Germaphobes Suffer From Sticker Shock When Traveling

If you're looking to plan a vacation on a budget, you're not alone. Many people are looking to save money on their travel plans. There are a few ways you can do this, such as by planning your trip during off-peak times or by finding discounts on hotels and transportation. With a little bit of research, you can find ways to save money and still have a great time on your vacation.
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Americans' demand for whole home rentals outside of urban areas increased significantly when the pandemic began. However, this social distancing came at a cost, which benefited the financials of middlemen.
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Now travelers appear to be craving community just as their wallets are craving a break. In a survey of more than 4,000 American travelers last month, tourism market research firm Destination Analysts found respondents were most excited to visit cities this year—but only at the right price. Nearly half of Americans polled said travel’s high costs kept them from taking as many trips as they would have liked in recent months. Of those Americans who claimed to be recession conscious, more than three-quarters said their reduced spending habits applied to travel.
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It is perhaps not surprising, then, that homestay rates are beginning to fall. Data from AirDNA shows that revenue per available room for short-term rentals in the US is forecast to decline this year, after many years of growth including a 28% annual increase in 2021.
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This could be a problem for companies whose multiples have been buoyed by Americans' seemingly insatiable demand for privacy. Outside of experiences one can book on its platform, Airbnb ABNB 2.20%
's core business is homestay bookings, while traditional online travel agents such as Booking Holdings focus on hotel bookings.
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Expedia Group (EXPE) is up 3.95% today. The travel company has been on a tear lately, thanks to strong demand for travel bookings. Expedia is one of the leading online travel agencies, and its stock has been a big winner for investors over the past year.
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Airbnb shares are currently fetching more than 17 times enterprise value to forward earnings before interest, taxes, depreciation and amortization, significantly higher than those of Booking and Expedia, which trade at an average of just over 10 times. This reflects the fact that Airbnb offers the ability to book everything from hotels to flights to cruises, making it a one-stop shop for travelers.
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The premium charged by Airbnb might not be warranted. While the company's revenue rose 25% in 2021 from two years earlier, the number of nights and experiences booked fell 8% over that period. Revenue was boosted in large part by higher average daily rates, which rose 36% in the fourth quarter of 2021 from the same period of 2019. Airbnb attributed much of the rate increase to a shift toward whole-home rentals and non-urban destinations, where lower supply and larger properties lead to higher prices. As of the third quarter of 2020, the most recent data available, Airbnb's average daily rates were even higher on an absolute basis.
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A change in travelers’ preference toward smaller, cheaper rentals would pressure Airbnb’s revenue growth, even if demand for the platform stays stable. According to AirDNA data, growth in average daily rates slowed across every type of location in December. Average growth in daily rates in mountain and lake destinations was up less than 1% last month from a year earlier, and the firm forecasts that growth might turn negative in future months as demand normalizes.
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RBC's latest property manager checks suggest that "pricing may be the next shoe to drop." The firm notes that some hosts have already started cutting prices as business this year has started out slow. And Goldman Sachs's fourth-quarter online-travel preview predicts that average daily rates are "likely to begin normalization" this year.
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Airbnb is differentiated from its online travel agent peers in that, in addition to private homes and apartments, it also offers shared vacation rentals, such as a private room in someone’s apartment. Airbnb’s messaging is all about making human connections in sharing one’s home and culture; but mostly, travelers share to save money. That might attract more travelers than the competing parts of Booking and Expedia in the current environment, but it might not make Airbnb that much more money.
Vrbo asks viewers in a recent commercial, "Why would you ever share your vacation home with someone you wouldn't share your vacation with?"
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We're more worried about our budgets than about Covid-19.