(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

 

WASHINGTON- Investors often have a hard time catching up with change. The massive gap in the valuations of Marriott International and Airbnb are showing just how slow they can be. The $56 billion hotel chain’s revenue hasn’t fully recovered to its pre-pandemic level but is expected to grow quickly to get there by next year. Meantime Airbnb’s best growth days may be behind it. Yet the $108 billion home-sharing app’s valuation is substantially higher. The two will converge.

The pandemic was a test of survival for the hospitality industry as travel patterns changed. As people sought refuge from crowded cities and avoided hotel lobbies, the home-sharing app didn’t do as badly in 2020, with revenue falling about 30% compared to 2019, in contrast to sales falling by half for Marriott.

As economic activity normalized, Airbnb and Marriott both recovered. Airbnb said on Tuesday that 2021 revenue is up 25% from 2019 before Covid-19 hit. The hotel chain is still behind its 2019 sales, but it is bouncing back quickly, too. It said the same day that revenue more than doubled in the fourth-quarter to $4.4 billion.

Still Airbnb’s enterprise value to last year’s revenue is about 18 times, compared to about five times for Marriott. And as travel opens up, the tables are starting to turn on the businesses. Analysts expect Marriott’s revenue to grow 52% between the end of last year and the end of next year. That’s slightly more than what is projected for Airbnb.

The World Travel & Tourism Council estimates that in 2022, U.S. activity would return to its pre-pandemic levels while hotel rates are expected to jump 13%, according to travel management platform CWT. It suggests both Marriott and Airbnb can still have very strong years. But Airbnb’s valuation appears to be pricing in that full rebound and then some, while Marriott’s valuation is about where it was before the pandemic started, according to Refinitiv. The latter has room to move up to higher floors while Airbnb looks to be on its way down.

 

CONTEXT NEWS

- Marriott International on Feb. 15 reported fourth-quarter revenue of $4.4 billion, more than doubling its top line from the same period a year ago. Analysts expected revenue of $4 billion, according to Refinitiv.

- On the same day, Airbnb said it had revenue of $1.5 billion in the fourth quarter, a 78% increase. Analysts had a forecast of $1.4 billion.

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

(Editing by Lauren Silva Laughlin and Sharon Lam) ((For previous columns by the author, Reuters customers can click on CHON/ SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS https://bit.ly/BVsubscribe | gina.chon@thomsonreuters.com; Reuters Messaging: gina.chon.thomsonreuters.com@reuters.net))