Airbnb's Recovery May Be Worth Betting On

 Airbnb's Recovery May Be Worth Betting On

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Airbnb has remained surprisingly resilient.

Airbnb has remained surprisingly resilient.

Photo: Akos Stiller/Bloomberg News

When the coronavirus pandemic first hit, Airbnb hardly looked like a company in the right place at the right time. What a difference eight months makes.

The Covid-19 crisis that has crushed the global tourism industry certainly made a serious dent in the home-sharing pioneer’s business. In its first filing for an initial public offering on Monday afternoon, Airbnb showed revenue plunging 72% year over year for the second quarter — the first full period reflecting the pandemic’s restrictions on travel and public life. In March and April of this year, cancellations actually outnumbered nights and experiences booked on the platform.

The company burned more than half a billion dollars in cash in the March quarter alone, much of which was from issuing refunds to guests, while also providing some backing for its hosts who suddenly found themselves without a needed income stream.

That would normally raise legitimate questions about why Airbnb would choose to go public now. But Monday’s filing also shows a business that has remained surprisingly resilient after such a major hit: Revenue in the third quarter fell just 18% from the same period last year. Gross bookings began picking up in June as travelers sought locations close by that wouldn’t involve airplanes or hotels.

Airbnb is certainly not back to operating at its pre-pandemic levels. And investors should be cautious about reading too much into the company’s recent boost in operating profit for the third quarter. Sharp, recent cost-cutting moves have left expenditures for operations support and sales and marketing well below normal levels, and those outlays are likely to return as travel restrictions ease sometime next year.

But for now, restrictions are in fact getting tighter amid a new wave of infections across the U.S. and Europe. Even Airbnb’s home state of California significantly rolled back its reopening on Monday. As such, Airbnb will be one of the few alternatives for getting out of the house during the holidays, and likely through some of spring. Hence, the timing of Airbnb’s listing now could allow public investors to participate in the recovery of a business that was averaging 33% annual growth before the pandemic hit. Sometimes, it isn’t best to go out on top.

Write to Dan Gallagher at dan.gallagher@wsj.com