Hotels haven't been killed by Airbnb after all
Shares of three top lodging chains are trading at all-time highs and have outperformed Airbnb since the home sharing site went public more than three years ago.
Airbnb is a giant in the travel industry. The house sharing company has revolutionized the way that many people choose to take vacations. Why rent a hotel for a few nights when you can live with more comforts of home? Airbnb’s successful business model has turned it into a company that is expected to generate $11 billion in revenue this year. The company’s market value is nearly $90 billion. The company is even now part of the S&P 500.
But the rise of Airbnb has not led to the demise of the traditional hotel industry. Quite the contrary. Shares of hospitality giants Hilton, Marriott and Holiday Inn owner InterContinental Hotels Group all hit new record highs Thursday. In fact, these three stocks have all outperformed Airbnb since Airbnb went public in December 2020.
Shares of Airbnb closed at just under $145 on their first day of trading. The stock more than doubled from its offering price. But not too many individual investors were able to buy the stock at the offering price of $68. So anyone who purchased Airbnb once it actually began trading on 12/10/2020 is likely sitting on a small loss if they’ve held on to the shares. Airbnb now trades at around $137.
Now take a look at Airbnb’s post-IPO slide compared to how Hilton, Marriott and IHG have done in the past three-plus years. IHG’s stock is up nearly 50%. Hilton and Marriott have both gained more than 70%. And did I mention that they once again hit new all-time highs Thursday? (Yes. I know I did.)
The big three hotel chains all lost money during 2020, the depths of the Covid-19 pandemic. But it’s been a much different story since then. Consumers and business travelers started to take trips (and stay at hotels) again once vaccines helped alleviate fears about Covid. Hilton, Marriott and IHG returned to profitability in 2021 and their revenue has surged since 2020. Sales and earnings are expected to keep growing this year as well. Apparently some people still like the idea of room service and a breakfast buffet instead of having to clean up and make your own meals when staying in a stranger’s house.
Of course, the continued success of hotels doesn’t mean that Airbnb is doomed either. There is room for traditional lodging and vacation house rentals (especially if you’re booking a long-term trip) at a time when many people are willing to spend on trips. The travel industry writ large has made a big rebound in the past few years. Shares of airlines and cruise line companies as well as Booking and Expedia have all rebounded from their pandemic era lows.
It just goes to show that despite the disruption that technology has had on the hospitality industry, big hotel chains are here to stay. With apologies to Don Henley, you can check out any time you like, but investors can never leave these stocks.