Will Airbnb Ever Pay A Dividend?

Up to date on Might 14th, 2022 by Felix Martinez

Advances in expertise have remodeled numerous industries. One which has been altered materially previously decade or so is journey. The times of discovering a lodge by way of arduous analysis or contacting a journey agent have gone, having been changed by all-in-one journey reserving options.

Whereas some journey shares like airways and cruise operators have traditionally paid dividends – and important ones at that – development shares within the area often don’t. That’s to be anticipated as when an trade is burgeoning, it’s way more advantageous for shareholders for the corporate to reinvest earnings and money stream into development ventures relatively than merely paying it out to shareholders.

The latest expertise journey inventory – Airbnb (ABNB) – started buying and selling on December tenth, 2020 after its blockbuster preliminary public providing, and naturally, doesn’t pay a dividend.

It’s already a large-cap inventory with a market capitalization above $183.6 billion. We’ve got compiled a listing of over 400 large-cap shares within the S&P 500 Index, with market caps of $10 billion or extra.

You may obtain your free copy of the large-cap shares record, together with related monetary metrics like price-to-earnings ratios, dividend yields, and payout ratios, by clicking on the hyperlink beneath:

Airbnb isn’t a very younger firm in comparison with another expertise firms, which begs the query of whether or not Airbnb will ever pay a dividend to shareholders. On this article, we’ll check out the corporate’s traits and see if that’s a risk.

Enterprise Overview

Airbnb was based in 2007 and is headquartered in San Francisco. The corporate had humble beginnings with only a single reserving and was initially known as Airbed & Breakfast. Ultimately, the corporate shortened its title in 2010 to the acquainted model we all know right this moment. The corporate’s founders realized the potential of a reserving platform and moved Airbnb to compete within the booming on-line journey reserving area through the monetary disaster.

Immediately, Airbnb has grown into a large participant in a really fragmented market, working a platform for stays and experiences worldwide. It runs a market mannequin whereby it matches friends and hosts by way of cellular units or on-line, taking a price within the course of. The corporate’s mannequin is totally different from a few of its opponents because it focuses on rooms and whole residences relatively than conventional inns.

The corporate has greater than 4 million hosts on its market, and people hosts have welcomed greater than 800 million friends in 100,000 totally different cities across the globe. Airbnb’s attain is huge geographically, as it’s current in almost each nation on the planet.

The inventory is now lowered from its IPO worth by the point it opened for buying and selling on its first day, and right this moment, Airbnb sports activities a gargantuan $73.8 billion market capitalization. The corporate ought to produce about $6.5 billion in complete income in 2022, however development from right here is anticipated to be excellent.

Investor Presentation

Progress Prospects

Airbnb has a really robust secular tailwind that ought to produce development for a few years to come back. The journey lodging market – inns, resorts, residences, and so on. – is greater than $800 billion yearly, and has grown for a few years. With the continued transfer to on-line and different bookings – people who aren’t for conventional inns or resorts – changing into ever extra widespread, we see Airbnb as having an enormous runway for continued development within the coming years.

Whereas not a direct competitor, Reserving Holdings, Inc. (BKNG) produced 19%+ annualized income for the last decade that led to 2019. This type of sustained, excessive development is due largely to the large adoption of customers in utilizing different reserving strategies akin to apps and web sites.

We see not solely that general tailwind as serving to Airbnb, nevertheless it has its personal aggressive benefit in its area of interest that ought to assist much more. We at present anticipate Airbnb to supply greater than 20% annual income development for at the least the following 5 years given these tailwinds which can be lifting all the trade.

Aggressive Benefits

Airbnb has the preeminent model in different on-line journey, with enormous model recognition amongst customers, in addition to the 4 million hosts it has in its market. This ecosystem results in an increasing number of customers over time as the corporate can scale and add extra instruments and merchandise to draw extra prospects and hosts.

As well as, the choice journey market, which is the place Airbnb excels, is booming. Shoppers are more and more keen to lease out parts of their dwelling, or their complete dwelling, for added revenue. As well as, customers are keen to lease one other particular person’s dwelling to have a special journey expertise than staying in a conventional lodge. This fast ramp-up in adoption is a boon for Airbnb.

The area of interest of on-line journey the place Airbnb operates can also be a lot much less crowded than conventional journey locations like inns. That implies that whereas different elements of on-line journey are way more saturated, we see Airbnb because the chief in a nascent and rising market.

Will Airbnb Ever Pay a Dividend?

Given the excellent development we anticipate the corporate to exhibit, it is smart that sooner or later the corporate ought to be capable of generate important income it can not profitably reinvest within the enterprise. Nevertheless, given how early on Airbnb is in its lifecycle, we don’t foresee the corporate paying a dividend anytime quickly.

For a corporation to pay a dividend, it wants a dependable and important revenue stream. This is the reason mature firms typically pay hefty dividends to shareholders; if their development cycle is full (or almost full), money piles up with no apparent higher use. That money is then returned to shareholders. Airbnb is a really good distance from that, so we see the chance of a dividend within the subsequent decade as fairly distant.

Airbnb has posted losses since its IPS, however it’s anticipated to make a revenue this yr, that means it can not even contemplate paying a dividend till someday after that. With that type of revenue outlook, it’s fairly apparent Airbnb gained’t be in any place to return earnings to shareholders. We additionally assume Airbnb could have loads of alternatives to reinvest money for a few years to come back given how early in its development cycle it’s, so it doesn’t exhibit any of the overall traits of a inventory that’s prone to pay a dividend.

Remaining Ideas

Whereas Airbnb has a really lengthy development runway in entrance of it, we see the chance of a dividend fee coming to shareholders as very distant. Airbnb has what’s prone to be many years of robust development in entrance of it, however with it nonetheless posting important losses, will probably be a few years earlier than the corporate is even producing regular income.

We see Airbnb’s skill to search out worthwhile methods to spend money on development as fairly robust for years to come back, which may embrace acquisitions, further companies and merchandise, and product extensions. Given the mix of no income, being within the very early phases of its development cycle, and what’s prone to be a simple threshold for reinvesting money into the enterprise, we don’t consider Airbnb can pay a dividend at any level within the subsequent decade, at the least.

See the articles beneath for evaluation on whether or not different shares that at present don’t pay dividends will in the future pay a dividend: