Airbnb

Shares of leading online travel agency companies Airbnb, Booking, and Expedia have declined about 10% during the last few trading sessions on fears that wide-moat Meta's AI agent, Muse, will disintermediate the platforms.

Why it matters: Our experience using Muse shows that the agent used Booking and Airbnb to search for travel accommodations. This supports our view that AI agents will depend on the supply, trust, and conversion that these platforms present. For example, when we asked Muse to find an accommodation during specific dates in a US city for three adults it immediately went to Booking's platform. When we then asked it to just search for vacation rentals in that city during those dates it shifted its search to Airbnb's network. We also found Muse's responses to be slow and circuitous, requiring additional prompts and time to narrow down the choices. We expect Google and other companies to have their own agents that should also use these leading online travel company platforms.

The bottom line: We are maintaining our fair value estimates of $185 per share for wide-moat Airbnb, $217 for wide-moat Booking, and $262 narrow-moat Expedia. We think investors have overestimated AI agents' impact on the relevance of these companies. We see Airbnb as best positioned. We believe Airbnb's alternative accommodation business is particularly protected from the AI threat, as most of its 5.5 million hosts are individuals with no websites for AI search engines to locate. We also see Booking as insulated, with about 10% of its accommodation room nights from brand chains that could see more direct bookings from AI use in the future. Meanwhile, we estimate Expedia's exposure to brand chains is about 20%-25% of its accommodation room nights.

After reviewing Airbnb's second-quarter results, we have increased our fair value estimate to $186 per share from $170 on higher sales and the time value of money. Our fair value estimate implies a 2027 enterprise value/adjusted EBITDA multiple of 19 times.

Airbnb's second-quarter sales were up 17%, ahead of 14%-16% guidance, with 10% room night growth accelerating from last quarter's 9%. Adjusted EBITDA was up 21%. Full-year sales growth guidance rose to at least mid-teens from low- to mid-teens.

We think marketing investment in Airbnb’s three expansion verticals can accelerate total revenue growth from 2025’s 10.3% level starting in 2026. We see expansion-market bookings growth averaging 17% during 2026-35, above the consolidated company's 12% growth. Airbnb is expanding into several countries (including Brazil, Spain, Italy, Germany, Japan, and India), which are among the world's most visited and account for 23% of accommodation industry sales. With its communal culture and leading lodging supply and demand, Airbnb's 5 million hosts are well positioned to monetize experiences, which we see becoming a noteworthy contributor with $5 billion, or 3% of total bookings, by 2030, ramping to $14 billion, or 5% of total bookings by 2035. Services such as massages and prepared meals will strengthen Airbnb's competitive position relative to hotels. We see service bookings reaching $5 billion by 2030, or 3% of total bookings, and increasing to $13 billion, or 5% of total bookings by 2035.

We estimate revenue growth during 2026-35 to average 12.4%, up from 11.3% previously. In addition to driving incremental bookings, we see Airbnb's experiences and services averaging a 20% take rate (the portion of each booking retained as revenue), above the 13.5% take rate for its core accommodation business. We see Airbnb leveraging near-term platform investments over the intermediate to long term, resulting in our 2035 EBITDA margin outlook at 41%. We forecast operation and support costs as a percentage of revenue to stand at 10% in 2035, down from 17% in the prepandemic year of 2019, as near-term trust and safety investments wane and generative AI customer service drives long-term savings. We also expect AI to reduce product development expense, which we estimate at 10.7% of revenue in 2035, excluding stock-based compensation, versus the 20% posted in 2019, a heavier investment year (2018's product development as a percentage of sales was 15.9%). Further, we expect Airbnb to lower marketing expenses to 15.3% of revenue in 2035, excluding stock-based compensation, from 30% of sales in 2018, as the company benefits from strong global awareness and a more complete platform offering in the long term.

As a result, we see operating margins expanding to 35% in 2035 from negative 17% in 2020 (before stock-based compensation) and 10% in 2019.

We assign Airbnb an economic moat rating of wide, based on our view that the company will successfully expand internationally in its core vacation rental market and further strengthen its position through a leading experiences and service offering. Even in the face of evolving dynamics in generative AI and large language models, we are confident that Airbnb will outearn our cost-of-capital estimate over the next two decades, underpinned by its strong record of innovation.

Airbnb has developed a two-sided marketplace network effect that it can effectively monetize, thereby driving a wide economic moat, in our view. Airbnb’s network advantage was established as it encouraged the fragmented marketplace of private accommodation owners to post their dwellings (supply side) on the company’s platform, which in turn attracted travelers (demand side), subsequently enticing more supply, creating a virtuous cycle that increases value for both new and existing users (hosts and guests).

We believe Airbnb’s platform hosts the industry’s largest number of individual rental owners, which are tough to aggregate given their fragmented nature, driving the supply side of its network advantage. In total, Airbnb’s network actively lists more than 9 million alternative accommodations across its 5 million hosts, the majority of which are individuals. Booking Holdings’ vacation rental supply is also over 9 million listings, although we estimate that around half are property managers rather than individual hosts, which are easier to aggregate. Meanwhile, Airbnb’s content offering in the vertical sits well ahead of Expedia’s more than 2 million listings through its Vrbo brand as well as other much smaller competitors.

Airbnb’s rental supply offering has driven strong user metrics, buoying the demand side of its network advantage. In 2025, Airbnb’s platform saw 533 million rental room-night bookings, compared with more than 1 million at Booking (rental and hotel combined) and 415 million at Expedia (rental and hotel combined). We calculate Airbnb’s 2025 alternative accommodation room-night share was in the 40s, compared with the 30s for Booking and 10% for Expedia.

Airbnb’s large share of the online travel agency market makes it extremely challenging for any smaller competitor or new entrant to gain customer traffic or supplier scale. The ability of Airbnb and its largest peers to invest in travel networks scales traffic, further reinforcing their network advantage by enabling them to test and implement platform changes more quickly than smaller competitors, leading to improved user experience and conversion.

Airbnb is investing in expanding its international vacation rental, boutique hotels, experiences, and hotel-like service offering, which we see as supportive of its network advantage. Currently, Airbnb’s top five countries represent 70% of its total bookings. The company believes it can bring several other countries to similar penetration rates over the next several years, supporting our forecast for tens of billions in incremental bookings from these international markets through the end of this decade. Airbnb's room nights in its expansion markets have grown twice as fast as its other markets for 10 consecutive quarters through June 30, 2026.

Airbnb also plans to launch a few travel-related verticals over the next few years, which started with experiences and services in 2025. We think Airbnb’s communal culture is well-suited to offering unique experiences and services, which we believe could generate $10 billion in bookings by the end of this decade, representing a low-single-digit percentage of the global market at that time. This will strengthen the company’s network edge.

Our constructive view of Airbnb’s network position is not swayed by the risk that generative AI could bypass the online travel company’s platform. Although LLMs like OpenAI and Gemini will increasingly have the capability to return relevant travel content information to users quickly, we think the content these generative AI search products draw upon will be owned by either the direct supplier or aggregated platforms like Airbnb, which have accumulated an amount of customer travel data that is hard for others to produce. In our view, this customer data is essential to unlocking the promise of more customized offerings and generating bookings in an AI world. Further, we believe that the alternative accommodation vertical is particularly protected from the potential threat of mass market AI/LLMs search products driving bookings directly to large brand suppliers, since this vertical is heavily fragmented and individually owned, unlike US hotels, where over 70% of rooms are part of a brand.

Also, Airbnb’s commitment to driving innovation will serve it well as it leverages its customer data and strong financial position to train large language models for specific use cases across its platform. Airbnb is already using AI to provide customized search results for travelers and pricing recommendations to its hosts. AI is also being used to do background checks on guests and hosts to reduce discrimination and wrongdoing. Furthermore, Airbnb uses AI to analyze the quality and accuracy of reviews and listing descriptions. Operationally, AI is helping engineers develop products quicker while automating customer service functions, which can lead to cost and innovation improvements. With $15 billion in estimated 2026-30 free cash flow to the firm, no debt, and leading consumer data, Airbnb is in pole position to one day have generative AI anticipate users' needs based on past interactions, supporting its network edge, in our view.

Airbnb’s network has reached critical mass, supported by its leading share of bookings in the alternative accommodation market.

Mobile application usage is increasing rapidly, and Airbnb has strong global awareness, which aids its more than 80% of traffic that comes directly and through unpaid searches to its platform.

Airbnb stands to benefit from its expansion of accommodations in several international markets and boutique hotels, as well as the launch of experiences and services.

Booking and Expedia are investing in their alternative accommodation supply and awareness. Also, Google's continued emphasis on placing its paid ads and metasearch platform ahead of free organic search links, and the adoption of travel search on large language AI models could elevate marketing costs for Airbnb.

Alternative accommodations face regulatory headwinds related to the industry's impact on society, safety, and the economy.

Airbnb’s core individual host alternative accommodation platform incurs higher servicing costs than traditional hotels and other travel verticals.