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Why Airbnb is great for Wall Street, but not so great for everyone else

December 11, 2020, 3:00 PM UTC

The rickety elevator was a bit scary, making the tiny top floor apartment in Rome’s Monti neighborhood more of a sixth-floor walkup. In Edinburgh, the spacious abode with brightly colored walls and twee decorative touches seemed like the set of a Wes Anderson movie. A Vancouver skyrise provided amazing views of sunrise and sunset. And in Florence, oh, Florence, a comfy, cozy home base was perfect for exploring that amazing city.

Airbnb says it has facilitated 825 million visits in its 13-year history, but without me and my family, it would only be about 824,999,910. Either way, it’s an amazing achievement. The Internet has proven fertile ground for sprouting new markets and super-charging some old fashioned ones, whether for short-term stays, car rides across town, or selling your collection of Beanie Babies.

an airbnb in Edinburgh
Aaron Pressman/Fortune

This week, we’ve seen the spectacular stock market debuts of two of those businesses. DoorDash raised $3.4 billion pricing its stock at $102 only to see it jump to $186 on Wednesday. Airbnb got $3.5 billion selling shares at $68. The stock closed at almost $145 yesterday. That puts the company’s stock market value at over $100 billion, more than Marriott, Hilton, InterContinental, Hyatt, Choice, Wyndham, GreenTree, and Red Lion combined (though only more than the top two or three if you include debt).

On one hand, you can understand why investors showered Airbnb with love this week. Before the pandemic, revenue was growing at 30% to 40% a year with gross margins around 75%. Marriott’s revenue last year was up just 1%, and it has to pay expenses for the more than 7,000 hotels with 1.4 million rooms that it owns whatever happens. Of course, Marriott also reported a 2019 profit of $1.3 billion while Airbnb lost $674 million.

Which would you rather own for the next 10 years? Investors say Airbnb.

That’s not necessarily a good thing. Despite my enjoyable stays around the world, many studies have found that the company’s service has an appreciable impact on raising rents by reducing the amount of housing available to residents of major cities (though Airbnb disputes the studies and points out that some were funded by the hotel industry). That means that although travelers may save a bit by avoiding hotels, the cost to residents is likely greater. And while Airbnb may bolster local tourism, it has also been bringing visitors to neighborhoods sometimes ill-equipped to deal with the onslaught (in much the same way Waze has turned some neighborhood streets into overcrowded commuter race tracks). Can this be fixed with regulation and/or taxes? I’m not sure.

The question on more people’s minds right now seems to be whether the Airbnb IPO, following DoorDash, Snowflake and other high-tech high flyers, signals that the stock market has entered a speculative bubble that could end poorly like the Internet bubble 20 years ago. I’ll just point out that while 19 IPOs have doubled on their first day of trading this year, according to CNBC’s ace IPO reporter Leslie Picker, the number was 78 in 2000 and 115 in 1999. And the story that popped the Internet bubble was a Barron’s piece calculating that new companies were burning cash so quickly many would soon be out of business. Airbnb has shown positive cash flow from operations pre-pandemic and currently has over $6 billion on its balance sheet. Now maybe electric vehicle stocks are in the danger zone and some of the high-profile new IPOs, but overall it looks less volatile.

Finally, I would be remiss if I didn’t direct those of you seeking a more in-depth look at DoorDash and Airbnb to check out some of Danielle’s coverage this week. I don’t know if she sleeps at all, but in addition to covering the Facebook antitrust lawsuit, she interviewed DoorDash CEO Tony Xu, wrote up the initial market reception of both DoorDash and Airbnb, and will have a feature-length look at DoorDash out real soon. Have a great weekend.

Aaron Pressman
@ampressman
aaron.pressman@fortune.com

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On the latest episode of Fortune’s Brainstorm podcast, we discuss how tech is powering the holidays. Retailers with services like curbside pickup are faring far better than others, says Fortune’s Phil Wahba. Brainstorm hosts Brian O’Keefe and Michal Lev-Ram also speak with Loren Padelford, vice president and general manager at Shopify, and Ben Jones, CEO of Ohi. His smart warehousing company enables same-day delivery for smaller brands looking to compete with Amazon and Walmart. Listen to the episode here.

NEWSWORTHY

When I left you, I was but the learner. Whatever you think of AT&T's decision to stream all its major movies online next year, the company remains an underdog in the streaming wars. Disney displayed its much stronger position on Thursday, raising the price of Disney+ by $1 per month and disclosing it has 87 million subscribers (versus 13 million active users on AT&T's HBO Max). The House of Mouse also said it would bring back Darth Vader and other iconic characters in new streaming shows for Disney+ with 10 Star Wars series spinoffs and 10 new Marvel series.

Ah, might as well jump. Those scary dog-like robots sure do get around. Hyundai Motor Group is buying a controlling stake in robot (and YouTube video) maker Boston Dynamics, paying SoftBank $1.1 billion. SoftBank bought the MIT spinout three years ago from Google for an undisclosed price.

A midsummer night's Aeon chair. Who is going back to the office in Silicon Valley and when? Apple CEO Tim Cook says it's unlikely his workforce will be required back before next June, Bloomberg reports. And Facebook boss Mark Zuckerberg told his employees that they won't be required to get a COVID-19 vaccination before returning. The social network has said everyone can work remotely until at least next July.

Dream of the soft look your eyes had once. Forget those fresh-faced IPO stocks. Some much older tech companies reported results on Thursday. Adobe said its revenue rose 14% to $3.4 billion, slightly better than analysts expected. Its shares, already up 47% this year, were unchanged in pre-market trading on Friday. Oracle's revenue gained just 2% to $9.8 billion, about as forecast by Wall Street. Its shares, up 13% in 2020, gained 2% on Friday morning.

FOOD FOR THOUGHT

There aren't many more crucial government functions that the National Weather Service. But insanely, as Washington Post reporters Jason Samenow and Andrew Freedman warn, the service is talking about making major cutbacks to its website and online data due to a tiny lack of funds.

The Weather Service held a public forum Tuesday to discuss the proposal and answer questions. When asked about the investment in computing infrastructure that would be required for these limits to not be necessary, agency officials said a one-time cost of about $1.5 million could avert rate limits. The NOAA budget for fiscal 2020 was $5.4 billion.

FOR YOUR WEEKEND READING PLEASURE

A few great long reads I came across this week:

A billion dollars from a junkyard (Forbes)
Advanced technology is not only making cars safer and easier to drive, it’s also making them nearly impossible to repair. Cashing in? Dallas-based Copart and the father-and-son-in-law duo who pioneered selling wrecks on the Internet.

The Real Queen’s Gambit: Catching Chess Cheaters (Wall Street Journal)
The popularity of chess boomed because of the pandemic and a hit Netflix show. So did cheating—making chess narcs the game’s most important figures.

Requiem for a Dream (Vanity Fair)
Keith McNally has opened many restaurants in New York City and closed them amid COVID. None has pained him quite like Balthazar, writes the restaurateur.

Wonder Women (Hazlitt)
The fight for female superheroes in Hollywood.

IN CASE YOU MISSED IT

Airbnb CEO Brian Chesky could be worth over $11 billion after IPO By Anne Sraders

Why Intuit bought Credit Karma in one of the biggest fintech deals of 2020 By Jen Wieczner

Europe goes all in on its net-zero pledge, backing tough new emissions targets —but not without a fight By Katherine Dunn

Shopify is ready for the holiday season. Just don’t call it the ‘anti-Amazon’ By Emma Hinchliffe

U.K. startup’s breakthrough could aid quantum computers in the hunt for exotic materials By Jeremy Kahn

The Facebook and Google antitrust suits are a warning shot for all corporate giants—not just Big Tech By Janet Guyon

(Some of these stories require a subscription to access. Thank you for supporting our journalism.)

BEFORE YOU GO

Are you fan of the mysterious street artist Banksy? I have been ever since watching the brilliant documentary Exit Through the Gift Shop. The pandemic has not slowed Banksy. He's taking credit for a wall mural in Bristol, England, of a big sneeze. Don't forget to wear your mask and we'll see you on Monday.