There is a saying in the business world: adapt or die.
And it’s this philosophy that can turn good businesses into great businesses.
When I first lived in America, Netflix’s business model revolved around sending rental DVDs by mail. The model was considered incredibly innovative at the time — it disrupted the Blockbuster video store chain — but Netflix wasn’t done. I remember having a conversation with friends about Netflix’s plan to become a streaming service, and they were genuinely unimpressed and threatened to boycott the service.
But Netflix had clearly done its research, because look where it’s at now!
(Fun fact: Netflix knew from the beginning that most content would be delivered by the internet, and that’s why they called it Netflix and not DVDFlix!)
There are many events that mean businesses have to adapt, from competitors to changing business environments to new technologies. While very few businesses would have thought to add global pandemic to the list, this is certainly one of those events.
Which brings me to the topic of today’s newsletter: Airbnb.
Before the pandemic hit, Airbnb was lining up to go public and was set to be one of the blockbuster IPOs of the year. But just a few months ago, some media sites were questioning whether Airbnb would even survive the pandemic.
The unicorn laid off 25% of its staff in May. At the time, chief executive officer Brian Chesky reportedly told Airbnb employees that the company’s 2020 revenue would be less than half of what it made in 2019. Additionally, its valuation nearly halved, despite raising money.
This week, though, the Wall Street Journal reported the company is again readying to go public, suggesting things have turned around for Airbnb, even if only slightly.
On 8 July, guests booked more than one million nights of future stays at global Airbnb listings, which was the first time bookings had hit that level since March.
Moreover, as the pandemic drags on, Airbnb has found that people are using its services for local getaways and staycations. No, you can’t jet off to Greece for the summer or live it up in the bright lights of New York, but you can still go somewhere you’ve never been.
Not to mention those who are working from home and want a different environment for a while.
Our senior portfolio manager, Jason Sedawie, said it’s possible, in light of this change, that Airbnb might even do better than most travel companies.
While many travel businesses have revolved their brand around long-haul travel and faraway places, Airbnb has actually been talking about local experiences for years now.
Additionally, given many Airbnbs are apartments or houses, they’re less crowded and likely safer (in pandemic terms) than hotels. In fact, for locales that still have a level of restriction, an Airbnb might actually be legal, whereas a stay in a hotel might not.
There’s still no guarantee Airbnb will go public this year; the only assurance Chesky has made is that “when the market is ready, [Airbnb will] be ready.” But if it does, it’ll certainly be one of the more unlikely business success stories to come out of the pandemic.
As for the “adapt or die” adage, make of this what you will: The world’s last standing Blockbuster store is now listed on Airbnb!
The Spaceship Origin Portfolio invests in Netflix at the time of writing.
Important! We’re sharing with you our thoughts on these companies for your informational purposes only. However, we are not making recommendations to buy or sell holdings in a specific company. Past performance isn’t a reliable indicator of future performance.
