Why a Popular Travel App like Airbnb Got Smashed in the Stock Market?

The Big News

According to NASDAQ, the company was having a good IPO (Initial Public Offering) in the first week of December. The share prices were 50-60 US dollars even before the shares were offered for trading. After the first day of the public offer, the price rose to double the value. But the routine of success broke when the price fell down dramatically.

The event of Airbnb’s IPO was held on Wall Street which included many huge investment banks. One firm named Gordon Haskett did not come to the event. On being asked by streetInsider.com, they said that the company is underperforming and they don’t feel right to invest in it.

The analysts said that the stock price of the company is three times more than the rival travel services such as Booking Holdings and Expedia. Although the analyst said that Airbnb’s rapid growth deserves a premium. They still consider this high 300 times plus premium as excessive and calls today’s downgrade a “tactical valuation-driven downgrade,” which will be soothed in the future. 

Now Gordon Haskett expects Airbnb share to get at $103 a share as opposed to its current valuation which is around 128 US Dollars. In today’s time, Airbnb has recorded more than $1 billion in losses, and analysts predict it to be continued for at least a year or two due to excess negative cash flow. Therefore the company is expected to face a crisis in coming times certainly.

But there is hope it will bounce back because of its amazing functionality. Let us learn how this travel app works.

Functional Model of Travel App Airbnb

Airbnb is an online marketplace that is also a travel app that connects travelers with local hosts. The localities of the area list their place for rent and earn. Also, it gives a chance to the travelers to interact with local people around. The app was found on 1st August 2018 and is currently functional in 190 countries. 

Just like you book a taxi from a taxi booking app, the customers can book their place of living. The app has 3 participants or users over the app of functioning. As follows-

1. Hosts

• Hosts are the people that list out their properties for rent.
• They can list their property with the pricing, facilities, and check-in and check-out like details.
• The host has the power to accept or reject requests of travelers based on profile review.

2. Travelers

• Travelers that book the place that is listed by localities.
• They have options to browse, search, and filter based on rent, prices, facilities, locations, etc.
• The payment could be done online through payment gateways.

3. Freelance Photographers

• The photographers can also use this travel app. They could be hired to click pictures of these properties.
• The high-quality photographs get more responses and they are directly paid for by Airbnb.

These three users sign up on their respective panel and the admin panel of the app controls the overall functionality.

Revenue Model of Travel App

The travel app Airbnb allows property owners to list their properties for free over the app. The condition is that booking and monetary transactions are done through the medium of this travel app. The company majorly earns in two different ways.

• Commission from Property Owners (Hosts)

Airbnb charges a flat 10% commission from the hosts who have listed their property. Once the booking is done, 10% of the total value of rent charges are transferred to the app’s account as a part of the commission.

• Transaction fee from Travellers (Guests)

Similarly, like the host is charged commission. The travel app charges only 3% as the booking and transaction commission from the travelers of the total amount they have given for booking.

Conclusion

The travel app was a massive hit in 2019 but due to the unfortunate situation of COVID19, it came under losses. The app has bright chances to bounce back once everything comes to normal. Meanwhile, it is suggested for investors to invest in apps that are going to be in demand in 2021 and avoid outdated trends of technology in 2021.