Drop In Airbnb Share Price Leads To Announcement Of Extended Services

At the outset, Airbnb was launched and promoted as a platform offering short-term rentals, but over the years, it’s managed to move beyond its initial ambitions. However, this hasn’t always been totally successful and various endeavours have had to be put on hold to return to the platform’s primary focus.

First launched in California in 2008 more than 15 years ago, Airbnb has announced that it’s now looking to extend its current offerings and improve some of the additions it made in recent years in an effort to regain and maintain valuable market share in the accommodation booking industry.

This announcement, however, didn’t come out of nowhere. Instead, it was made by Airbnb CEO, Brian Chesky, during a meeting with investors earlier this week, and it was posed as a proposed effort to grow company revenue after a disappointing second quarter for the business.

Indeed, the online booking platform saw a 15% decrease in profits in Q2, which resulted in a significant 16% drop in Airbnb share prices that executives are now attempting to rectify.

 

What Causes Share Prices to Drop?

 

The reasoning behind the changes of the price of shares comes down to the basic economic principle of supply and demand.

If there are more people wanting to buy shares of a stock than there are people who want to sell it, that drives the price of the stock up, making it more expensive.

Conversely, however, if there are more people wanting to sell a stock than purchase a stock, that results in a decrease in stock prices, making it cheaper.

And, what motivates people to buy and sell stocks?

The incentive behind buying stocks is value. So, in this case, if the business in question – that is, Airbnb – is doing well, that means its stocks are valuable. Essentially, the company as a whole is valuable because it’s making profit. Or, the business could be perceived to be doing well. Indeed, a lot of the value placed on companies and, consequently, stocks, is about perception and speculation.

On the other hand, if a company isn’t doing well, or if outsiders speculate that it’s not doing well, that could result in its stocks becoming less valuable.

So, when stocks hold value, people want to buy them, and when stocks hold less value, people want to sell and get rid of them, essentially getting rid of the risk.

In this case, the fairly drastic decrease in Airbnb share prices occurred as a result of the announcement of the company’s decreased profits in Q2.

The announcement implied a decrease in value in Airbnb, therefore, its stocks, which resulted in more people selling their shares than there were people purchasing shares – more supply than demand. Thus, Airbnb suffered a 16% decrease in stock value.
 

 

How Does Airbnb Plan On Moving Forward? 

 

The massive decrease in the value of Airbnb stock has led the company to reevaluate its future, contemplating the reasoning behind its drastic decrease in profits and what it can do to remedy this blow.

The company’s response, according to Chesky, is expansion. The plan is to expand into brand-new products and services as well as revisit previous projects in order to diversify its overall offering.
 

New Products and Services

 

Expanding into new markets is a great way to increase the company’s opportunity to make a profit, and the model of the business, as well as its online platform in particular, does lend itself to variety of services.

Here are the few potential products and services Airbnb is looking to introduce:

 

• Co-Hosting: Co-hosting will be a new feature that aims to connect homeowners and property managers, so to speak. The way they’ve explained it is connecting people who own homes and want to rent them out but don’t have the time (or desire) with people who have the ability to manage the rentals but don’t own their own homes.
• In-Home Experiences: Airbnb has also proposed possible in-home services like personal chefs, additional cleaning services, massage services and more.

 

The motivation behind introducing a co-hosting feature would allow more potential hosts to join the platform, including people who would currently have to resort to ordinary rentals with traditional rental agents as they don’t have the time to manage their properties themselves.

Co-hosting basically provides them with the possible services of a rental-agent type actor – that is, the co-host – allowing them to participate in the short-stay market via Airbnb.

In-home experiences, on the other hand, are an effort to close the gap between hotels, with loads of amenities and facilities, and Airbnbs.

 

Revisiting and Improving Previous Offerings

 

Chesky also hinted at the possibility of reigniting Airbnb Experiences.

Airbnb Experiences was originally launched in 2016 and seemed to pose a major opportunity for the company. However, it was forced to pause operations in 2020 due to the Covid-19 pandemic, and unfortunately, it never really restarted.

After a planned relaunch in 2022 didn’t quite go to plan, Airbnb announced that the project would remain on the sidelines for the time being while it focused on “perfecting its core values” – that is, short-term accommodation rentals.

Now, however, it seems as though the platform is working towards the eventual relaunch of Experiences, although they haven’t yet released any more details pertaining to what that may look like.

For now, we’ll just have to wait and see which new products and services Airbnb chooses to launch and when they announce the comeback of Airbnb Experiences.