This beaten-down travel stock has a major upside opportunity — Here’s why

When it comes to travel, there are many options for places to stay. Traditionally, hotels have had a monopoly on this aspect of travel, but that has changed and is largely due to Airbnb (ABNB 0.68%). From the company’s humble beginnings renting out a room and an air mattress, Airbnb has become a destination for many travelers, disrupting the hotel industry in the process.

From an investment perspective, the results were less impressive. Since its debut on the public markets, Airbnb has fallen 19%, while S&P 500 increased by 54%. The last two earnings reports disappointed Wall Street and sent stocks lower. However, a deeper look at the business reveals some interesting growth opportunities that investors would be wise to consider. If these opportunities work, they could lead to much better returns for investors.

Top 1,000 events in the world

It may not have been the most important thing for the millions of people who tuned in to watch the Paris Olympics, but all those spectators needed places to sit at the games. A city like Paris and its surrounding areas do not have the hotel capacity to accommodate the massive influx of visitors, so Airbnb has played a crucial role in providing housing. Airbnb CEO Brian Chesky even met with the French president to collaborate on the initiative.

Big events aren’t new to Airbnb — it was the reason the company was founded. The origin story of renting an air mattress in a bedroom was to provide cheap housing for event attendees. Airbnb is now targeting the world’s top 1,000 events as a growth opportunity. In addition to introducing attendees to Airbnb, the company can use these events as an opportunity to increase the number of hosts on the platform.

Many people don’t want to rent out their homes on an ongoing basis, but they might consider doing so for a few days or weeks when a big event comes to town. If those regular hosts end up liking the experience and the extra income, they could become regular hosts, which is great for Airbnb.

Another interesting initiative that management mentioned in the recent earnings call was a co-hosting market. The point is, some people might have a house to rent, but not the desire or time to host. Others may have the interest and time to put into hosting, but don’t have the home. In October, the company will launch this new service to unlock new inventory.

A travel concierge

When using Airbnb, most travelers have a destination and time frame in mind. Searching for location and travel dates brings up a list of potential inventory for users to browse. However, the emergence and rapid improvement of generative artificial intelligence (AI) presents a new opportunity for Airbnb.

Imagine that instead of traditional search, users could have a conversation with Airbnb’s AI. Over time, AI could learn about the user and their preferences, unlocking better and more personalized search results. This travel concierge idea is something Airbnb is working on, but management was clear it wasn’t imminent. Regardless, it’s something worth keeping an eye on.

Relaunch experiences

One of Airbnb’s key performance metrics is nights and experiences booked. In its most recent quarter, the second quarter of 2024, Airbnb had 125 million nights and experiences booked. This increased by 9% year-on-year. Interestingly, the experience side of the business is not that well known to Airbnb users, and management wants to change that.

With an upcoming relaunch of the experiences business, the company hopes to increase awareness and grow its inventory of unique and accessible experiences that can only be found on Airbnb. By making experiences more searchable and promoting them with video trailers, management hopes its impending relaunch can boost this important part of its business.

The bottom line for investors

Airbnb is a well-known brand that is continuously gaining market share. Growth has slowed over the past year, but that appears to be due to the general travel environment rather than anything specific to Airbnb. The company is constantly innovating, adding new features and responding to user feedback. If these new growth opportunities can happen, it could unlock even more revenue, hosts and guests.