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Yesterday news reports revealed that Airbnb was raising $400-$500 million dollars from TPG Capital Management LP at a $10 billion valuation.
Unlike many darlings of the startup scene, Airbnb has plenty of revenue coming in. But is there enough to justify a value that puts it above the market caps of Hyatt, Accor, Wyndham, InterContinental Hotel Group, and Choice Hotels, not to mention the public and profitable HomeAway?
A few years ago comparing a vacation or short-term rental company to a hotel brand would have been downright silly. At their extremes, rental sites were electronic bulletin boards while hotels were brick and mortar establishments with lots of employees and dependencies.
But as hotels have moved towards asset-light, brand-centric models where they eschew real estate holdings in favor of managing properties for owners, and companies like Airbnb are eyeing a suite of services that encompass the entire travel experience, the comparison is not so insane.
In an asset-light strategy, hotel brands make money from management contracts and a double-digit share of gross revenues. Airbnb collects fees from the host and the user, and HomeAway offers a mix of plans, from the more traditional subscription to a percentage of each booking. In the end, they all offer the promise of a night’s sleep with a varying array of comforts and amenities. And users discover and book them in much the same way.
What’s a Room or a Listing Worth?
|Hospitality Brand||Number of rooms/listings||Market cap/valuation||Value of room|
|Airbnb (adj.)||330,000||$10 billion||$30,303|
|InterContinental Hotel Group||686,873||$7.93 billion||$11,545|
|Choice Hotels||500,000||$2.71 billion||$5,420|
Who’s on Top
Using some third-grade math, we put a value on each room and listing for the major public hotel companies, as well as Airbnb and competitor HomeAway. Admittedly, there is a bit of comparing apples to oranges here. But understanding which fruit is what helps explain the transition that’s happening.
The number of available rooms held by the hotel chains are disclosed publicly, and they tend to range from single rooms to suites and even to some vacation rentals (at Wyndham and Marriott in particular).
A “listing” on a rental website could be for a multi-room house or a bed in a shared room (although that is incredibly rare). They also are not constant. The volume of listings fluctuate by season (summer rentals), opportunity (a big event in town), and need (the host needs to make some extra cash). They may also only be available a few days a week — and can disappear overnight. This is changing, though, as HomeAway and Airbnb are more about professional landlords than one-off hosts.
HomeAway’s number of listings is revealed in public disclosures. The number of Airbnb’s rooms is somewhat of a mystery. The latest number it has shared with media is 550,000 listings. When Skift looked at the New York market, we saw a wide discrepancy — our numbers were 40% less than Airbnb’s numbers — between what it stated on the website and what our data dive revealed. Because of that, we’ve provided both an adjusted number based on a ‘Skift discount’ and one based on Airbnb’s numbers.
HomeAway has more overnight options than anyone else has rooms or listings, but it’s at the bottom of the pile when it comes to the value of these listings in comparison to its market cap. As HomeAway moves more property managers from a subscription model to a per-night transaction fee, expect this value to increase.
On the flip side, Hyatt does not have the largest market cap (it’s smaller than the Airbnb valuation), but its rooms are worth more than any of its competitors. Starwood and Hilton also appear at the top, with Marriott and Accor sandwiched between the two Airbnb values. Choice Hotels, with its voluminous yet low-budget offerings like Days Inn, brings up the bottom for hotel brands.