Why AirBnB is a screaming buy today

Actions of the alternative accommodation platform Airbnb (NASDAQ:ABNB) have lagged the market so far this year, now up more than 14% year to date. After the company’s poor quarter, which included a downbeat forecast for third-quarter bookings, several analysts downgraded their price targets for the name. One firm, Argus Research, downgraded its recommendation to hold from buying, citing a range of factors, notably lower booking growth and higher marketing spend, which could weigh on earnings.

Indeed, it’s hard to be bullish on ABNB stock after that nasty earnings miss, guidance downgrade and a slew of analyst downgrades that followed. As traditional hotels and accommodations gain relative traction, Airbnb will need to bring a little more to the table to attract travelers back. Without a doubt, Airbnb will always have fans looking for unique stays and experiences. However, after some inflation over the past few years, some consumers may question the value they offer compared to more traditional accommodations (think hotels and motels).

Key points about this article

• Airbnb’s latest quarterly bubble is a concern for some investors.
• Adding amenities and other perks could even the playing field with hotels.
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Airbnb blames the economy for a tough quarter

For now, it seems management is mostly pointing the finger at the economy for its recent rough patch. While economic growth is certainly not optimal, many major hotel firms are not in too bad of a place right now. For example, actions of Hilton Worldwide Holdings (NYSE:HLT) and Hyatt Hotels (NYSE:H) are down just 6% and 9%, respectively, from their all-time highs. More surprisingly, both are up big (44% and 33%) over the past year, while ABNB shares are down nearly 20%.

Indeed, one of the main attractions of booking with Airbnb in the earlier days was the substantial cost savings that were achieved over hotels. However, after the last few inflationary years, Airbnbs value proposition may have faded a bit.

Can you still save a lot of money by going for an Airbnb over your cheap hotel?

Possibly, but probably not a significant amount over comparable traditional accommodation. Also, any cost savings may come at the expense of the benefits and amenities sought.

Looking ahead, it looks like Airbnb will have to cut out of the pie and risk increasing margin pressures, or step up its amenities game to be more competitive with traditional stays. This could prove incredibly difficult.

That said, the company will give it its best chance to improve its value proposition and win over customers without taking too much of a margin. If Airbnb can get the benefits and amenities right, perhaps it can pad its margins while reversing the worrying trend of declining bookings.

Airbnb’s sweeter perks may help it recoup its share from hotels

Undoubtedly, Airbnb needs to offer better bang for the buck if it’s right, because consumers are talking with their wallets right now. Their spending behavior suggests that consumers see more value in traditional stays than in new alternative accommodations, as well as the uncertainties and lack of amenities that come with it.

Looking ahead, Airbnb seems to be hoping that it can improve guest experiences by introducing new amenities to keep pace with various hotel chains. Whether it’s the inclusion of spa-like perks (think linens, robes, slippers, luxury shower gels and soaps) or the availability of mobile massage services, Airbnb has the opportunity to bridge the amenity gap with the big chains. hotels.

Additionally, Airbnb may be able to augment hotels, allowing users to seek out unique amenities not normally found in hotels. Think pet benefits, premium gaming options (how many hotels have video game consoles?), and even private meditation spaces to find your zen.

Without a doubt, I find that there is a huge opportunity to make a splash in unique stays with personalized amenities. While only time will tell if doubling down on perks will help Airbnb regain its edge, I believe amenities are becoming an increasingly important part of the travel experience, especially for younger generations, many of whom value convenience and customizable amenities in luxury place.

Conclusion on Airbnb

Demand from the US market may be lagging of late. But adding sweeter perks might just win back some of the crowds lost to hotels. Additionally, the company has plenty of global share to capture as it expands while building affinity and brand awareness through higher marketing spend. At a forward 15.6 times price-to-earnings ratio, ABNB stock looks too cheap, especially for a firm with the leverage to pull to return double-digit growth.

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