – 24 + 683) / 624,8 x 10 = $82,85 in Ten Cap price.
The final calculation is referred to as the Payback Time price. It is a calculation based on the free cash flow per share. With Airbnb's free cash flow per share at $7,11 and a growth rate of 15%, if you want to recoup your investment in 8 years, the Payback Time price is $114,13.
Conclusion
I believe that Airbnb is an intriguing company with a solid moat and strong management. Since its IPO, the company has achieved a high return on invested capital (ROIC) in three out of four years, with 2021 being the weakest due to the lingering effects of the pandemic. In 2024, Airbnb delivered its highest free cash flow ever and has consistently maintained a high free cash flow margin, which is very encouraging. Regulations pose a significant risk to Airbnb as governments worldwide impose restrictions on short-term rentals to address housing affordability concerns. Strict regulations or outright bans in major cities, along with limitations on rental durations elsewhere, could reduce Airbnb’s supply of listings and create uncertainty for its business model. Competition is another challenge, as Airbnb faces pressure from online travel agencies, hotel chains, property management companies, and alternative rental platforms. Additionally, search engines like Google and AI-powered travel platforms could reduce Airbnb’s visibility, making it harder to attract both hosts and guests. Macroeconomic conditions also pose a risk, as Airbnb relies on discretionary travel spending, which declines during economic downturns, inflationary periods, or financial instability. Global events such as pandemics, wars, or natural disasters could further disrupt travel demand, leading to lower bookings and revenue. Despite these risks, Airbnb’s continuous improvements in usability, affordability, and reliability strengthen its competitive position. By streamlining search, pricing, and the booking process, Airbnb increases conversion rates and has significant potential to attract hotel guests, supporting long-term growth. Additionally, its expansion into global markets presents a major opportunity, as 70% of its gross booking value still comes from just five core markets. By investing in underpenetrated regions with rising demand for alternative accommodations, Airbnb is accelerating its growth potential. Furthermore, Airbnb’s plan to launch and scale new offerings expands its platform beyond short-term rentals, creating additional revenue streams and increasing user engagement. By integrating adjacent travel and living services within the Airbnb app, the company aims to drive more frequent usage and build a broader ecosystem. Overall, I believe Airbnb is a great company, but given the uncertainties outlined in this analysis, I would require a discount before investing. I believe that buying shares at the Ten Cap price of $82 would represent a strong long-term investment.
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