A Brisk Walk Down Main Street – Airbnb Primer

I’ve already mentioned the importance of the housing numbers being released on Tuesday, but the data reminded me of another trend in the market, one that could become a long-term headache for Airbnb (ABNB).

If you’re not familiar with it, my “Walk Down Main Street” is an approach I use to see investing trends that haven’t fully developed. I’ve literally beat the market many times just paying attention to what’s going on around me on any given day.

Try it for yourself – I’m sure you can, too.

This weekend, we had some amazing weather in Cincinnati, so the dog and I got a whopping 14.2 miles of walking around the city. The walk revealed something I’ve read but never seen.

The landscape of our city is now heavily dotted with Airbnb and other short-term rentals.

Between the Bengals, Reds, concerts, and other attractions, our city has seen an incredible surge in Airbnb’s alone. A quick check showed me that just under 2% of the houses in Cincinnati are Airbnbs. I’m sure that number is not exact, but wow.

The problem… Cincinnati, like other cities all over the country, is facing a housing shortage. You know, the thing that has everyone’s real estate values at all-time highs.

It’s funny how we’ll start to talk about an “AI Bubble,” but nobody is talking about the “Housing Bubble 2.0.”

We’ll get to that sometime this week.

Back to the walk, Cincinnati is among a growing number of cities that are considering higher “resort taxes,” licensing fees, income taxes, and other tactics to reduce and limit the number of Airbnb and other short-term rentals.

The move makes sense, as it could lower prices and make more inventory available for their constituents.

Of course, Airbnb would hate the idea. Lower inventory for them means lower revenue for a business that is already seeing pressure.

Here’s what I’m watching for over the next six months.

Remember, we’re heading into the six-month election cycle. Expect short-term rentals to start popping-up as a plank in the platform of local and perhaps even some House Representatives. It’s happening in Cincinnati, and you know what Mark Twain said about Cincinnati…

Airbnb spent more than $1,000,000 lobbying last year. The amount they spend this year will be a good indicator of where the long-term takes this company.

abnb stock chart

(Click to enlarge)

The hotels want their business back. Companies like Hyatt (H), Marriott (MAR), and IHG (IHG) want their pre-pandemic business back. They’re advertising against the short-term rentals and don’t think that they’re not lobbying against Airbnb.

Expect that pressure to start playing out on the long-term trends of the stock. Keep in mind that this stock has yet to come within 25% of its 2021 highs.

I’m still a holder of ABNB, but my walk this weekend lowered my expectations and has me looking to the traditional overnight options as an alternative to ABNB stock.

… And by the way, Mark Twain said “When the end of the world comes, I want to be in Cincinnati because it's always 20 years behind the times.”

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About the Author

Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.

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