Airbnb Reveals Falling Revenue, With Travel Hit by Pandemic

SAN FRANCISCO — Airbnb, the home rental service that disrupted the travel industry and was itself disrupted by the coronavirus, took a major step toward one of the year’s largest initial public offerings when it revealed declining revenue and growing losses in a prospectus on Monday.

The offering, which could value Airbnb at more than $30 billion and raise as much as $3 billion, will test investors’ appetite for hospitality-related stocks in a year when the industry has been battered and its future is uncertain. The company provides a marketplace for people to rent their homes, taking a percentage of the fees, and facilitates bookings for activities.

Airbnb’s prospectus painted an optimistic picture, advertising its brand’s association with unique travel experiences. “We have helped millions of people satisfy a fundamental human need for connection,” the company said. “And it is through this connection that people can experience a greater sense of belonging.”

In total, Airbnb brought in $2.5 billion in revenue in the first nine months of the year, down from $3.7 billion a year earlier. Its net loss more than doubled during that period to $697 million.

Airbnb’s revenue bounced back in its most recent quarter, giving it a profit. But because of the overall trajectory of shrinking revenue and the continued uncertainty of the coronavirus, the company is unlikely to be able to pitch Wall Street on the typical tech start-up narrative of soaring growth. It was the first time Airbnb provided a comprehensive look at its finances.

Airbnb was valued at $31 billion before the pandemic, but some investors bought shares valuing it at $18 billion after travel ground to a halt. The company has since positioned its business around getaways that are within driving distance of people’s homes, allowing it to recover from the disruption faster than hotels.

“It’s going to be a mixed story,” said Karen Xie, a professor at the University of Denver who researches the short-term-rental industry. Airbnb’s fast rebound showed it could win customers from hotels, she said, but that success could disappear with the virus surging again. In another lockdown, she said, “they’ll face a hard time again, and history will repeat just like last spring.”

Airbnb follows a string of highly valued start-ups to the public market this year. Listing shares in recent months, to mixed reviews, were Palantir, a data company valued at $20 billion; Unity Technologies, a gaming software business worth $6.2 billion; Snowflake, a data storage start-up worth $12.4 billion; and Asana, a collaboration technology provider valued at $1.5 billion. On Friday, the delivery start-up DoorDash also revealed its finances in preparation for going public.

The start-ups are taking advantage of an ebullient stock market that has defied the pandemic’s economic destruction. Airbnb will most likely go public in December, giving investors time to absorb the results of this month’s election.

Other tech-related public offerings have been delayed. Ant Financial, the Chinese financial tech company, was slated for the largest-ever public offering this month, valuing it at $310 billion, with expectations that it would raise $34 billion. But Chinese regulators suspended the offering after saying the company no longer met the requirements for a listing.

Airbnb’s public debut has been anticipated for years. The San Francisco company is one of the highest-profile start-ups to emerge from a generation of “sharing economy” companies born after the 2008 recession. The start-ups, which include Uber, DoorDash, WeWork and Instacart, rode a wave of smartphones, cheap cloud computing and gig work. Plentiful venture capital funding allowed them to stay private and put off turning a profit.

If Airbnb goes public in the coming months, the company will have squeaked its offering in before a compensation deadline affecting many of its employees. Start-ups like Airbnb compensate workers, especially those who join in the earliest years, with potentially lucrative stock options and restricted stock units. But if a company waits too long to sell or go public, that equity can expire and become worthless. If Airbnb goes public before the end of the year, its employees will avoid losing a large tranche of equity that was set to start expiring next spring.

The I.P.O. could also enrich Airbnb’s earliest backers, some of whom invested 12 years ago, while turning its founders into billionaires.

Airbnb has raised more than $3 billion in venture capital funding. Its largest shareholders include Silver Lake and Sixth Street, which invested in the company as the pandemic set in. Sequoia Capital, Founders Fund and Accel also own sizable stakes.

Airbnb’s founders — Brian Chesky, who is the chief executive, and Nathan Blecharczyk and Joe Gebbia — each own around 15 percent of its Class B shares. In a move that is common among Silicon Valley companies, the founders have carved out a special class of shares for themselves, which gives them 20 votes per share and disproportionate control of the company.

The three men founded Airbnb in 2008 after they rented out a spare room in their apartment to make extra money. That idea became a company, which has since expanded to seven million listings in almost every country.

Airbnb’s website helped bring the world of short-term rentals, once limited to vacation homes and time-shares, into city apartments, country cabins, spare bedrooms and treehouses, while advertising a message of authentic travel and “living like a local.”

As it has grown, Airbnb has fought with regulators over the legality of letting people rent out their homes while communities have become increasingly agitated about the arrival of tourists, parties and even shootings in their neighborhoods.

Airbnb put its plan for a public listing on hold in March, when the pandemic spurred a flood of cancellations. The company laid off a quarter of its roughly 7,600 workers and raised emergency funding. Between April and June, revenue fell to $335 million, from $1.2 billion a year earlier.

By July, bookings had bounced back as more people sought getaways in country homes. Between July and September, revenue was $1.3 billion, down from $1.6 billion a year earlier, though Airbnb delivered a profit of $219 million. It resumed work on its I.P.O.

Yet challenges abound. The virus continues to surge not only in the United States, but in other countries where Airbnb has a large presence, which may crimp people’s willingness to leave their homes.

Airbnb’s problem with “party houses” has also become worse in the pandemic. With bars and clubs closed, party promoters and large groups have moved some gatherings to rental homes. At least 27 shootings were connected to Airbnb rentals in the United States and Canada between March and October. Airbnb has announced a string of measures designed to curtail parties.

Regulation remains a threat. Cities such as Chicago, San Diego, Atlanta and Ann Arbor, Mich., have recently proposed or passed stricter rules or bans on short-term rentals in response.

The company counts and Expedia Group, which owns the home rental site VRBO, among its competitors. This month, those companies reported steep declines in quarterly revenue compared with last year because of the pandemic.

Morgan Stanley and Goldman Sachs will lead Airbnb’s public offering, which will list on Nasdaq.