7 ms·

I plan on shorting Airbnb once it IPOs. It will only go down in the short term. Regulations were at an all time low and will slowly ramp up. For better or for w

I plan on shorting Airbnb once it IPOs. It will only go down in the short term. Regulations were at an all time low and will slowly ramp up. For better or for worse, these regulations will hurt Airbnb. I'd be curious to hear from anyone who seriously thinks Airbnb will be able to achieve substantial growth in the next 5 years, given the increasing likelihood of a slowdown and more regulations from large cities.

ianhawes 8y ago
I will sell you the puts myself. You're ignoring a massive market for vacation rentals outside of major metropolitan areas that AirBnB has conquered from craigslist. The risk for regulation has passed as citizens see AirBnB as an accepted reality. Hotels aren't happy, but rightfully see AirBnB as a competitor.
- jedberg 8y ago
  > The risk for regulation has passed as citizens see AirBnB as an accepted reality. Hotels aren't happy, but rightfully see AirBnB as a competitor. I agree with your overall, but I'm not so sure I agree with this part. South Lake Tahoe just passed a voter initiative in November that bans AirBnB (and VRBO) except for a few places right next to the major hotels. It was, not surprisingly, heavily supported by the major hotels.
  - zaroth 8y ago
    I was just reading about this. Looks like the measure barely squeaked by (less than 1 percent margin) and parts of it are on hold pending a lawsuit. I’m very conflicted about these types of bans. I have an apartment which I share with extended family, and we share the costs. Technically the way these bans are written would prevent us from doing that without somehow getting everyone’s name of the lease which would not be practical. I wish that people would fine heavily for actual bad behavior, and let fair economic arrangements between respectful parties happen. But I also understand that enforcement is very difficult, and most people are assholes.
  - the_watcher 8y ago
    South Lake Tahoe is exactly the kind of market that OP isn't talking about (if I'm reading it correctly). There are tons of places where hotels simply aren't dominant. A good framing for me: If Airbnb were just looking to compete with hotels, this wouldn't be that exciting of a business, even if I knew they could survive. What's exciting about Airbnb is that they're looking to win in places that hotels aren't.
    - jedberg 8y ago
      Yes and no. There are three big hotels, but VRBO and AirBnB have been the dominant way to get housing in Tahoe forever, unless you're a gambler.
      - the_watcher 8y ago
        That can be true at the same time that "winning markets like South Lake Tahoe aren't the markets most critical to their growth" is true.
  - _delirium 8y ago
    Washington DC also passed a partial ban a few months ago: https://dc.curbed.com/2018/11/15/18095658/dc-airbnb-regulations-short-term-rentals-council https://dc.curbed.com/2018/11/15/18095658/dc-airbnb-regulati... Under the new rules, you can only rent out your primary residence that you actually live in (not second homes/condos), and you can only do that for up to 90 days a year. That'll remove a pretty large percentage of the AirBnB inventory if it's enforced, since a lot of units on AirBnB are investment properties used purely to rent out, not anyone's primary residence.
  - rconti 8y ago
    Pacific Grove, too. I was just staying in an AirBnB in PG in October. Signs in yards opposing "measure M" which turned out to be an initiative to "keep Pacific Grove a community"... which means no short-term rentals.
- ohazi 8y ago
  > vacation rentals outside of major metropolitan areas that AirBnB has conquered from craigslist. Last time I looked, many/most vacation rentals are multiply listed on VRBO, etc. Is there a reason to think that AirBnB is stickier than the other vacation rental sites?
  - dominotw 8y ago
    > Is there a reason to think that AirBnB is stickier than the other vacation rental sites? 1. Has more volume of listings. 2. There are much cheaper options on airbnb than other sites like VBRO. 3. More trustworthy and better brand recognition.
  - nostrademons 8y ago
    That hasn't been my experience. The other way around has - most VRBO listings are cross-listed on AirBnB, but AirBnB has a large superset of VRBO listings. As a guest, that makes me want to go to AirBnB over VRBO, because I know they'll always have selection, while if I go to VRBO I see largely the same listings I would've on AirBnB. My experience is that as long as you go to a tourist destination (like Hawaii, Croatia or Santa Cruz) VRBO is fine, but as soon as you start to go off the beaten track (like Northern Northern California past Redding, or suburban rentals near major cities, or rural college towns) AirBnB has much more selection. I just did a quick test at my alma mater (Amherst MA) and VRBO had 4 listings, AirBnb had 15. When your reputation score stays with the platform and is a major factor in who will host you, it behooves you to pick one platform for all your travel and stick with it, so getting the "long tail" of non-resort travel is a big coup for AirBnB.
    - yesiamyourdad 8y ago
      I believe that this is because historically VRBO had a listing fee but they didn't have a booking fee and didn't take a cut of the booking. AirBnB I believe takes only a cut of the booking, so it costs nothing to have a listing and you price your booking taking the cut in mind. The economics work better for a place that rents sporadically. HomeAway pivoted VRBO after the buyout to have both a listing fee and a booking fee.
  - 8y ago
the_watcher 8y ago
I have conflicting thoughts on this. In the US, it's true that in the near term regulations are likely to get more, rather than less onerous at the local and state level. At the federal level, I don't anticipate any changes in either direction until at least 2020, but probably longer, as this is the kind of issue that is generally hyperlocal as opposed to splitting entirely on party lines (the cynical view is that it's prone to capture). That said, Airbnb's most promising growth opportunities aren't in the US in my opinion, they're international. While there's always a risk of regulation, the world is huge and has a lot of places who'd love to be this year's Iceland (although they might regret that 5 years from now) driven by cheap flights and/or housing. Also - a slowdown could be counterintuitively good for Airbnb, as constituents may start lobbying to relax some of the more onerous regulations so that they can more easily make money via Airbnb (regardless of the accuracy, it can easily be cast as the hotel lobby vs. the recently unemployed family who has a room he wants to rent out). Ultimately, I guess my position is that it's almost definitely overvalued right now, but not by as much as bears think it is and that I think they can probably remain a good business for the foreseeable future assuming good leadership.
- toomuchtodo 8y ago
  The places where Airbnb has left to grow are more likely to enact legislation restricting their operation. The low hanging fruit is already picked.
  - the_watcher 8y ago
    I disagree with this completely, but I'll admit that reasonable people can disagree about that.
  - opportune 8y ago
    Highly disagree, I see Airbnb growing massively in the developing world as local safety+tourism infrastructure, desire to travel there, and internet familiarity/enough English to make a listing among those living there increase in the next 10-20 years. Of course, Airbnb is already big in places like Bali, but over time I see essentially all areas of Indonesia, Malaysia, Ecuador etc. becoming vacation destinations
pbreit 8y ago
I am super bullish on AirBnB as rare company that can credibly consider a variety of humongous future aspirations. I could see it getting involved in all sorts of travel, lodging and housing industries. Very, very few companies have demonstrated the ability to combine the imagination and execution as AirBnB. I don't think the regulatory environment will be even a speed-bump on its path.
- FireBeyond 8y ago
  What has AirBnB done that's imaginative beyond VRBO and similar ilk? > I don't think the regulatory environment will be even a speed-bump on its path. They certainly haven't treated it as such. "Laws? Fuck'em". Witness: New York. Witness: Gibraltar-issued anonymous credit cards to avoid taxation issues. I'm not sure these are things to be proud of or aspire to.
dominotw 8y ago
I've been exclusively living on airbnb for past 6 months and I've paid "Occupancy taxes" [1] on all of them. My impression was that states are now in friendly tax relationship than an antagonistic one with airbnb. Regulations are positive for airbnb not negative. 1. https://www.airbnb.com/help/article/654/what-is-occupancy-tax--do-i-need-to-collect-or-pay-it https://www.airbnb.com/help/article/654/what-is-occupancy-ta...
user5994461 8y ago
Having worked at the main competitors, I wouldn't advise to do that. It is a fantastic business with a fat 20 to 30% margin on every booking. There is plenty of market left to capture, between mouth to mouth rentals and what used to go on craiglist, or never wanted to go on craiglist because it wasn't trustworthy.
jameslk 8y ago
1. There's usually a limited number of shares to short an IPO 2. Given the extreme volatility of IPOs and small amount of past history on a company's fundamentals, this will essentially be gambling with the potential of unlimited downside Good luck!
- mylons 8y ago
  you can buy puts and easily limit your down side. edit: whoever downvoted this, do you not understand how buying puts works? your risk is capped at the money you spent on the contracts. you can only lose that amount.
  - jameslk 8y ago
    That sounds like hedging a bad idea with another bad idea. Options expire, so not only do you have to be right that the stock will go down, but you also have to be right that it will go down before your options expire. The further away the expiration, the higher you'll be paying for implied volatility. This sounds like a terrible strategy for a hunch that regulations are going to eventually impact Airbnb at some fuzzy point in the future.
    - hervature 8y ago
      I am pretty sure what the parent is saying is to buy puts in lieu of shorting. There is no hedging here, just limiting downside.
      - jameslk 8y ago
        Yes I'm aware, since they suggested puts instead of calls. I'm not sure what your point is since my argument applies in either case. It's much less probable to be right about both price and timing. You won't have unlimited losses, but you will likely be wrong and lose money, unless you're the one writing the regulations.
        dlubarov 8y ago
conanbatt 8y ago
If regulations went up, Id bet more on airbnb: they will hurt competition a lot more than it will hurt them. They will drive regulations. Do you see Google, Facebook etc being hurt by the regulations put in place in the last 10 years?

ianhawes 8y ago

I will sell you the puts myself. You're ignoring a massive market for vacation rentals outside of major metropolitan areas that AirBnB has conquered from craigslist. The risk for regulation has passed as citizens see AirBnB as an accepted reality. Hotels aren't happy, but rightfully see AirBnB as a competitor.

jedberg 8y ago
> The risk for regulation has passed as citizens see AirBnB as an accepted reality. Hotels aren't happy, but rightfully see AirBnB as a competitor. I agree with your overall, but I'm not so sure I agree with this part. South Lake Tahoe just passed a voter initiative in November that bans AirBnB (and VRBO) except for a few places right next to the major hotels. It was, not surprisingly, heavily supported by the major hotels.
- zaroth 8y ago
  I was just reading about this. Looks like the measure barely squeaked by (less than 1 percent margin) and parts of it are on hold pending a lawsuit. I’m very conflicted about these types of bans. I have an apartment which I share with extended family, and we share the costs. Technically the way these bans are written would prevent us from doing that without somehow getting everyone’s name of the lease which would not be practical. I wish that people would fine heavily for actual bad behavior, and let fair economic arrangements between respectful parties happen. But I also understand that enforcement is very difficult, and most people are assholes.
- the_watcher 8y ago
  South Lake Tahoe is exactly the kind of market that OP isn't talking about (if I'm reading it correctly). There are tons of places where hotels simply aren't dominant. A good framing for me: If Airbnb were just looking to compete with hotels, this wouldn't be that exciting of a business, even if I knew they could survive. What's exciting about Airbnb is that they're looking to win in places that hotels aren't.
  - jedberg 8y ago
    Yes and no. There are three big hotels, but VRBO and AirBnB have been the dominant way to get housing in Tahoe forever, unless you're a gambler.
    - the_watcher 8y ago
      That can be true at the same time that "winning markets like South Lake Tahoe aren't the markets most critical to their growth" is true.
- _delirium 8y ago
  Washington DC also passed a partial ban a few months ago: https://dc.curbed.com/2018/11/15/18095658/dc-airbnb-regulations-short-term-rentals-council https://dc.curbed.com/2018/11/15/18095658/dc-airbnb-regulati... Under the new rules, you can only rent out your primary residence that you actually live in (not second homes/condos), and you can only do that for up to 90 days a year. That'll remove a pretty large percentage of the AirBnB inventory if it's enforced, since a lot of units on AirBnB are investment properties used purely to rent out, not anyone's primary residence.
- rconti 8y ago
  Pacific Grove, too. I was just staying in an AirBnB in PG in October. Signs in yards opposing "measure M" which turned out to be an initiative to "keep Pacific Grove a community"... which means no short-term rentals.
ohazi 8y ago
> vacation rentals outside of major metropolitan areas that AirBnB has conquered from craigslist. Last time I looked, many/most vacation rentals are multiply listed on VRBO, etc. Is there a reason to think that AirBnB is stickier than the other vacation rental sites?
- dominotw 8y ago
  > Is there a reason to think that AirBnB is stickier than the other vacation rental sites? 1. Has more volume of listings. 2. There are much cheaper options on airbnb than other sites like VBRO. 3. More trustworthy and better brand recognition.
- nostrademons 8y ago
  That hasn't been my experience. The other way around has - most VRBO listings are cross-listed on AirBnB, but AirBnB has a large superset of VRBO listings. As a guest, that makes me want to go to AirBnB over VRBO, because I know they'll always have selection, while if I go to VRBO I see largely the same listings I would've on AirBnB. My experience is that as long as you go to a tourist destination (like Hawaii, Croatia or Santa Cruz) VRBO is fine, but as soon as you start to go off the beaten track (like Northern Northern California past Redding, or suburban rentals near major cities, or rural college towns) AirBnB has much more selection. I just did a quick test at my alma mater (Amherst MA) and VRBO had 4 listings, AirBnb had 15. When your reputation score stays with the platform and is a major factor in who will host you, it behooves you to pick one platform for all your travel and stick with it, so getting the "long tail" of non-resort travel is a big coup for AirBnB.
  - yesiamyourdad 8y ago
    I believe that this is because historically VRBO had a listing fee but they didn't have a booking fee and didn't take a cut of the booking. AirBnB I believe takes only a cut of the booking, so it costs nothing to have a listing and you price your booking taking the cut in mind. The economics work better for a place that rents sporadically. HomeAway pivoted VRBO after the buyout to have both a listing fee and a booking fee.
- 8y ago

the_watcher 8y ago

I have conflicting thoughts on this. In the US, it's true that in the near term regulations are likely to get more, rather than less onerous at the local and state level. At the federal level, I don't anticipate any changes in either direction until at least 2020, but probably longer, as this is the kind of issue that is generally hyperlocal as opposed to splitting entirely on party lines (the cynical view is that it's prone to capture). That said, Airbnb's most promising growth opportunities aren't in the US in my opinion, they're international. While there's always a risk of regulation, the world is huge and has a lot of places who'd love to be this year's Iceland (although they might regret that 5 years from now) driven by cheap flights and/or housing. Also - a slowdown could be counterintuitively good for Airbnb, as constituents may start lobbying to relax some of the more onerous regulations so that they can more easily make money via Airbnb (regardless of the accuracy, it can easily be cast as the hotel lobby vs. the recently unemployed family who has a room he wants to rent out). Ultimately, I guess my position is that it's almost definitely overvalued right now, but not by as much as bears think it is and that I think they can probably remain a good business for the foreseeable future assuming good leadership.

toomuchtodo 8y ago
The places where Airbnb has left to grow are more likely to enact legislation restricting their operation. The low hanging fruit is already picked.
- the_watcher 8y ago
  I disagree with this completely, but I'll admit that reasonable people can disagree about that.
- opportune 8y ago
  Highly disagree, I see Airbnb growing massively in the developing world as local safety+tourism infrastructure, desire to travel there, and internet familiarity/enough English to make a listing among those living there increase in the next 10-20 years. Of course, Airbnb is already big in places like Bali, but over time I see essentially all areas of Indonesia, Malaysia, Ecuador etc. becoming vacation destinations

pbreit 8y ago

I am super bullish on AirBnB as rare company that can credibly consider a variety of humongous future aspirations. I could see it getting involved in all sorts of travel, lodging and housing industries. Very, very few companies have demonstrated the ability to combine the imagination and execution as AirBnB. I don't think the regulatory environment will be even a speed-bump on its path.

FireBeyond 8y ago
What has AirBnB done that's imaginative beyond VRBO and similar ilk? > I don't think the regulatory environment will be even a speed-bump on its path. They certainly haven't treated it as such. "Laws? Fuck'em". Witness: New York. Witness: Gibraltar-issued anonymous credit cards to avoid taxation issues. I'm not sure these are things to be proud of or aspire to.

dominotw 8y ago

I've been exclusively living on airbnb for past 6 months and I've paid "Occupancy taxes" [1] on all of them. My impression was that states are now in friendly tax relationship than an antagonistic one with airbnb. Regulations are positive for airbnb not negative. 1. https://www.airbnb.com/help/article/654/what-is-occupancy-tax--do-i-need-to-collect-or-pay-it https://www.airbnb.com/help/article/654/what-is-occupancy-ta...

user5994461 8y ago

Having worked at the main competitors, I wouldn't advise to do that. It is a fantastic business with a fat 20 to 30% margin on every booking. There is plenty of market left to capture, between mouth to mouth rentals and what used to go on craiglist, or never wanted to go on craiglist because it wasn't trustworthy.

jameslk 8y ago

1. There's usually a limited number of shares to short an IPO 2. Given the extreme volatility of IPOs and small amount of past history on a company's fundamentals, this will essentially be gambling with the potential of unlimited downside Good luck!

mylons 8y ago
you can buy puts and easily limit your down side. edit: whoever downvoted this, do you not understand how buying puts works? your risk is capped at the money you spent on the contracts. you can only lose that amount.
- jameslk 8y ago
  That sounds like hedging a bad idea with another bad idea. Options expire, so not only do you have to be right that the stock will go down, but you also have to be right that it will go down before your options expire. The further away the expiration, the higher you'll be paying for implied volatility. This sounds like a terrible strategy for a hunch that regulations are going to eventually impact Airbnb at some fuzzy point in the future.
  - hervature 8y ago
    I am pretty sure what the parent is saying is to buy puts in lieu of shorting. There is no hedging here, just limiting downside.
    - jameslk 8y ago
      Yes I'm aware, since they suggested puts instead of calls. I'm not sure what your point is since my argument applies in either case. It's much less probable to be right about both price and timing. You won't have unlimited losses, but you will likely be wrong and lose money, unless you're the one writing the regulations.
      - dlubarov 8y ago

conanbatt 8y ago

If regulations went up, Id bet more on airbnb: they will hurt competition a lot more than it will hurt them. They will drive regulations. Do you see Google, Facebook etc being hurt by the regulations put in place in the last 10 years?