How will Airbnb's 'travel revolution' prediction affect stocks?
In September 2021, Brian Chesky, the billionaire CEO of global short-stay rental booking company Airbnb made headlines when he predicted a soon-to-be “golden age of travel”.
Chesky believes the world is experiencing a “travel revolution” and “travel as we know it is never coming back”.
So, how true is this vision, and consequently, what impact will it have on travel stocks, both now and in the not-too-far-away future?
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Diving into Chesky’s vision
Chesky, 39, didn’t know much about tech before he founded and grew an idea that stemmed from overbooked hotels into a multi-billion-dollar startup, and has become one of Silicon Valley's key players.
After IPOing on the Nasdaq in December 2020, Airbnb has continued to dazzle investors, especially as it nears its Q3 earnings report announcement this month.
Citing pent-up travel demand, as well as an increase in bookings and extended stays as a result of more people getting vaccinated globally for its success, Airbnb smashed its Q2 earnings report, demonstrating a 300-per-year, year-over-year revenue growth.
Given this stellar performance, it seems Airbnb has quite the hold on the travel industry, and in particular, can be seen as one of the leaders.
For this reason, Chesky’s statement that travel will be “back bigger than ever,” definitely holds some weight for the industry as a whole.
In his vision, Chesky points to the fact that workplace changes on the horizon have meant traditional business travel will be reduced, as more people will be “untethered” from, not just offices but their home cities too.
As a result of this, he anticipates there will be longer stays, with remote workers having a deeper desire to travel if they’re stuck at home for longer periods.
He also believes that because many people have more flexibility, it opens up opportunities for travel.
Airbnb’s data also supports this, with the platform’s long-term-stays category experiencing significant growth in Q2, up 70 per cent from Q2 2019.
The impact on travel stocks
From a business travel perspective, current domestic flight demand still remains far off pre-pandemic levels, with online bookings in August 2021 reaching US$4 billion, a decline of more than 35 per cent from August 2019 and 24 per cent from July this year. Furthermore, in the year to August, total domestic bookings represented US$38 billion - a 30 per cent decline from the same period in 2019.
Despite this, most international airline stocks have recovered from the dire lows experienced in 2020, as the industry encounters a rebound in travel demand. An example of this is the US Global Jets ETF, which holds some of the travel industry’s most popular stocks, including Delta Air Lines, EasyJet, Qantas and Air Canada.
The ETF has climbed more than 106 per cent since its low in May 2020.
Global hotel companies like Marriott International are also looking to help bring business travel back. The hotel recently launched its Work Anywhere program, which includes options such as using a hotel room and guest facilities for just one day without staying in the room overnight, similar to a hotdesk or WeWork setup.
Marriott's stock has gained more than 5.1 per cent over the past six months and continues to rise after it announced in September it had signed 22 new hotel agreements in South Asia over the past 18 months. The company also expects to add more than 2,700 rooms to its fast-growing portfolio.
When it comes to domestic leisure travel, the US is set to recover much faster than Australia. In fact, Delta Air Lines expects to see domestic travel bookings in 2022 exceed the numbers set back in 2019.
In terms of performance, Delta Air Lines’ stock has recovered quite well. In its Q3 earnings report, Delta reported an adjusted profit of US$0.30 per share, double the Zacks consensus estimate of US$0.15. Revenue also jumped 199 per cent to US$9.15 billion, well ahead of the US$8.37 billion consensus.
Down under, ASX-listed stocks such as Qantas and Sydney Airport have lagged behind the highest price over three years, however, both have double-digit, two-year earnings growth forecasts (Qantas up 69 per cent and Sydney Airport at up 81 per cent), which will play favourably for investors.
Then there are cruise liners. They were the hardest hit during the pandemic, especially when some trips made headlines for being super-spreaders. Most of the major cruise liner companies reported significant losses as a direct result. Nevertheless, the sector has some serious loyalty, with diehard “cruisers” determined to get back out on the sea, opting for vouchers for future travel rather than refunds when their planned trips were cancelled.
During Q2, Royal Caribbean Cruises chalked up about 50 per cent more bookings compared to Q1 2021, with trends indicating this will continue moving forward. So far this year, the company’s shares have gained 17.4 per cent, compared to the industry’s rally of 16.4 per cent.
Is the future up, up & away?
Overall, it looks like travel at some point in the future will return and in a big way, just like Chesky has predicted, as long as the effects of the global pandemic, including new waves, don’t halt the progress that has been made in the past 18 months.
Investors with a long-term outlook will likely benefit if the travel sector continues its upward trajectory, especially if Chesky’s “golden age” of travel vision comes true.
Josh Gilbert, market analyst at eToro
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