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Fast-growing Airbnb making its mark on the hospitality industry

by  | Corporate
Posted:     Updated: Oct 20, 2015  14:56 ET
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Airbnb Inc., the short-term vacation-rental site, is disrupting the hotel business one room at a time.

Property owners in 191 countries list rooms, apartments and houses on Airbnb's website, and the company collects 3 percent of the booking fees those listings generate. The company's take will reportedly amount to $1 billion this year, four times its 2013 revenue.


Those figures have attracted the attention of venture capitalists, who've invested $2.3 billion in Airbnb since the company's founding in 2008, according to MarketWatch.

The financial-research company PrivCo estimates privately held Airbnb's value at $25 billion. That puts the company essentially even with Hilton Worldwide Corp., whose market cap of $25.5 billion is the largest of any hotel company traded on the New York Stock Exchange.

PrivCo also reports that despite Airbnb's tremendous revenue growth and attention from investors, it lost more than $150 million in 2014. And Airbnb does face direct competition from vacation-rental sites like VRBO (Vacation Rentals by Owner) and HomeAway.

Industry thriving

Even as investors have taken note of Airbnb's growth, lenders continue to show high confidence in the hotel market, which also is in a growth mode. Hotel occupancy rates, daily room rates and revenue per room all reached new highs in the second quarter of 2015, according to the hotel-data tracking firm STR.

In the second quarter of 2015, more than 120,000 hotel rooms were under construction in the U.S., and lending volumes for hotels and motels increased 16 percent year over year, according to the Mortgage Bankers Association (MBA).

The increase comes after 20 percent growth in hotel and motel lending in 2014, to a total of $31.4 billion, the MBA says. Those recent lending figures are still far below the $73 billion lending peak in 2007, but they're more than double the volume of only three years ago.

Forecasters say Airbnb's impact will grow, even as hotel operators invest the new capital. Investors are betting on that potential, not on Airbnb's current bookings, which now account for about 1 percent of the hospitality market.

Analysts at Merrill Lynch, for instance, predict the company's share of the market could quadruple in five years, to 4 percent of all bookings. "Our preliminary work suggests Airbnb is a force to be reckoned with that is likely to have an increasing impact on the travel landscape," the analysts say.

Sharing' economy

Airbnb operates in the travel segment of the so-called "sharing economy," in which individuals use the Internet to make money from underused assets. Uber is the best-known company attempting to turn a profit using the technique. Instead of rooms, Uber deals in cars, and instead of renting them out, Uber users drive their automobiles as part of a technologically directed freelance taxi service.

The two companies have something else in common, beyond their innovative business models. Both have drawn criticisms from local regulators — Uber for falling short on insurance standards and driver-background checks and Airbnb for skirting local zoning regulations and avoiding hotel-room taxes.


Bill Lewis is editor of Scotsman Guide Commercial Edition. Reach him at (425) 984-6023 or

Topics: Commercial business development | Commercial lending
More by: Scotsman Guide Media


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Fast-growing Airbnb making its mark on the hospitality industry

by Scotsman Guide Media | Corporate
Posted: Aug 26, 2015  14:46 ET    Updated: Oct 20, 2015  14:56 ET

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