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iggerPockets CEO Scott Trench joins Motley Fool analyst Alicia Alfiere and host Mary Long to discuss Airbnb as a stock and real estate investment. They cover topics such as Airbnb's capital allocation strategy, competition, and scaling challenges of managing short-term rentals.
Scott Trench notes that the interest in short-term rentals has receded from its peak in 2021-2022, with only 18% of BiggerPockets members now interested in this type of investing. He attributes this to the professionalization of the industry and the shift towards other platforms like Vrbo.
Alicia Alfiere explains that Airbnb's revenue growth has decelerated, from 18% in Q1 to 11% in Q2, causing concern among analysts about future growth prospects. She also notes that the company's lead time for booking trips has declined, which may indicate a shift towards more last-minute bookings.
The panel discusses the bull and bear cases for Airbnb as an investment. Alicia Alfiere presents the bear case, citing concerns about economic uncertainty and the cyclical nature of travel demand. However, she also highlights the company's strong brand, network effects, and competitive advantage in the market.
Mary Long asks Alicia to explain the "snap test," which is a valuation metric that assesses whether a company would be missed if it were suddenly snapped out of existence. Alicia argues that Airbnb passes this test due to its massive user base and network effects.
The panel also discusses Airbnb's asset-light business model, with over $10 billion in revenue generated in the past 12 months and over $4 billion in free cash flow. However, they note that the company spends around 60% of its free cash flow on share buybacks, which may not be ideal from an investment perspective.
Alicia Alfiere suggests that Airbnb is trading at a reasonable price relative to its peers, with a price-to-free-cash-flow ratio of around 20. However, she notes that the company's growth prospects are still uncertain and may impact its valuation.
Scott Trench shares his perspective as a real estate investor, noting that hosts are dependent on Airbnb for bookings and often grumble about policy changes. He also highlights the challenges of scaling an Airbnb business, including managing multiple listings, pricing, and guest services.
The panel discusses the pros and cons of hiring a property manager versus going it alone as an Airbnb host. Scott Trench notes that property management fees can range from 18% to 30% of revenue, but argues that this is a necessary cost for many hosts who want to scale their businesses.
Mary Long asks about regulation in the short-term rental industry, noting that some cities have introduced bills to quadruple property taxes on Airbnb operators. Scott Trench notes that local markets may continue to crack down on Airbnb operators, making it more difficult for them to operate profitably.
The panel takes questions from the live audience, including one about how hotels are responding to the rise of Airbnb. Alicia Alfiere suggests that hotels are focusing on their strengths, such as business travel and loyalty programs, while also trying to offer unique experiences that differentiate them from Airbnb.
Scott Trench notes that he sees a segmentation of the travel market, with some travelers preferring the space and flexibility offered by Airbnb, while others prefer the amenities and services offered by hotels. He argues that this trend is likely to continue, with both Airbnb and hotels coexisting in the market.
The episode concludes with Ricky Mulvey thanking the Denver Press Club for hosting the event and reminding listeners to do their own research before making investment decisions based on what they've heard.
