Weekly Update: Airbnb's TAM
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Airbnb's TAM
We’ve long been curious about Airbnb's (ABNB) market valuation relative to Booking.com (BKNG). In 2026, the Street estimates ABNB’s revenue and EBIT will hit $16.5bn and $4.9bn, respectively. At a current $105bn market cap, ABNB trades at ~21x 2026 EBIT.
ABNB is selling the same amount of rooms as BKNG did in 2013-14 albeit at very different unit economics. In 2014, BKNG sold 346m room nights with a 15% take rate, 40%+ EBIT margin, and generated $2.5bn+ in FCF.
Last year, ABNB sold 365m room nights with a 12.8% take rate and generated over $1bn in FCF net of SBC. To meet Street estimates, assuming a constant take rate, ABNB needs to compound room night growth at 18.1% to 691m nights in 2026. As we can see from the numbers above, this is a similar 5-year growth rate as BKNG achieved from 2014.
Given ABNB enjoys 90% direct traffic and BKNG and EXPE spend over 30% of revenue acquiring new customers, a 30%+ EBIT margin in 2026 is not unreasonable.
However, the big question we have is around ABNB’s room night TAM with individual hosts.
We’ve explored this question in various interviews including with a Former Google Travel Search Director, Former Homeaway Board Member, and recently the Former Head of Global Operations at Airbnb Experiences.
Before we discuss the core Room Night TAM, ABNB also includes $200bn of experience spend and $1.1trn of additional non-tourist spend in its long-term TAM.
Bundling accommodation, flights, attractions, ground transportation, and every other travel service has long been the goal for online travel agents. Although Airbnb shut down the majority of its non-core business lines during the COVID outbreak, it still runs Airbnb Experiences in major cities.
Experiences is Airbnb’s authentic version of ‘tours and activities’. It curates individual hosts to take guests on unique experiences at the travel destination. The $200bn short-term Experiences TAM includes day or hourly activities whereas the additional $1.1trn is effectively all recreational spend excluding flights and accommodation (mainly food and drink).
As with most TAM charts, it’s highly likely this opportunity is overstated. Mainly because booking a short-term rental is a different customer journey than organizing a tour around a city; accommodation is typically booked in advance yet travelers prefer the spontaneity of booking experiences during the trip.
[Accommodation and Experiences] bookings are certainly not part of the same user journey. It depends on the segment. If you're a holidaymaker and you booked your Airbnb three months ahead, and as part of that journey, you get a choice of Experiences to book, that can be seen as part of that flow, if you like. But it doesn't always work like that. A lot of people are booking Experiences at the last minute. Generally, you have to lay down your head and sleep when you stay somewhere, so the accommodation part is a must-buy, whereas going on a food tour is not a must-buy. - Former Global Head of Operations at Airbnb Experiences
In 2014, Booking acquired OpenTable, the restaurant reservation platform, as part of Fogel’s ‘connected trip’ vision. Two years later, BKNG took a ~$900m impairment on the asset. Just as we book experiences during the trip, we also typically book restaurant reservations at the destination rather than ahead of time. However, this impairment hasn’t hindered Fogel’s vision and last November BKNG acquired Etraveli, a leading flight OTA. Flights are easier to integrate than experiences, but the decline in packaged holidays and growth of discount airlines with direct customer relationships could make this an uphill battle.
If integrating other services proves difficult, this leaves ABNB with a market of ~$1.2trn short term stays.
Even with such a huge TAM, it seems Airbnb’s longer-term challenge could be to get access to quality, available inventory.
It reminds us of this quote from a Former Homeaway Board Member:
Availability is the key point. When you’re comparing unit count, Airbnb says how many millions of units they have, Booking.com says how many individual units they have. The relevance in driving value is the overall total availability of a unit. One unit on Airbnb can be available for one week a year because the owner is going on holiday, so he rents his own house or apartment out for a week or two. That’s one week a year this unit is available, so that already counts as one listing. - Former Homeaway Board Member
Room night growth is a function of the number of available rooms, not just the total number of rooms. Last year, ABNB booked 301m nights from ~4m hosts with an average of 6m active listings. Active listings are broadly defined as ‘listings viewable on Airbnb and previously booked at least once on Airbnb’. This isn’t a good indicator of the quality of the supply as a listing can be visible but with no attractive dates available.
ABNB’s challenge is to not only grow the number of hosts, but ensure that inventory is available to meet demand. This can be tricky when it’s rent-by-owner (RBO) inventory. With 6m listings and $47bn in gross bookings, each listing earns ~$8k per year. At the average daily rate, this amounts to 15-20% occupancy.
Is ~20% close to full occupancy for RBO’s?
If so, how many more individual hosts will really make their home available to rent? And is it available in destinations and at times in demand?
To hit 691m room nights in 2026, ABNB needs to double the amount of quality, available room nights from individual hosts. Even if we assume ABNB is growing the market supply by adding new individual hosts, doubling the number of quality, available listings is a tough challenge. Especially when we compare to BKNG which grew room nights at 20% per year but had the advantage of adding large hotel accounts with thousands of units at a time.
There are an estimated 27m listings globally for alternative accommodations with roughly 50/50 split between RBO and PM. Airbnb already has ~50% of RBO inventory and arguably a large portion of luxury inventory will never move to ABNB. If the long run occupancy of RBO inventory is ~20%, ABNB will need to rapidly expand the number of people willing to rent their home or onboard more professionally managed inventory (PM) to to hit ~700m room nights in 2026. And this is where BKNG and Vrbo come into the picture.
BKNG only shows instantly bookable inventory, hence the name Booking.com. The higher the availability of the inventory, the higher Booking places the listing in the search. The more available inventory professional managers feed BKNG, the greater the occupancy. BKNG has 20-years of trust built in delivering occupancy for hotels and has scaled its alternative accommodation inventory from under 20% to 29% of total rooms booked over the last three years.
The image below compares BKNG and ABNB mobile feeds for a recent accommodation search for Tenerife, a UK-tourist trap this time of year. BKNG is presenting many more apartments and villas high in the feed and recently launched its new alternative accommodation rating system with gold squares instead of star ratings for hotels.
BKNG is moving aggressively into alt accommodations in Europe and Vrbo, which now includes Homeaway, is the leading US OTA serving professionally managed vacation homes. Pre-COVID, ABNB was gaining share in the US PM market but it’s still under half the size of Vrbo.
Although ABNB is expanding the TAM by unlocking more individual homes, the company is still tapping into the OTA profit pool. This means getting access to available professional inventory in prime travel destinations is crucial to hitting the 691m room night target in 2026. With BKNG’s scale in Europe / APAC and Vrbo in the US, this is a tough challenge for ABNB.
It will likely require a significant change to ABNB’s supply-side offering:
In terms of managed versus unmanaged, we all know that, when you have an Airbnb account, you are limited to the number of listings you can have from one Airbnb account. This is obviously not very property management friendly because a property manager, with several hundred units, needs to have several different Airbnb accounts to manage them, so Airbnb, strategically, has never really addressed the managed market. They were more RBO friendly while Booking.com was totally the opposite. - Former Board Member at Homeaway
ABNB not only needs to change how the organization serves the supply side, but also ensure professional owners earn the required cap rate per unit. With 90% direct traffic, ABNB could potentially use the sales and marketing cost savings and undercut BKNG and Vrbo for PM inventory. This will be a market-by-market battle and seems to require flawless execution to make the investment work at 21x 2026 EBIT.
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