Airbnb’s Secret Weapon
Since Airbnb is going public soon, this post is going to stay short. I want to wait for all the financials to become available because I think this new trend is the biggest thing to hit the travel market possibly since AirBnB itself.
My thesis for Airbnb’s next catalyst revolves around the growth of a new type of worker called a “digital nomad”. Here is the definition according to Wikipedia:
“Digital nomads are people who use telecommunications technologies to earn a living and, more generally, conduct their life in a nomadic manner. Such workers often work remotely from foreign countries, coffee shops, public libraries, co-working spaces, or recreational vehicles.”
A digital nomad is someone who, instead of “working from home,” can work from anywhere because of the nature of their job and family situation. It isn’t a new term, but one that has been accelerated into the lexicon because of all the events/changes in work culture in 2020. There are now likely 10-times as many people who, because of how people view work now, can become a digital nomad if they want to.
So what does this have to do with Airbnb? Two words: monthly rentals.
Monthly rentals are relatively new to Airbnb, but I’ve noticed over the past year the company promoting the segment on the front page of their app. It is apparently seeing huge growth amid this boom in digital nomads in 2020 (according to this article, Airbnb is “courting” them). I have no idea what the financials look like, but from a common sense standpoint Airbnb monthly rentals and digital nomads are a match made in heaven.
Why? Because prices are cheaper (just perusing my local Seattle listings you can get a solid place for $1,000 or less a month) than a per night rental, and using Airbnb keeps you from being locked-in to a lease for a year. It gives you the freedom to live as a digital nomad but at a reasonable price.
If scaled correctly, this could have a giant impact on Airbnb’s top line. Assuming an average of $15,000 in annual spend for each user and a 3% take rate for Airbnb, the company would be bringing in $450 million for every million users that “live” on the platform.
It would also increase Airbnb’s competitive advantage because if they aggregate supply of these monthly rentals it will lock-in customers who know they can find a reasonable place to stay in any city in the world, which would then keep the supply of offerings high worldwide. Or in other words, the business would have a phenomenal moat.
The only question any investor needs to ask is, how big will this market be? My bet is quite large with a decades-long runway of growth as most white-collar jobs will eventually give the option to be a digital nomad if you want to be. Not saying everyone will live like this, but I’d bet a lot of money a good portion will.
Disclosure: The author is not a financial advisor, and may have an interest in the companies discussed.