Source item

Capital investment cycles are not always extremely short - like they are in tech. In many non tech businesses, they can be extremely long and sneak up on you. And it can affect investor returns massively. Look at Airbnb. I was curious to understand why the company was range bound despite the underlying economics. What few hosts realized when they joined Airbnb is that after many years of guests, their homes would become “well used” and sometimes dilapidated and require upgrades, updates and general maintenance/TLC. Otherwise guest quality would trend down and their pricing power would go down with it. Even though Airbnb is asset light, after so many years in the market they are now more levered to the capital investment cycle, home improvement ability and, as a result, the credit quality of their hosts, downstream. That’s a much tougher (read, low return) business than an asset light marketplace. That affects return assumptions. And that, more than anything else, has influenced the stock since going public, imo.