Airbnb vs Marriott Stock: Which Is Best?

Airbnb vs Marriott Stock: The pandemic years were devastating for travel and hospitality. At the start of the COVID-19 crisis, widespread travel bans, quarantines, and stay-at-home orders virtually eliminated tourism and severely depressed business travel.

Global international tourist arrivals declined nearly 75 percent in 2020. That is equivalent to one billion fewer travelers compared to the previous year.

The second year of the pandemic didn’t bring much of an improvement – international tourism was still down by 72 percent.

In 2022, the industry started to recover, but it is unclear how robust that recovery will be. Nearly two-thirds of the industry experts at the World Tourism Organization (UNWTO) said they don’t expect travel to reach pre-pandemic levels until 2024.

Needless to say, travel and hospitality stocks have suffered tremendously due to the pandemic, and their troubles are far from over. The dual challenges of high inflation and rising interest rates have prompted consumers and businesses to rethink their plans to resume travel.

The Dow Jones U.S. Travel & Tourism Total Stock Market Index is down more than 30 percent year-to-date, and the Dow Jones U.S. Hotels Index lost nearly 20 percent of its value so far in 2022. That includes companies like:

Even perennial favorites like Airbnb and Marriott have been unable to avoid losses in 2022. Airbnb stock declined 33.98 percent year-to-date, and Marriott stock dropped 9.60 percent.

Many investors are convinced that these low share prices present an opportunity to get reliable companies at a discounted price. They are confident that the hospitality industry will come back stronger than ever, and buying hotel stock now will lead to impressive long-term returns.

The question is, which company is likely to see the most success in terms of recouping losses and achieving growth objectives? In other words, when it comes to Airbnb vs. Marriott stock: which is best?

Will Airbnb Stock Go Up?

Airbnb fits squarely into the travel space, but it is by no means a pure hospitality company. By nearly every measure, it is fundamentally a tech company that sells a digital platform – not hotel rooms.

Airbnb’s primary source of revenue has nothing to do with managing real estate. It provides the infrastructure for property owners to connect with people who need a place to stay.

Hosts benefit from the exposure offered by the platform, and travelers have the opportunity to book non-traditional, often low-cost accommodations knowing hosts are held to high safety and quality standards.

Airbnb’s position as a tech stock is partly to blame for the sharp decline in its share price. Inflation and rising interest rates have frightened investors out of growth stocks and into more reliable alternatives.

Other major tech companies like Apple, Microsoft, Alphabet, Amazon, and Meta (formerly Facebook) are also down in 2022, which has caused the tech-heavy Nasdaq to drop more than 28 percent year-to-date. A portion of the decline in Airbnb’s stock price can be attributed to the same factors.

However, there is good reason to believe that Airbnb will recover – probably sooner than its pure hotel peers. To begin with, the travel industry will bounce back, and most experts project a surge once travel restarts in earnest. There is pent-up demand from consumers and businesses that have put off vacations, conferences, and other events.

When economic conditions make travel more appealing, Airbnb has a massive inventory of listings that can accommodate a rush of bookings. There are more than six million options on the Airbnb site.

In comparison, Marriott manages just 1.5 million rooms. It doesn’t cost Airbnb a dime to increase capacity. Better still, Airbnb doesn’t have the same expenses that Marriott faces when rooms remain empty.

Is Marriott Stock A Buy?

Marriott isn’t taking the competitive threat from Airbnb lying down. In 2019, it created its own Airbnb-style service that connects members of the Marriott Bonvoy program with property owners interested in renting out private homes.

The success of this service, which is called Homes & Villas by Marriott, can’t be accurately assessed quite yet. It was brand-new when the pandemic struck, so it hasn’t been tested in a typical travel market.

Marriott has a strong brand and a global footprint that appeals to a large percentage of travelers – particularly when it comes to business trips. That advantage, coupled with its Bonvoy loyalty program, makes the chain a top choice for those who prefer traditional lodging.

The downside to having that global footprint is the cost associated with managing extensive real estate holdings. Marriott is responsible for expenses whether rooms are rented or not. During the years-long downturn in travel demand, it has been difficult for the company to compete with Airbnb on the basis of free cash flow margin relative to revenue.

For the most recent 12-month period, Marriott generated $1.9 billion in free cash flow against almost $18 billion in revenue. Airbnb only produced $1.5 billion in free cash flow over the same period, but the margin is substantially higher against its $7.4 billion revenue.

With the current challenges in mind, is Marriott stock a buy? Opinions vary. There’s likely no harm in buying Marriott stock – it will probably go up long-term – but most analysts agree that other travel and hospitality stocks offer better return potential.

Marriott vs Airbnb Stock: Which Is Best?

In a choice between Marriott stock and Airbnb stock, Airbnb is a better buy.

While there are no guarantees, the company appears better positioned for significant medium- and long-term growth. Low overhead gives Airbnb more breathing room when economic conditions are volatile, and it is successfully building a reputation among professionals to match its popularity among leisure travelers.

Two of Airbnb’s most effective marketing campaigns target those traveling for work. First, Airbnb is promoting the fact that it offers affordable long-term rentals, which are growing more quickly than short-term bookings.

Second, Airbnb is working hard to position itself as the lodging partner of choice for “work-anywhere” employees who want to travel. That’s a clever move in a post-pandemic world that has left a large percentage of the population working remotely.

The bottom line is that both Airbnb stock and Marriott stock are solid additions to an otherwise well-diversified portfolio, but Airbnb stock is a better choice.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.