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The rickety elevator was a bit scary, making the tiny top floor apartment in Rome’s Monti neighborhood more of a sixth-floor walkup. In Edinburgh, the spacious abode with brightly colored walls and twee decorative touches seemed like the set of a Wes Anderson movie. A Vancouver skyrise provided amazing views of sunrise and sunset. And in Florence, oh, Florence, a comfy, cozy home base was perfect for exploring that amazing city.
Airbnb says it has facilitated 825 million visits in its 13-year history, but without me and my family, it would only be about 824,999,910. Either way, it’s an amazing achievement. The Internet has proven fertile ground for sprouting new markets and super-charging some old fashioned ones, whether for short-term stays, car rides across town, or selling your collection of Beanie Babies.
This week, we’ve seen the spectacular stock market debuts of two of those businesses. DoorDash raised $3.4 billion pricing its stock at $102 only to see it jump to $186 on Wednesday. Airbnb got $3.5 billion selling shares at $68. The stock closed at almost $145 yesterday. That puts the company’s stock market value at over $100 billion, more than Marriott, Hilton, InterContinental, Hyatt, Choice, Wyndham, GreenTree, and Red Lion combined (though only more than the top two or three if you include debt).
On one hand, you can understand why investors showered Airbnb with love this week. Before the pandemic, revenue was growing at 30% to 40% a year with gross margins around 75%. Marriott’s revenue last year was up just 1%, and it has to pay expenses for the more than 7,000 hotels with 1.4 million rooms that it owns whatever happens. Of course, Marriott also reported a 2019 profit of $1.3 billion while Airbnb lost $674 million.
Which would you rather own for the next 10 years? Investors say Airbnb.
That’s not necessarily a good thing. Despite my enjoyable stays around the world, many studies have found that the company’s service has an appreciable impact on raising rents by reducing the amount of housing available to residents of major cities (though Airbnb disputes the studies and points out that some were funded by the hotel industry). That means that although travelers may save a bit by avoiding hotels, the cost to residents is likely greater. And while Airbnb may bolster local tourism, it has also been bringing visitors to neighborhoods sometimes ill-equipped to deal with the onslaught (in much the same way Waze has turned some neighborhood streets into overcrowded commuter race tracks). Can this be fixed with regulation and/or taxes? I’m not sure.
The question on more people’s minds right now seems to be whether the Airbnb IPO, following DoorDash, Snowflake and other high-tech high flyers, signals that the stock market has entered a speculative bubble that could end poorly like the Internet bubble 20 years ago. I’ll just point out that while 19 IPOs have doubled on their first day of trading this year, according to CNBC’s ace IPO reporter Leslie Picker, the number was 78 in 2000 and 115 in 1999. And the story that popped the Internet bubble was a Barron’s piece calculating that new companies were burning cash so quickly many would soon be out of business. Airbnb has shown positive cash flow from operations pre-pandemic and currently has over $6 billion on its balance sheet. Now maybe electric vehicle stocks are in the danger zone and some of the high-profile new IPOs, but overall it looks less volatile.
Finally, I would be remiss if I didn’t direct those of you seeking a more in-depth look at DoorDash and Airbnb to check out some of Danielle’s coverage this week. I don’t know if she sleeps at all, but in addition to covering the Facebook antitrust lawsuit, she interviewed DoorDash CEO Tony Xu, wrote up the initial market reception of both DoorDash and Airbnb, and will have a feature-length look at DoorDash out real soon. Have a great weekend.
On the latest episode of Fortune’s Brainstorm podcast, we discuss how tech is powering the holidays. Retailers with services like curbside pickup are faring far better than others, says Fortune’s Phil Wahba. Brainstorm hosts Brian O’Keefe and Michal Lev-Ram also speak with Loren Padelford, vice president and general manager at Shopify, and Ben Jones, CEO of Ohi. His smart warehousing company enables same-day delivery for smaller brands looking to compete with Amazon and Walmart. Listen to the episode here.