For years, Airbnb (NASDAQ: ABNB) CEO Brian Chesky has been promising to take the brand "beyond the core."
In his eyes, Airbnb has the potential to be much more than a home-sharing platform, and the company took its first steps in that direction on Tuesday as it launched a set of new marketplaces.
In its release, Airbnb announced:
Airbnb Services, with local services like meals by chefs, photography, massage, and nails.
A revamped Airbnb Experiences that includes tours and activities that are vetted for quality, and Airbnb Original experiences, which are limited-edition opportunities for an experience hosted by a celebrity like Megan Thee Stallion, Sabrina Carpenter, or Patrick Mahomes.
A redesigned Airbnb app that allows users to book homes, services, and experiences in the same place.
Of the three of these, Airbnb Services has the most potential. This is a largely new offering for the company, and there is not an existing local marketplace for these services, which also include personal training, catering, and makeup, according to Airbnb's post.
What's potentially game changing about the services marketplace is that it is available to locals just as much as travelers since there is nothing about the services that is particular to tourism.
It's clear from Airbnb's post that these services are intended for travelers, and they will likely be marketed that way, but encouraging people to use the Airbnb app for local needs could expand the market significantly, though the company seems to want to keep the brand focused on travel.
An adjacent marketplace, which Airbnb did not launch but could come in the future, is services intended for hosts, such as cleaning, landscaping and lawn care, hiring a handyman, and the like, which would expand the addressable market even further.
The revamped experiences platform could be meaningful, but Airbnb has offered experiences for nearly a decade, so it will take more work to convince travelers to consider its experiences again.
Image source: Getty Images.
Is Airbnb Services a game changer?
Homestays will always be the biggest business on Airbnb, but adding services expands the company's addressable market significantly.
For instance, the global market for hair salon services is $247 billion. Airbnb will only get a sliver of that at best, but that is just one of several categories the company is competing in. Scaling up in services could take years, but it certainly has the potential to be a game changer.
Chesky has referred to Amazon on previous earnings calls, noting that company's evolution from a bookseller to a seller of everything, and the services expansion gives Airbnb the opportunity to do something similar, with a market that is essentially uncontested in the way that Airbnb is imagining it.
Investors seemed to like the move -- the stock rose nearly 1% after the announcement, closing the day up 2.9%.
Is Airbnb a buy?
The core home-sharing marketplace will remain the key to the business for the foreseeable future, but the services launch and the revamped experiences page is refreshing. It demonstrates the company's optionality and its ability to harness new ideas and launch new platforms.
Chesky is right: There is potential for Airbnb to expand its marketplace beyond homestays, but the company will have to execute at a high level both in home-sharing and its newer businesses.
The launch comes as the company's growth has slowed to its slowest rate since the pandemic, coming in at just 6% in the first quarter. Other travel companies have reported headwinds due to the weakening economy, so Airbnb could be facing a sluggish 2025.
However, the services launch shows that management is squarely focused on the long term, and its execution in home- sharing and other businesses will matter much more than the cycles of the travel market.
While the stock has been a disappointment since its initial public offering, the business is strong enough that it should outperform the S&P 500 over the long term, especially since its valuation is now looking more reasonable. The launch of the services marketplace is certainly a step in the right direction.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jeremy Bowman has positions in Airbnb and Amazon. The Motley Fool has positions in and recommends Airbnb and Amazon. The Motley Fool has a disclosure policy.
