It’s a big week for IPOs in what’s turning out to be a very big year. The meal-delivery service DoorDash is expected to raise more than $3 billion when it starts trading publicly on Wednesday. Airbnb will follow on Thursday, hoping to net around $3 billion as well.
On Monday, the short-term rental company increased its expected price range for the IPO to between $56 and $60 a share, which would put the company’s total value at as much as $42 billion. That would be quite a comeback from earlier this year, when the pandemic upended the whole business model.
Airbnb was planning an IPO back in March, but we all know what happened that month. As global travel ground to a halt, its bookings fell by 80%, and the company had to refund a billion dollars.
“I felt like a captain of a ship, and a torpedo just hit the side of the ship,” CEO Brian Chesky told Bloomberg this summer.
The company laid off a quarter of its staff — nearly 2,000 people, cut executive salaries and marketing, and focused on the core short-term rental business.
By September, it was profitable again. As domestic travel picked up over the summer, Airbnb offered something hotels didn’t, said Tarik Dogru, who teaches hospitality management at Florida State University.
“It’s all yours,” he said. “You are not going to, if you don’t want to, encounter with the host, and some people really shifted, I think, to Airbnb.”
Not everywhere. In big cities like New York, Boston and San Francisco, demand for short-term rentals is still down 40% to 60% from a year ago, said Jamie Lane, who tracks bookings at AirDNA.
“But where demand is up, and it’s up significantly, is in small towns and destination markets throughout the country,” he said.
Places that are an easy drive from metro areas, like Big Bear, California, outside Los Angeles, and Gulf Shores, Alabama, near the Florida panhandle, have seen bookings rise, Lane said. And with more people able to work or attend school remotely, they’re staying longer, too. The average length of a stay has grown from three to four days in 2019 to six to seven days this year, Lane said.
“Where you might have just gone for a weekend before, now you’re staying a week,” he said.
But there’s another reason to go public now, said Kathleen Smith with Renaissance Capital, as investors chase returns in a hot stock market. Companies have raised more than $140 billion so far this year, according to Dealogic, with several large IPOs to come.
“It may be one of the worst years when it comes to the pandemic,” said Smith. “But it has been one of the best years for IPOs.”
COVID-19 Economy FAQs
Millions of Americans are unemployed, but businesses say they are having trouble hiring. Why?
This economic crisis is unusual compared to traditional recessions, according to Daniel Zhao, senior economist with Glassdoor. “Many workers are still sitting out of the labor force because of health concerns or child care needs, and that makes it tough to find workers regardless of what you’re doing with wages or benefits,” Zhao said. “An extra dollar an hour isn’t going to make a cashier with preexisting conditions feel that it’s safe to return to work.” This can be seen in the restaurant industry: Some workers have quit or are reluctant to apply because of COVID-19 concerns, low pay, meager benefits and the stress that comes with a fast-paced, demanding job. Restaurants have been willing to offer signing bonuses and temporary wage increases. One McDonald’s is even paying people $50 just to interview.
Could waiving patents increase the global supply of COVID-19 vaccines?
India and South Africa have introduced a proposal to temporarily suspend patents on COVID-19 vaccines. Backers of the plan say it would increase the supply of vaccines around the world by allowing more countries to produce them. Skeptics say it’s not that simple. There’s now enough supply in the U.S that any adult who wants a shot should be able to get one soon. That reality is years away for most other countries. More than 100 countries have backed the proposal to temporarily waive COVID-19 vaccine patents. The U.S isn’t one of them, but the White House has said it’s considering the idea.
Can businesses deny you entry if you don’t have a vaccine passport?
As more Americans get vaccinated against COVID-19 and the economy continues reopening, some businesses are requiring proof of vaccination to enter their premises. The concept of a vaccine passport has raised ethical questions about data privacy and potential discrimination against the unvaccinated. However, legal experts say businesses have the right to deny entrance to those who can’t show proof.
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