The Travel Boom Is Coming, Here’s How To Play It

Even record oil prices can’t stop consumers’ demand for travel. Delta Airlines (DAL) posted its highest one-day cash sales just a few weeks ago, not too shabby when you consider they have been in business for more than 90 years!

Booking pace for travel is 49% higher than this time last year, according to AirDNA data. 

And with covid cases dropping and some medical experts calling the end to the pandemic, it shouldn’t come as a surprise that more Americans are ready to travel this Spring and Summer. 

Most companies are fighting to get business back to where it was in 2019. 

However, Airbnb (ABNB) has not only generated more revenue than it did in 2019, it’s at record highs. 

Amongst financial pros, searches for AirBnB dominated all other hotel and lodging stocks this past month.

In fact, it’s been one of the most popular searches since the start of the pandemic and coming out of it. Currently, demand is through the roof for travel and leisure. Yet, labor is hard to come by.

But AirBnB’s model doesn’t rely on employment in the industry.

And that’s just one of the reasons why we think it’s the best play in the travel and leisure category. 

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Airbnb’s  Business

Founded in 2007, Airbnb operates a platform which connects hosts and guests online to book spaces and experiences. It has since grown to 4 million hosts who have welcomed more than 1 billion guest arrivals across 220+ countries and regions. 

In 2021, we delivered $47B of global book value, 23% higher than the pre-pandemic year of 2019, and $6 billion in revenue, 25% higher than 2019. 

There were 6 million active listings on the platform last year, and active listings grew 20% year-over-year in non-urban destinations in North America.  

AirBnB’s Financials

Last year was a record revenue year for ABNB, despite having to deal with the Delta and Omicron variants. Fiscal year growth was up 77%, a significantly higher percentage than its competitors BKNG, MAR, HLT, and EXPE. 

Believe it or not, ABNB is an excellent cash position. The short-term assets are 1.95x the short-term liabilities, which is significantly higher than the industry average. 

Furthermore. The company’s quick ratio stands at 1.89, and its debt to equity ratio is an impressive .42. 

ABNB Valuation

An obvious concern Wall Street has in an interest rate hiking environment is valuation. For the most part, ABNB is valued on a price to sales ratio, which currently sits at 16.85. 

But it seems that investors are willing to pay a premium given how different it is from its competitors. For example, one trend we’re seeing more of is the “workation”, where individuals take a trip while still doing work. 

While we expect most people to go back to the office, some businesses have already announced that they’ll give their employees greater flexibility. And because of that, ABNB could benefit from this new trend. 

In Q4 2021, ABNB reported $381 million of net cash provided by operating activities and $376M of free cash flow. 

Despite its challenges, Wall Street is bullish ABNB. The average analyst price target for the stock is $198.70. 

ABNB Growth

The compound annual growth rate is 17.9% over the last three years. Revenue year-over-year grew by nearly 80% and gross booking value spiked by 91% year-over-year. 

Our Opinion 8/10

Airbnb (ABNB) is now bigger than the world’s top five hotel brands put together, with more than 6m listings worldwide. With more people ready to start traveling this year, it seems like ABNB is in a good position to continue its growth spurt. 

It has outperformed most of the tech stocks in the Nasdaq YTD, and we believe it will do so for the next 12 months.