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Airbnb Loses $1 Billion: What Does It Mean for Short-Term Rentals?

May 28, 2021 by Staff Reporter

In a letter Airbnb (NASDAQ: ABNB) released to shareholders, it reported a total first-quarter 2021 net loss of $1.2 billion. As Scooby Doo used to say, “Ruh-roh.”

But considering the year the travel industry has had — travel spending down an unprecedented 42% — Airbnb’s massive loss might not mean too much for the future of the company, as the travel industry’s loss was due to extenuating circumstances: the pandemic. Let’s dig more into this.

A breakdown of the losses

Most of Airbnb’s losses for Q1 2021 weren’t because of day-to-day operations. Here’s the breakdown of where the losses came from:

  • $377 million due to the repayment of loans.
  • $292 million for a mark-to-market adjustment for warrants associated with a term loan.
  • $113 million impairment loss regarding San Francisco office space.
  • $229 million was stock-based compensation expense.

So most of the reported $1.2 billion loss, as you can see, had to do with repayment of past debts and an adjustment in the value of its stock.

Airbnb’s revenue rose 5%

The good news for Airbnb is that it reported increased revenue of $887 million in the first quarter of 2021, more revenue than in both the first quarter of 2020 and first quarter of 2019 — and this despite the pandemic not being completely over.

The company explained the increased revenue came from two main factors:

  • Higher average daily rates.
  • In Q1 2020, Airbnb gave full refunds to guests who canceled because of the pandemic.

Why Airbnb is still confident

Airbnb believes it’s well-positioned for the future. The company reports that guests aged 60 and up, after the COVID-19 vaccine became available, are again searching for summer travel plans, and those searches have increased by 60% between February and March 2021.

Another development is Airbnb has recorded an increased interest in longer stays (28 days or more), which benefit the company’s model: People who plan a longer-stay vacation tend to want to stay in a home versus a hotel room. Longer stays went up from 14% in 2019 to 24% in Q1 2021, largely because people are now able to work remotely.

The Millionacres bottom line

Because of the coronavirus pandemic, the travel industry overall, of which Airbnb is a part, lost money.

But Airbnb has changed its business model to better prepare for the future. The focus is on Airbnb hosts, and Airbnb rolled out a program to help make it easier to be a host. This change indicates Airbnb is going back to its roots, back to what made Airbnb popular in the first place: giving travelers a homier, and oftentimes cheaper, experience than what they could find from hotels.

Airbnb is positioned to be a strong force in the future as travel rebounds. If you believe in Airbnb, you might wish to invest, despite its Q1 2021 reported loss.

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Originally Appeared Here

Filed Under: MONEY, REAL ESTATE

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