[00:02:58] Shawn O’Malley: My final decision on whether to invest in Airbnb or not, I’ll tell you about later on, will be made completely independently. With that, let’s begin the story of Airbnb. Can’t be told without discussing Brian Chesky at length, the company CEO, and co-founder. He is a very likable and compelling figure, not your typical Silicon Valley guy who has a background in programming or serial entrepreneurship, but rather he’s kind of a very down to earth and mission-driven guy.

[00:03:27] Shawn O’Malley: He’s mindful of design because he started his career in industrial design and went to art school before founding Airbnb, and I think that has translated into how well configured and how simple the platform is to use. It also makes sense because Airbnb required a tremendously bold vision and no practical business person would’ve thought a business premise around asking people to share their homes with travelers could be worth tens of billions of dollars at every point along the way, Chesky was told that the idea couldn’t work and was silly, and Chesky didn’t believe it at himself initially either.

[00:04:00] Shawn O’Malley: He originally started just trying to rent a spare bedroom, simply hoping to have some help paying rent. He saw a chance to capitalize on these large conventions in town that would cause a shortage of hotel rooms, but he didn’t expect it to have much potential beyond that. However, he stumbled upon a real pain point for people and learned continuously from user feedback about what guests actually wanted and what they expected out of the service.

[00:04:24] Shawn O’Malley: What stands out to me is the Hustle. Chesky had in the early days of Airbnb, Chesky and his co-founders did everything they could to scale the idea from selling special presidential election themed cereal boxes for $40 a pop to help fund the business. Personally taking photos of properties to bribe listings.

[00:04:43] Shawn O’Malley: And over time the idea evolved from Airbnb literally being a bed and breakfast service where hosts were required to be on property and make breakfast for guests to its current shape now where guests can book an entire space to themselves. But it wasn’t until going through Y Combinator and getting an investment from Sequoia that anyone even really took their idea seriously.

[00:05:04] Shawn O’Malley: Still, they pushed on, and I love this quote from Chesky. He says, pessimists are often right, but optimists change the world. Evidently, his optimism really did help him change the world. My colleague Fin did a wonderful job telling the story of Airbnb in an episode back in 2022 on, we study billionaires, but Aly some excerpts here to help paint the picture of Chesky. Let’s listen.

[00:05:25] Clay Finck: Brian Chesky is one of the founders of Airbnb, and today is the CEO of the company, and he is just totally different from your traditional Silicon Valley tech entrepreneur because he is an artist and creator at heart and not an engineer or a computer geek like many other tech CEOs. This reminds me a little bit of Steve Jobs, his persona of caring much more about the design in user interface and user experience, rather than just making money from being an entrepreneur.

[00:05:58] Clay Finck: Chesky went to art school at the Rhode Island School of Design and studied industrial design. Having grown up in upstate New York, Brian didn’t really have much of an aspiration to be an entrepreneur because no one in his network was doing such a thing like building a company as both of his parents were social workers who just wanted their son to go out and get a secure job to pay the bills month to month.

[00:06:20] Clay Finck: Clay continues explaining some of the early challenges they faced with Airbnb. The first real events that Airbnb really launched for was the Democratic National Convention, which was in Denver and Barack Obama would be visiting. There were 80,000 people heading to the convention, and all the hotels were booked as they only had 27,000 hotel rooms in the city.

[00:06:45] Clay Finck: So there was definitely plenty of opportunity to potentially be seized. They launched their site on August 11th, 2008, just a few weeks before the convention. So the way they tried to tackle this problem of allowing people to find their website was to try and get a ton of press on their site. So a ton of people would start to learn about it, read about it online, and then go and book a place on Airbnb and it might catch fire through this spontaneous combustion of sorts where there’s just all this media and press covering them.

[00:07:17] Clay Finck: They managed to get featured in TechCrunch, which created a decent amount of buzz for the company as the site received so much traffic that it actually ended up crashing. Now, scaling was such a huge problem for Airbnb. Initially, Chesky described it as the chicken and egg problem. They wanted customers, but in order to get customers, they needed hosts on the platform.

[00:07:38] Clay Finck: They also needed hosts, but in order to attract them, they would need customers. So it’s impossible to have one without the other in order to create the transaction. And not only do you need both parties, you need both parties and locations all over the world in order to scale.

[00:07:56] Shawn O’Malley: So Airbnb is truly an all American story of building something from nothing and becoming fabulously wealthy as a result, overcoming countless obstacles along the way and building something that a few people really, really love that catches on with millions.

[00:08:13] Shawn O’Malley: The company grew with multiple rounds of funding from venture capital, and along the way, investors in the company rapidly escalated their pricing of the business from $1 billion in 2011, $10 billion in 2014 to more than $30 billion in 2016, and now it has a market cap of over $80 billion. That success and even wealth though, hasn’t placated chesky.

[00:08:35] Shawn O’Malley: He remains as involved as ever, and he has not even been taking a salary as CEO. Instead, his sole compensation is from a restricted stock grant worth hundreds of millions of dollars, is certainly not modest, but it vests based on certain total shareholder return hurdles over a 10 year period, and he’s promised to donate much of that to charity Today, he owns 10.5% of the company, but sold less than 1% of his position in the IPO.

[00:09:01] Shawn O’Malley: The thesis here largely ties back to Brian Chesky, what you think of his vision, whether you believe he can also manage the business in a way that’s efficient for shareholders. So I’d recommend that any prospective Airbnb investor take some time to really get to know Chesky and decide whether he’s someone to bet on With all that on the CEO though, let’s talk about the actual business.

[00:09:22] Shawn O’Malley: Airbnb’s primary business model connects hosts who own houses and apartments with guests who want to rent them for mostly short-term stays, while providing a secure and easy to use platform for search, reservations, communications, and payments. Like many tech companies that have iPod in recent years, Airbnb has shares with different voting rights.

[00:09:42] Shawn O’Malley: It’s Class A shares have one vote, and are the most liquid share class that trades publicly while Class B shares have 20 voting rights per share. And Class C shares have no voting rights per share. Unsurprisingly, the Class B shares are held by founders and insiders furthering their control of the company.

[00:09:59] Shawn O’Malley: And it’s not clear why there are Class C shares other than to give founders who already have control even more control in future years if they feel threatened. And the Class eight shares are apparently set aside in an endowment for long-term Airbnb hosts, which is a nice way to make the most committed operators supporting the business.

[00:10:16] Shawn O’Malley: Actually owners in it. Looking at the addressable market for Airbnb, some believe that the conventional hotel market understates the potential for a sharing economy company like Airbnb, since it can increase the supply of rental units without making its own investments and perhaps induce new types of people to list their homes.

[00:10:35] Shawn O’Malley: Similar to how ride sharing companies like Uber have doubled or even tripled the size of the car service business in the last decade. If you had looked at the market size of just taxi businesses, you would’ve understated the opportunity for Uber, because Uber changed behavior at a societal level, and that is a really rare thing in business.

[00:10:54] Shawn O’Malley: But Airbnb, I’d argue, has done the same people who didn’t take taxis before. Now take Ubers because Ubers are different. They’re more accessible and decentralized and operate in areas where taxis don’t. More people pay for rides due to Uber’s existence and pay for rides more frequently than they otherwise would have Increasing the addressable market for Uber to grow into beyond just the taxi market.

[00:11:18] Shawn O’Malley: Airbnb’s addressable market, for better or worse, is not the hotel industry because they’re different things in some ways to hugely generalized. People book Airbnbs to stay in a cliffside cottage on the Italian coast, and people stay at hotels for business trips and resort like experiences. Again, that is a very gross generalization, but in essence, that is the difference.

[00:11:38] Shawn O’Malley: One is focused on reliability, consistency, and convenience, and the other is focused on unique experiences being integrated into communities and accommodating larger groups wanting to stay together in the same place. And people book trips and pay for experiences that they may not have otherwise. Due to the existence of Airbnb, Airbnb offers a service that didn’t exist at scale before, but has changed how people think about traveling.

[00:12:03] Shawn O’Malley: Where Uber convinced the world to get into stranger’s cars, Airbnb convinced ’em to stay in stranger’s homes, and that has been a society changing and hugely profitable shift. In its IPO prospectus, Airbnb broke out its potential market as follows. We estimate our total addressable market to be $3.4 trillion, including $1.8 trillion for short-term stays, $210 billion for long-term stays, and $1.4 trillion for experiences.

[00:12:31] Shawn O’Malley: That is ambitious, to say the least. But Airbnb’s addressable market will continue to expand over time as they branch out into offering more and more hospitality related services. For example, I don’t see why they couldn’t partner with Uber such that when you book an Airbnb, you also schedule Uber rides to take you to your destination from the airport and back.

[00:12:50] Shawn O’Malley: I’m completely speculating, but you can imagine that Airbnb would get a small fee from Uber for facilitating that booking and at scale. That could be one of many ways to further drive their business beyond simply booking short-term rentals. Of course, a chunk of Airbnb’s business has come from eating away at hotels, but not entirely so every Airbnb booking isn’t necessarily a lost customer for hotels because these are sometimes customers that hotels never would’ve had anyways.

[00:13:15] Shawn O’Malley: Looking at just the global vacation rental market. This is an industry that has consistently grown by double digit rates since 2013 and bounced back quickly after the pandemic, and that has been a major tailwind supporting Airbnb. In terms of how Airbnb makes money, they charge fees as a percentage of the gross booking value for a trip.

[00:13:35] Shawn O’Malley: The fee gets divided up so that hosts pay roughly 3% of the gross booking value to Airbnb while guests pay a fee worth 12% of their gross booking value. This is referred to as a split fee structure since it divides the fees between the hosts and guests, but some hosts pay the fees entirely themselves.

[00:13:52] Shawn O’Malley: They eat the costs, but their listings become more competitively priced, thanks to not making customers pay any fees, and that typically increases bookings. And in some cases, hosts are required to absorb the entire chunk of fees to Airbnb if their listing is for a hotel or a host. For context, the average daily booking rate across Airbnb worldwide is roughly $164.

[00:14:13] Shawn O’Malley: An Airbnb’s take rate, which is the revenue they earn divided by the gross booking value, turns out to be around 14% on average. So for every a hundred dollars spent on an Airbnb booking, Airbnb earns about $14 in revenue from fees charge either to host or to customers. Lemme clarify though that there is some variance in their fee structure, which is why it averages out to a bit below 14% rather than simply being 15% from adding the typical 3% host fee and 12% customer fee.

[00:14:42] Shawn O’Malley: For example, there’s the split fee structure and host only fee structure I mentioned, and Airbnb’s fees can also vary for hosts depending on their cancellation policies or whether a booking was made across different currencies. Hosts can also add their own optional fees, including cleaning fees, fees for extra guests, security deposits, and guest cancellation fees.

[00:15:01] Shawn O’Malley: From a single property posts can make a decent amount of money. For example, an Airbnb in New York with an average daily rate of $300 and a 30% occupancy could theoretically earn roughly $33,000 per year. The economics get tighter when you net out insurance, property taxes, utilities, and mortgage costs, but it’s a great way to monetize an underused property.

[00:15:22] Shawn O’Malley: And while Airbnb gets paid the gross booking value at the time of booking by guests, they don’t pay host their cut of fees until two days after the initial check-in date, so they have some negative working capital where they get to hold the prepayment upfront, earn interest on those funds, and then pay them out at a later date.

[00:15:41] Shawn O’Malley: This float, as it’s known, can easily generate millions of dollars in interest income for the company, and acts as a form of interest Free financing too. I know this well because I recently got married and our friends got us an Airbnb gift card for a honeymoon, and until we decide where to go, that money is sitting in Airbnb’s pockets earning them interest based on the latest filings.

[00:16:02] Shawn O’Malley: Airbnb holds around $7 billion from customer prepayments on its balance sheet. And as I said, that can generate a meaningful amount of interest that supports profit margins. That’s a subtle advantage, but what really counts for Airbnb is what’s known as the alternative accommodations market, which is basically any travel where you stay somewhere besides a hotel, and it’s a fast growing niche.

[00:16:23] Shawn O’Malley: Generally speaking, not only has Airbnb benefited from eating into hotels market share and appealing to travelers who want more unique experiences or want to actually be integrated into the communities they visit, rather than staying in the commercial part of town where the hotels are located. Airbnb has also enjoyed a tailwind from remote work trends, especially after the pandemic.

[00:16:43] Shawn O’Malley: Since remote workers are likely to be short or long-term renters of vacation properties rather than living and working out of hotels, even though things have normalized since the pandemic a bit and not nearly as many people work remotely as when they were locked down, the number of remote workers is still structurally higher post covid and even has doubled by some estimates, if not more so.

[00:17:04] Shawn O’Malley: For Airbnb. The next phase of the company’s growth as launched late last year is to make hosting just as popular as traveling. Underpinning that is the company’s more than 8 million active listings, which it’s helping to expand via its new co-hosting initiative. As management put it in the Q3 shareholder letter to retain and attract new hosts.

[00:17:25] Shawn O’Malley: We’ve prioritized making hosting easier. Last month, we introduced co-host Network, an easy way to find the best local hosts to manage your Airbnb. Co-hosts are experienced hosts who provide personalized support on the hosts needs from listing setup to managing bookings, and communicating with guests.

[00:17:42] Shawn O’Malley: And so we actually run ads for the co-host program on this show. So maybe you’ve heard these promotions and are familiar with the initiative. Basically, co-hosts are experienced hosts who have exceptional track records on Airbnb. 73% of co-hosts are what the company calls Superhosts, and 84% of co-hosts help manage at least one property known as a guest favorite, which are some of the highest quality homes on Airbnb.

[00:18:08] Shawn O’Malley: With more than 10,000 co-hosts across 10 countries, Airbnb’s algorithm recommends a list of co-hosts to work with based on dozens of factors including location, hosting experience, and home type. And correspondingly, we’ve tried to make it as simple as possible to coordinate with co-hosts, adding collaborative features like messaging, calendar, access, payouts, and more built right into the app to streamline hosting and co-hosting as much as possible.

[00:18:33] Shawn O’Malley: As management explains, hosts on the co-host network typically have high ratings, low cancellation rates, and established Airbnb hosting experience. By making hosting easier, we believe the co-host network will allow us to unlock even more high quality supply. In three weeks since launching, they’ve apparently received interest from over 20,000 potential new co-hosts who wanna join the program.

[00:18:55] Shawn O’Malley: As a shareholder, I think the co-hosting network is probably something to be cautiously optimistic about. I’m not sure it’s gonna be a massive growth engine, but I also see why management is excited about it. Airbnb’s biggest constraint is in providing enough supply to meet demand, so this might be a way to unlock more listings on the platform.

[00:19:13] Shawn O’Malley: Brian Chesky has described co-hosting as solving a Venn diagram problem where some people have available properties to list but don’t have the time to do so, and others have time, but not properties. So co-hosting addresses both of their needs and should expand Airbnb’s inventory, which will increase its earnings power.

[00:19:30] Shawn O’Malley: At the same time, Airbnb has been pretty focused on improving its core service too. Over the past three years, they’ve launched more than 535 new features and upgrades to improve the platform. This winter, they’ve focused on making the app more personalized with recommended destinations, suggested search filters and personalized listing highlights.

[00:19:50] Shawn O’Malley: Importantly, they’ve also addressed one of the biggest thorns in their side, and that has been listing quality. Guests have complained for a while now that there are too many properties listed that don’t live up to expectations. And in response to that, Airbnb has removed over 300,000 poorly rated listings.

[00:20:06] Shawn O’Malley: That doesn’t just improve customer satisfaction, but it also reduces the number of customer service issues that the company has to deal with, which should end up saving them on overhead costs. On the flip side, Airbnb is trying to drive more people to its top performing properties and highest rated hosts.

[00:20:22] Shawn O’Malley: And that is another angle to approach improving customer satisfaction and reducing customer service complaints from according to the company. Over 200 million nights have been booked at guest favorite listings in the past few years in Knights booked with Superhosts have increased by 21%. Fewer poor quality listings and more traffic to top hosts.

[00:20:41] Shawn O’Malley: I’ve also translated to fewer host related cancellations and thus host cancellation rates have dropped almost 30% since 2023, which serves to make Airbnb a more consistent experience. On average, fewer, fewer instances of guest trips being canceled by hosts. Last summer, Airbnb’s initiatives centered around a feature they call icons.

[00:21:01] Shawn O’Malley: The company describes this as a category of extraordinary experiences hosted by some of the biggest names in music, film, television, art, and sports. Some of these are just really cool. One that I saw was an exact replica of the floating house from the Pixar movie Up Complete with 8,000 balloons. Other ones I’ve seen include spending a night in the Ferrari Museum, a VIP experience with Kevin Hart, a living room GM session with Doja Cat, and a chance to stay in a Bollywood Stars home in India.

[00:21:30] Shawn O’Malley: Since launching icons in May, 2024, it has received over 60 million views on their site and more than 1 billion impressions on social media. Something the company specifically highlighted as helping expand Airbnb’s brand beyond travel accommodations. They also launched new features for group travel, including shared wishlists and trip invitations.

[00:21:49] Shawn O’Malley: Since then, the percentage of bookings from shared wishlist has nearly tripled, so it’s been an effective tool in converting people from dreaming about a trip to actually taking it. And these new features have reportedly contributed to over 1.2 million new app downloads and more than 1.7 million new user signups.

[00:22:08] Shawn O’Malley: Thinking about Airbnb and these new features prompted me to wanna see what real people actually think. So I went through a few different subreddits discussing Airbnb and in a stock investing subreddit. I found that even though the vast majority of commenters were all piling on ripping Airbnb for its fees, or landlords for overs, overseeing the quality of their properties, or having a laundry list of demands or guests before leaving, I found what I thought was a very thoughtful comment that pretty well captures the signal from the noise.

[00:22:35] Shawn O’Malley: The commenter said quote. Is it a good value compared to hotels? Not always, but it entirely depends on your situation. Is it sometimes the only place to stay? You can find in a lot of areas, especially rural areas. Absolutely. You spend a long weekend in an entire house relaxing near a beach with your whole family at a hotel.

[00:22:53] Shawn O’Malley: Heck no. And certainly for not nearly as cheap, Airbnb has specific cases that it is very good for. People trying to do one for one versus hotels in a city are being silly. I stayed at a house with friends and I had a view of the Columbia River watching various huge ships roll by. There was a pool table in the basement.

[00:23:12] Shawn O’Malley: I also stayed in a house in the middle of the mountains by a river and the Canadian Rockies. We made Thanksgiving dinner there. We stayed a block from the beach off an estuary watching bald eagles catch fish every time we’ve all had our own bedrooms. Don’t treat it like a hotel alternative all the time.

[00:23:27] Shawn O’Malley: You’ll find some real jams. I really love crowdsourcing insights like that on customer facing products and services from the internet. So just by going through the Airbnb subreddit, for example, I learned a lot about how some of the most engaged guests and hosts view the company. In contrast to the argument in favor of Airbnb above, I’ve seen a number of people complain about host cancellations, undermining trust in the service.

[00:23:51] Shawn O’Malley: As another commenter wrote quote, the biggest issue with Airbnb for me that I see more than fees are cancellations. Why would I as a consumer feel secure booking with Airbnb when the host can literally cancel as I’m rolling up, the best I can get is a refund that won’t appear for possibly one to two weeks to add prices.

[00:24:09] Shawn O’Malley: Jump at the last minute and now you’re stressed while traveling and trying to find new accommodations. Why in the world would anyone want to risk their travel? I still haven’t seen hosts explain how guests should feel at ease. It comes up multiple times a week here where someone says, host canceled.

[00:24:24] Shawn O’Malley: What do I do? I’ve traveled a ton and I’ve only had a hotel cancel once due to a needed repair, and the room didn’t have power. They rebooked me at a close hotel that was nicer than theirs. I didn’t have to wait for a refund or pay anything. It was done before I even arrived. Airbnbs literally twice out of a dozen stays I’ve been canceled on.

[00:24:42] Shawn O’Malley: It first makes you lose trust in the platform, and then a second time, yeah, never again. And you know, I’ve seen a lot of anecdotal feedback like that, and it does worry me. The company has definitely squandered a lot of built up goodwill and probably needs to do some image rehabbing in the coming years to make up for some of that.

[00:24:59] Shawn O’Malley: And obviously Airbnb is certainly not without controversy. Last summer, Barcelona erupted with protests over waves of tourists with many locals pointing fingers directly at Airbnb for disrupting their communities. And in New York, last September, 80% of the city’s Airbnb listings went offline after a crackdown by local regulators on short-term rentals.

[00:25:19] Shawn O’Malley: In response, Airbnb has poured millions of dollars into lobbying for a reversal of the city’s licensing law, hoping to win back business in a city that as of 2023 at least, made up 1% of its global revenues. Fortunately for Airbnb, no single city makes up more than 2% of its revenues. So even the wipe out of 18,000 listings in New York City isn’t devastating to its worldwide business model, but it’s certainly not a precedent they’re excited to see set.

[00:25:45] Shawn O’Malley: City officials have argued that the law is necessary to crack down on unlawful rental operations run by bad actors who subject guests to hazardous living conditions. Drive up Branson, erode the fabric of neighborhoods. Airbnb is very much in the throes of trying to win a battle with New York City after a major setback, but it has had clear victories elsewhere.

[00:26:05] Shawn O’Malley: In 2015, for example, Airbnb spent $8 million to defeat a ballot measure that would’ve imposed tougher limits on short-term rentals in its hometown of San Francisco. Airbnb’s policy recommendations for New York City include an option for single and two family homes who lists their residents on Airbnb without needing to be physically present at all times.

[00:26:25] Shawn O’Malley: Increasing the number of adults permitted on a reservation from two to four, and allowing hosts to restrict some areas from guests since the current rule prohibits short-term rentals with internal door locks. They’ve also accused the city of failing to deliver on promises to combat the housing crisis.

[00:26:40] Shawn O’Malley: While rents have continued to rise and hotel prices have skyrocketed, as travelers have fewer accommodation options. As someone who travels to New York periodically, I can definitely attest to hotel prices being crazy. And the longer this Airbnb crackdown continues, while other conditions don’t improve, the more likely I’d guess that the city would eventually relent on short-term rental restrictions.

[00:27:01] Shawn O’Malley: We’ll see what comes of it, but New York City is definitely a key city. If for no reason other than symbolically, there’s a number of other cities may be inclined to follow its lead. There are a handful of other cities though that have already strictly regulated and even banned Airbnb from Paris to Berlin, New York, London and Amsterdam officials are demanding that Airbnbs be registered with city governments and imposing restrictions on how long they can be rented for how many people can stay in an Airbnb, and how many Airbnb property hosts are allowed to have.

[00:27:30] Shawn O’Malley: Barcelona became one of the first major cities to outright ban short-term rentals starting in 2029, and that effectively outlaws Airbnb there in Singapore. Short-term rentals have been banned since 2017, and if you go to Airbnb’s website, you’ll see that people will get around this by registering every listing as a hotel.

[00:27:48] Shawn O’Malley: So there are workarounds for sure. These aren’t as much family homes as they are hostiles with shared sleeping areas and bedrooms. But either way, Airbnb is definitely still operating there, even if its presence is reduced. I do think Airbnb generally has the upper hand with regulators because by and large consumers want it to exist.

[00:28:06] Shawn O’Malley: In many ways, Airbnb is a middle class movement, empowering both hosts and guests. No matter how much hotels or some locals hate it, I don’t think you can kill something that millions of people love and rely on. Relatedly, Airbnb drives tourism, which boosts local economies and raises tax dollars for governments.

[00:28:25] Shawn O’Malley: So government crackdowns on Airbnb don’t come without costs. Some did think though that Covid was going to kill Airbnb, and if Lockdowns had gone on long enough, it might have. Instead, the company came out on the other side even stronger. During the pandemic hosts and Airbnb were confronted with 80% declines in bookings, in mass requests for refunds.

[00:28:47] Shawn O’Malley: And in response, Airbnb distributed $250 million off its balance sheet directly to hosts, recognizing that without them, the company is nothing. It also have to cut its own costs to survive laying off 1900 of its 7,500 workers. Yet that helped the company become extremely efficiently structured with the same number of employees as before the pandemic, but twice the revenue.

[00:29:10] Shawn O’Malley: Another lasting effect of the pandemic was that Airbnb largely exited China due to their harsh lockdowns and competition from local rivals. So this wiped out 150,000 listings. It was ultimately probably a good thing because I doubt in the long run they really could have won there. They do, however, is still catered to Chinese travelers when they’re abroad.

[00:29:29] Shawn O’Malley: Last but not least, another effect of Covid was in helping management realize just how powerful their brand actually is. This appreciation didn’t come until the company temporarily shut off all performance marketing in the first half of 2020 to save on costs, but subsequently saw 90% of its pre pandemic traffic return.

[00:29:47] Shawn O’Malley: As a result, Airbnb has significantly reduced its performance marketing budget while continuing to invest in broader brand building. Airbnb’s cost advantage and customer acquisition is so large in fact that Airbnb is able to spend much more on r and d than its peers. Yet Airbnb’s total marketing and r and d spending is less than what its peers spend on things like Google Ads to buy web traffic.

[00:30:09] Shawn O’Malley: Meanwhile, Airbnb is leaning into luxury and offering more upscale experiences. As Bloomberg reports, we can all live like royalty at a stranger’s apartment, thanks to new Airbnb offerings. Think fridge, restocking, midweek cleaning in transportation to and from the airport, among other features that Airbnb has teased as part of a new guest service marketplace for 2025.

[00:30:30] Shawn O’Malley: That alongside other initiatives, Brian Chesky has said, will help add another billion dollars in annual revenue. The hope is that when guests go to book A stay, Airbnb can cross sell them on added products and services in an earnings call. Last August just told investors we’re going to completely reimagine our search and discovery engine to cross sell experiences after you book a home.

[00:30:52] Shawn O’Malley: For example, jet skiing or surfing classes might be recommended with a beach rental booking and wine tasting or cooking classes would be suggested to foodie staying near vineyards. Other more practical, but smaller add-ons might include requesting an advanced bottled water, extra body wash, and other little necessities, or even full grocery orders.

[00:31:09] Shawn O’Malley: This all plays into a core idea that has defined Airbnb in recent years, and that is the idea of belonging, making guests feel at home in someone else’s place, possibly on a different continent. Clay describes this pretty well again, so let’s listen to his episode.

[00:31:25] Clay Finck: Chesky and the team took this idea of belonging extremely seriously, and he felt that this would be the company’s mission for the next 100 years.

[00:31:35] Clay Finck: When thinking about what this mission really meant, he mentioned how today’s world seems very disconnected from what it once was. That feeling of belonging was what people experienced when they traveled with Airbnb. When travelers leave their homes, they feel alone, but when they’ve reached their Airbnb, they feel accepted and taken care of by their host, whether that be through kind messages on the app or a welcome note and treat when they arrive.

[00:32:00] Clay Finck: This mission of belonging was so important for growth of the company as how the business model operates, includes some of the most intimate things people do, visiting people’s homes, sleeping in their beds, and using their showers and bathrooms. This aspect of the business is what separates it from other shared economy companies like Uber, Lyft, and Upwork, for example.

[00:32:22] Clay Finck: The most hardcore users of the platform are a small subset of people who live in an Airbnb full-time and hop from one location to another from month to month when traveling around and being a bit savvy with the locations you choose in the listings, you select. It can cost just as much to use Airbnb as it does to rent out an apartment in a big city such as New York City or Seattle, especially with this trend to work from home.

[00:32:48] Clay Finck: Ever since the pandemic, more and more people are finding the value in booking an Airbnb, working from anywhere, and making the world a place to be continually explored.

[00:32:59] Shawn O’Malley: I really like how Clay puts it there, and by now we should have a pretty good idea of what Airbnb stands for. So let’s look at how it stacks up with competitors despite having grown sales at more than twice the rate as booking.com over the last five years.

[00:33:12] Shawn O’Malley: On average, booking.com trades at an enterprise value to sales of 6.4. Whereas Airbnb trades in an enterprise value to sales of 5.9. So as a multiple sales at least, just despite faster growth, Airbnb is priced a little bit more cheaply than one of its most direct competitors, even though there are some differences in their business models in terms of its valuation as a multiple of sales.

[00:33:32] Shawn O’Malley: Airbnb is about as cheap as it ever has been in its four year history as a public company, as its valuation spread against booking.com has narrowed over time and then went negative last fall. To Judge Airbnb’s future, we need to understand two of its peer groups. The first is the hotel business, since it is the business that is most at risk of being disrupted by the Airbnb model.

[00:33:55] Shawn O’Malley: The other is the online travel booking business with large players like Expedia, which owns VRBO and booking.com. Both largely make their money as travel intermediaries or brokers connecting guests with hospitality offerings. The hotel business is large and diverse, composed of hotels that range from luxury to budget, and a number of these businesses are publicly traded too, as Asat Moran explains in his analysis of Airbnb.

[00:34:20] Shawn O’Malley: Conventional hotel business is an asset heavy business, the significant real estate component to its value. And while some hotel companies have stayed with that model, others have moved onto a more capital light model where the real estate is owned by a separate entity and the hotel companies operate primarily as an operator.

[00:34:37] Shawn O’Malley: Marriott, for instance, follows the latter model with the Marriott REIT owning the real estate and Marriott collecting operating revenues from running the hotels. While hotels are being disrupted the most by Airbnb, it is the travel booking business that is closest to Airbnb’s business model. Because Airbnb, unlike hotels just mentioned, doesn’t own the underlying real estate.

[00:34:58] Shawn O’Malley: And even here, there are key differences. Expedia and booking.com for starters generate revenue by buying blocks of hotel rooms at a discount from hotels, and then reselling them at a higher price. And secondly, they also derive revenues from online advertising by hotels and travel providers. Basically, different hotels will do various types of sponsorships with these companies to promote their listings.

[00:35:21] Shawn O’Malley: Both of these businesses looking at hotels and travel intermediaries were designed to profit from the status quo and hospitality and derived all of their revenues until recently from existing hotels and airlines. Airbnb’s success has unsurprisingly driven them to make drastic change, and both companies tried to expand into the home and apartment rental businesses to diversify themselves.

[00:35:44] Shawn O’Malley: Snuffing out Airbnb’s competitive advantages then is nuanced. For example, Airbnb has a dominant presence in longer term stays that are 30 days or longer. Meanwhile, VRBO still skews to North American vacation rentals, and booking.com is mostly hotels, so it’s not a perfect substitute for Airbnb, particularly for travelers, focused more on experience rather than simply finding a place to stay.

[00:36:08] Shawn O’Malley: Whereas Airbnb gets more than 85% of its traffic from people directly searching for Airbnb by name, approximately 40% of the traffic for VRBO and bookings.com comes from more generalized Google searches. This is a huge difference that shows up directly in the marketing costs and hence profit margins of these three businesses.

[00:36:28] Shawn O’Malley: Secondly, roughly 70% of properties on Airbnb are exclusive to Airbnb. This is especially the case in newer markets for the company like Latin America and Asia. From the estimates I’ve seen, the comparable figure is much lower for VRBO and bookings.com, perhaps below 50%. So even though properties can be listed on multiple sites, there does seem to be stickiness with Airbnb where many Airbnb hosts remain exclusively loyal to the company and its platform, perhaps for no other reason than to simplify their operations.

[00:36:59] Shawn O’Malley: As silly as it sounds, most people who list on Airbnb are not corporations or even necessarily professionals. This is a secondary stream of income and probably not their core focus. So trying to manage bookings across two other platforms may be too much to bother with. For your average part-time host with one property or commercialized hosts with multiple or even dozens of properties are much more likely than hosts with one or two properties to list on multiple platforms.

[00:37:27] Shawn O’Malley: On that point, rental property owners and managers can list their properties on multiple sites, either manually or through the use of property management services that allow them to list and manage properties across multiple sites using a single platform. These platforms make a host slash property managers life easier with features like a universal inbox, pricing algorithms, and automatically updating inventory availability once a property is booked.

[00:37:51] Shawn O’Malley: The vast majority of individual hosts with fewer than five units do not use these services, and most of these individual hosts only lists their property on one platform, usually Airbnb. However, new and improved property management services are targeting this individual host market. One example is a company called Guestie, which raised $130 million in its April, 2024 funding round.

[00:38:17] Shawn O’Malley: So I do see this as a real risk because if Airbnb’s listings overlap excessively with other platforms, the whole experience becomes commoditized and I think Airbnb would begin to lose pricing power over hotels and guests in terms of the fees it charges. Fortunately though the data I’ve seen suggests that Airbnb is continuing to expand its market share relative to Expedia and booking.com, which is promising and suggests I guests continue to see something special and valuable about Airbnb.

[00:38:45] Shawn O’Malley: While watching a video on tips and tricks for new Airbnb hosts based on one host’s experiences, I actually got a targeted ad from VRBO Kan, not exclusively hosting on Airbnb, but also listening on VRBO to get higher quality guests. And I felt like I was seeing the booking wars unfold firsthand before me.

[00:39:03] Shawn O’Malley: Clearly VRBO sets its ads to target people, specifically watching videos about hosting on Airbnb and tries to get them to book with VRBO instead. And I have to admit the ad was effective from what I’ve seen. VRBO host fees could be more than twice as high as Airbnb’s though, which is possibly one reason why fewer hosts lists there.

[00:39:22] Shawn O’Malley: Same for booking.com, which apparently can charge as much as a five times higher fee to host than Airbnb. Ultimately the biggest competitive advantage for Airbnb is the network effects surrounding it, and this makes sense from a host perspective. They want to be on the platform where the most guests are, and even if they list across multiple platforms, if most people use Airbnb, most of their bookings are still going to come through Airbnb, so it may not even be that much of a threat if hosts are listing their homes on different platforms.

[00:39:52] Shawn O’Malley: If most of that traffic still comes from Airbnb. So a positive network effect occurs when each additional user to a system makes the system better for all other users as well, which attracts more users to the system. More guests spurs more hosts to list properties, which provides a wider range of vacation options and experiences that attract more guests and so on.

[00:40:13] Shawn O’Malley: An early example here was the telephone. If you own the only telephone in the world, basically useless ’cause you can’t call anyone with it. For every additional telephone owner though, it increases the number of people that all telephone owners can call. During the age of telephone adoption, your telephone would get better every time some person or some company adopted a telephone attracting more people and more companies to also adopt telephones in a more modern example would also obviously be Facebook.

[00:40:40] Shawn O’Malley: But you know, I think you get the idea. With over 5 million hosts globally in a user base of more than 150 million guests, Airbnb has an incredibly robust network that is only growing and making the entire network incrementally more valuable. All you need to do to see this in action is to compare Google search trends and Airbnb versus alternative booking sites.

[00:41:00] Shawn O’Malley: You’ll see that Airbnb is dominant. Airbnb has consistently had two to three times more searches than vrbo. And again, that doesn’t surprise me because it is among a unique group of brands whose name is synonymous with a product or service similar to Google and Kleenex. That is a massive testament to their brand power.

[00:41:20] Shawn O’Malley: Now let’s discuss the company’s growth prospects outside of Airbnb’s core markets like the us, Canada, Australia, and France. There are many countries and regions that remain underpenetrated. Management has focused on these expansion markets to drive growth, and it seems to be working. In Q3, the average growth rate of knights booked in expansion markets was more than double of that in their core markets.

[00:41:43] Shawn O’Malley: I’d say international growth is a medium term focus, where despite operating in 220 countries, they’ve only deeply penetrated five of them. If they can get Brazil, Japan, or Germany, for example, to have the same penetration as Canada, that could be worth tens of billions of dollars. It’s also clear from listening to calls with management that they believe the company is entering into a new phase of its maturity.

[00:42:06] Shawn O’Malley: Brian Chesky often talks about how short-term rentals have taken the company to $10 billion in revenue, but like Apple and Google, it needs to now begin expanding into new areas to complement that core product. He said that this will include more paid and unique experiences, long-term rentals, and other yet to be announced services for guests and hosts.

[00:42:25] Shawn O’Malley: But basically they wanna launch a major new product every year. I should mention too that the 2024 Olympics in Paris were a huge hit for Airbnb. Over 700,000 guests stayed in an Airbnb for the events, which is the equivalent of more than seven full-sized stadiums worth of people packed into Airbnbs across the city, and Airbnb specifically worked with city officials to help them absorb all of the excess travelers that hotels couldn’t.

[00:42:53] Shawn O’Malley: Airbnb was originally envisioned only as a service to be used in connection with big events and conferences to help soak up what hotels couldn’t. So this success was at the core of what Airbnb was created to do, and Brian Chesky has talked about how management wants to focus even more on these kinds of large scale events, ensure that as many Airbnb listings as possible pop up in response to them.

[00:43:15] Shawn O’Malley: From the Super Bowl to the World Cup, Taylor Swift concerts and major conferences, Zeke has said that they’re eyeing the 1000 largest events worldwide and they wanna work with hosts in corresponding cities to boost listings around these events. I imagine that primarily relates to convincing folks who don’t otherwise host an Airbnb very frequently to do so for these big events, and maybe this is one of management’s primary use cases for the co-host network.

[00:43:41] Shawn O’Malley: When I think about Airbnb, I definitely get excited about its potential to recreate its success with the Paris Olympics or spend more deeply outside of its core markets. But I also see a chance to penetrate more deeply into luxury bookings or to even establish a sizable advertising business. On the advertising point, I see no reason why hosts wouldn’t want to pay Airbnb for more promotion on their algorithm.

[00:44:02] Shawn O’Malley: This would probably come about by hosts accepting a higher percentage fee to Airbnb on promoted bookings, similar to how artists can have their royalty rate reduced in exchange for greater reach on Spotify. Not every host could afford to do this or would want to, but I’m sure there are some hosts out there who want to maximize their occupancy rates and would pay up to do so.

[00:44:23] Shawn O’Malley: Expedia and booking.com both have made over $900 million in the last year from sponsored listings and have seen estimates that this could eventually drive an additional $1 billion a year in sales for Airbnb. The difference though is that booking.com and Expedia are getting sponsored by corporate partners like hotel chains, whereas Airbnb would be leaning on a base of hosts that operate with narrow budgets and then profit margins.

[00:44:46] Shawn O’Malley: In the past still, Brian Chesky has called this a massive opportunity and said it was on the horizon, so I’d assume it’s coming sooner or later. About $80 billion in annual gross booking value. Airbnb could grow revenues by $160 million. If 10% of listings are sponsored and host pay an additional 2% fee for those sponsorships.

[00:45:06] Shawn O’Malley: I’m not sure what the average fee for sponsored listings would be, but I could easily imagine it being more than 2%, which would dramatically increase advertising revenue. So this is just an example for illustrative purposes, Amazon’s fees for sponsored products actually range from two and 10%. So if Airbnb follows a similar playbook, my figures would definitely be on the lower end.

[00:45:27] Shawn O’Malley: Yeah, I could almost immediately see it adding at least a hundred million dollars in revenue and perhaps over a billion dollars over a few years after being rolled out. This is another great way to think about how scale and network effects add up for Airbnb. As more people use the service and as there are more listings, the more they can lean into alternative monetization strategies like sponsored listings, which are at the core of their business now, but could play a big role down the road.

[00:45:51] Shawn O’Malley: And of course, the more hosts and guests you have, the more you can earn from advertising, so you can see how the flywheel spins faster and faster over time for Airbnb. Before we fall over ourselves to buy Airbnb, let’s consider some of the downsides. There are the regulatory risks I described earlier, as well as the negative perceptions among a number of consumers who perhaps fairly think that Airbnb comes with too many strings attached and too many extra fees.

[00:46:17] Shawn O’Malley: There’s also the reality that Airbnb is probably more economically sensitive than your typical major tech company outta Silicon Valley because it’s just a fact that people travel less and spend less on travel during recessions. That has a double whammy effect of reducing knight’s booked and average booking values.

[00:46:33] Shawn O’Malley: And because Airbnb is a capital light business with a good deal of operating leverage, that would hurt them a lot because operating leverage cuts both ways As you scale up, economies of scale make you more and more profitable. But if sales fall off, there’s a dis economies of scale that occurs where not only is there less revenue coming in, but a lower percentage of that revenue is converting into net income or free cash flow.

[00:46:56] Shawn O’Malley: Now the counterpoint is that Airbnb is more diversified than it seems at first, but its global presence and range of budget and luxury offerings should at least mitigate some of the pain. The whole world doesn’t always enter into recessions at the same time, which is why I think it’s important for Airbnb to penetrate more deeply into other markets.

[00:47:14] Shawn O’Malley: That’s just an example. Maybe the US is a recession, but Japanese and Chinese tourists offset that weakness with higher than expected spending on trips worldwide. Also hiring bookings would fall off, as I said, but that could be partially offset by an increase in lower cost bookings. Since some amount of travel will always still need to happen.

[00:47:32] Shawn O’Malley: I’m not saying Airbnb isn’t tied closely to the global economy and specifically the US economy, but there’s some reason to be cautiously optimistic that the business is a little bit more diversified than you might initially think. So we’ve covered the business growth opportunities, competitors and downside risks.

[00:47:49] Shawn O’Malley: It’s time now to pull it all together and try to understand the company’s valuation to then make a portfolio decision on Airbnb. To begin, I always like to look at free cash flows and free cash flows over the last 12 months. For Airbnb, were hefty $4.1 billion, the nearly 40% free cash flow margin on revenues.

[00:48:07] Shawn O’Malley: That is very promising, but there are some drawbacks. Even though they’ve repurchased over $3 billion in stock over the last year, stock-based compensation remains so high that the total share count has grown by 1.5% per year. Still since IPO-ing though, that number has actually been declining. More recently after Airbnb launched its share repurchase program in Q3 2022.

[00:48:30] Shawn O’Malley: The trend in stock-based comp isn’t completely reversing either with stock-based compensation expenses rising 25% year over year in 2024. This is partly connected to restricted stock units tied to Airbnb’s IPO, but they expect stock-based comp to increase in line with employee headcount growth, which would presumably mean much slower rates of dilution going forward.

[00:48:51] Shawn O’Malley: In other words, their free cashflow number is a bit manipulated because it doesn’t account for their massive stock-based compensation expenses. So I think it overstates the results. They’re still solidly profitable. With that and more than $11 billion in cash and negative $9 billion in net debt.

[00:49:07] Shawn O’Malley: Airbnb’s financial position is quite stable and they should have no issue continuing to fund an aggressive stock repurchase program, which is necessary to reign in the effects of their generous stock-based compensation, which is hopefully finally normalizing at a more conservative rate in 2025. In looking at net income 2020 three’s number was heavily distorted by a $2.8 billion tax allowance that boosted profits because Airbnb was basically permitted to use billions of dollars worth of tax benefits that they weren’t otherwise expecting to be able to utilize.

[00:49:39] Shawn O’Malley: So if it looks like there was a surge in fall off and profits, that’s why it really has nothing to do with the operating business, and that’s why I’ll focus on free cash flows. It is promising though that Airbnb’s operating margin has steadily risen to 15% over the last few years, and it could plausibly increase to 20% or higher as it continues to benefit from economies of scale.

[00:50:00] Shawn O’Malley: With marketing and overhead costs declining further as a percentage of revenue over time, that improvement in margins dramatically increased net income and free cash flows even without any growth in revenues, as more of every dollar of existing sales drops to the bottom line. So I took two approaches to valuing the company looking at free cash flows.

[00:50:20] Shawn O’Malley: I adjusted these numbers to account for stock-based compensation, assuming they would need to spend at least as much on share repurchases to offset stock options and stock units granted to employees. Meaning what I would consider the real free cash flows generated by the business available to be reinvested or distributed to shareholders needs to account the cost of offsetting dilution from stock-based comp.

[00:50:41] Shawn O’Malley: In this approach, I assume that outstanding shares remain roughly flat over the next five years while estimating the growth in adjusted free cash flows, slapping on an exit multiple in 2029, and then discounting that value back to the present to estimate its current intrinsic value. It’s a flawed process, but if Airbnb can grow free cash flows by low double digit percentages per year, do both to revenue growth, add to more bookings, a marginally higher take rate on those bookings and some improvement in operating margins as the company scales up while stock-based compensation moderates by get a target share price of about $145.

[00:51:15] Shawn O’Malley: Assuming you can sell the company for roughly 17 times free cash flows, which is a bit below the company’s current price to free cash flow of 20 times, reflecting that the company will trade at a lower multiple as it matures in the future. There are some optimistic assumptions baked in there, but nothing too crazy.

[00:51:32] Shawn O’Malley: As Airbnb penetrates more deeply into a number of markets worldwide scales, its experiences, offerings, lists, more luxury properties, and potentially unveils sponsored listings through Kickstart its advertising business. It could easily imagined free cash flows growing by much more than that over the next five years.

[00:51:49] Shawn O’Malley: This is clearly very subjective depending on the free cash flow, multiple you use and the expected growth rate. But I use a second and similar approach focused on operating profits measured as earnings before interest in taxes, also known as ebit, which directly accounts for stock-based compensation.

[00:52:05] Shawn O’Malley: Here, I assumed Airbnb could grow gross booking value from $80 billion a year today to $140 billion in 2029, which is a growth rate of about 12% a year, while some improvement over time again, and operating margins and take rate due to initiatives like sponsored listings, and I get a valuation of roughly $150 per share when you add back in the company’s $9 billion of cash net of debt.

[00:52:29] Shawn O’Malley: So Justing, the stock might be slightly undervalued. I also anticipate that they’re able to use their accumulated cash and profits to actually reduce the share count each year, which helps the valuation as well. To come up with a present value estimate for the company. I used the enterprise value to EBIT ratio, and I did a scenario analysis with a range of plausible weighted enterprise value to EBIT ratio values ranging from 16 to 34 with the highest weights for values in the mid twenties by 2029, which would be a considerable decline from its current valuation at 45 times ebit and its median valuation of 38 over the past four years.

[00:53:05] Shawn O’Malley: Maybe that is too conservative, but I’m trying to account for investors paying a smaller premium of operating earnings as growth tapers off and guess by 2029. We would definitely see that happening By using a weighted range of values, I can put probabilities on a number of plausible outcomes and then factor that into my intrinsic value estimate or Airbnb.

[00:53:26] Shawn O’Malley: If you think Airbnb’s growth will continue well into the future beyond 2029, and therefore want to use a higher multiple of operating profits closer to say 45, which is where, like I said, it trades at now, I think you could justify valuation as high as $180 per share. But again, I prefer to be more conservative than that.

[00:53:44] Shawn O’Malley: With both calculations, I get between 145 and $150 per share. It’s a fair value for the stock. Today, I’ll say this comes with a considerable amount of upside because Airbnb has a potential for explosive growth. It also has a potential to get decimated by competition regulators or a recession, plus leaving the company worth a fraction of these numbers.

[00:54:03] Shawn O’Malley: So when you average out this range of scenarios, I settle on the stock being a bit below their value. I’ll also mention that if you want to download my model to play with the valuation yourself and see what I’m talking about here, you can do so by signing up for our weekly Intrinsic Value newsletter in the show notes below, or share my model for every company I cover.

[00:54:22] Shawn O’Malley: You’d also track the full intrinsic value portfolio there. So for that reason, the load, I’d encourage you to sign up. So where does that all leave me with Airbnb? As always, I don’t adhere super strictly to targets or models, but they do help orient me. My conclusion is that Airbnb is reasonably attractively priced below $140 per share and becomes very attractively priced below $125 per share.

[00:54:47] Shawn O’Malley: I should add that neither of my valuation approaches account for the fact that Airbnb has a massive amount of cash on its balance sheet, both its own cash and cash that it holds to pay hosts later with from customer prepayments. So as long as interest rates remain elevated, this can be a very significant driver of profits.

[00:55:06] Shawn O’Malley: In 2023, Airbnb made over $700 million in interest income on cash. An Airbnb’s cash pile is only going to keep compounding in the future, further boosting profits and giving them even more ammo to do buybacks with. While I don’t explicitly account for this possibility, because who knows if interest rates are gonna remain at a meaningful level or get cut to zero again, but this hedges some of the risks and helps me feel comfortable about making some aggressive assumptions elsewhere.

[00:55:33] Shawn O’Malley: In my model, they generate a good bit of cash outside of their operations, and that provides a margin of safety to a degree. After learning about it and having used Airbnb as a customer, I’ve decided it’s a business I want to own long term, I can easily see a number of levers that can pull to dramatically increase growth, which I don’t think are incredibly speculative, but will accelerate the flywheel spinning in their favor.

[00:55:55] Shawn O’Malley: I do see this as a riskier position in the portfolio that I need to watch carefully. For example, if stock-based compensation doesn’t slow down as expected, insure accounts don’t decline despite billions of dollars being spent on repurchases, then I would have to seriously reconsider. As you might recall, I pass on Vital Farms over the same concern with Airbnb.

[00:56:16] Shawn O’Malley: I see a much more robust business with more staying power and long-term growth potential, as well as a specific expectations set by management for shared dilution to slow, which is why I’m more inclined to bet on Airbnb, but it is not without hesitation. My thesis in short, primarily boils down to Airbnb growing its gross booking value by low double digit percentages in the coming years, while Airbnb’s share of those bookings increases due to sponsored listings and some modest improvement in operating margins.

[00:56:43] Shawn O’Malley: As Airbnb spends a smaller percentage of its revenues on r and d and marketing as it grows, while also continuing to direct a chunk of free cash flows toward share repurchases. On top of all of that, there’s the element of them earning a ton of interest on their cash from float. With that outlook, I think the stock’s current price certainly justifies a rich valuation of 45 times operating profits and can still deliver attractive returns, even with a significant multiple compression as the business’ growth continues slow.

[00:57:13] Shawn O’Malley: I wanna be the first to admit though I could easily be a victim of my own biases, I worry that I was too excited to cover this company and I wanted to invest in it from the beginning. And I very much like the service, which may make me inclined to be too generous in the valuation, but I feel I understand the company reasonably well.

[00:57:29] Shawn O’Malley: And if I had to guess, I think Airbnb will be a dramatically bigger and higher quality business in a few years. And that simple reality alone makes me want to be along for the ride. I plan to add Airbnb to the intrinsic value portfolio with at least a 5% allocation. It’s an exciting new position that I look forward to learning more about and will hopefully add a powerful growth element to compliment some of the more mature businesses we’ve covered.

[00:57:54] Shawn O’Malley: I suspect some in the audience will have very mixed feelings, and I welcome any feedback on the company and why am I thinking here? Might be wrong, because I’d rather learn that sooner than later and adjust the position before it can do too much damage. You can always email me at shawn@theinvestorspodcast.com.

[00:58:09] Shawn O’Malley: Shawn spelled S-H-A-W-N. For the sake of full transparency, I should mention that I added Airbnb to my personal portfolio about a month ago ahead of the episode at an average price of $131 or share, and I expect to hold onto it for years to come. Before I let you go, let me share one last quote for you from Brian Chesky.

[00:58:29] Shawn O’Malley: He says, to build something a hundred people love. Not something 1 million people kind of like. Fortunately for him and shareholders, he’s built something that I’d say more than just a hundred people love. That’s all for today, and I’ll see you again next week with another company to break down as a potential addition to the portfolio.

[00:58:47] Outro: Thank you for listening to TIP. Make sure to follow The Intrinsic Value Podcast on your favorite podcast app and never miss out on our episodes. To access our show notes and courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decisions, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permissions must be granted before syndication or rebroadcasting.