By Victor Anthony
Airbnb is one of the rare private Internet companies that is primed to go public (2019) with a combination of fast revenue growth, expanding EBITDA margins, growing free cash flow, and likely GAAP profitability. The company is the market leader in every country in which it operates, even in China, a market in which no U.S. based Internet company has succeeded in a meaningful way. Already over 70% of the business is outside the U.S. and Airbnb is expanding beyond its core home-rental business to business travel, family travel, experiences, luxury travel, all of which are more lucrative than the core business. In many ways, Airbnb is becoming a full-service online transactional platform given additional service options such as restaurant reservations and concert ticket offerings. We see the company generating $8.5 billion in revenue in 2020, $3 billion in EBITDA, and $2 billion in free cash flow. Based on those estimates, we value Airbnb at $55 billion for year-end 2019.
Airbnb is operating within an industry with a $7.6 trillion global TAM for travel and tourism. As the market continues to expand, millennials and Generation Z, an increasing segment of the sharing economy market, have been quick to embrace platforms like Airbnb over traditional travel accommodations such as hotels. Travel to the U.S. and parts of Europe remains strong with increasing popularity in destinations in and around Asia Pacific.
Airbnb is benefiting from an essential first-mover advantage in the home-rental market. It is operating at scale, generating network effects, and expanding beyond its core business of short-term home-rentals. It also has the competitive advantage over traditional lodging options given its lower price points. It offers travelers the feeling of a local experience and its selection is broad, consisting of apartments, entire homes, vacation rentals, mansions, and individual rooms.