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Airbnb raised an additional $100 million in funding, according to the Wall Street Journal, bringing its total to some $2.4 billion but among the more interesting aspects were the financial metrics that the apartment-rental site was showing off to potential investors.
The WSJ reporter said he viewed the pitch deck, which indicated that Airbnb transacted $2.2 billion in gross bookings during the third quarter, generating $340 million in revenue. Room nights sold during the quarter jumped 110.6 percent to 23.8 million, according to Airbnb’s presentation.
Airbnb’s pitch to investors was undoubtedly crafted before Marriott International, seeing a competitive advantage in getting bigger, agreed to acquire Starwood Hotels for $12.2 billion, and the Priceline Group went on the offensive to tout its 21 million bookable rooms.
But Airbnb undoubtedly wanted to show investors that it is the lodging company with the greatest momentum. Even if Airbnb’s numbers turn out to be somewhat inflated, the overall trajectory is illuminating.
Skift compared Airbnb’s third quarter revenue of $340 million with the third quarter revenue figures that publicly traded hotel chains have reported [see chart below] and it turns out that Airbnb’s revenue, if reported correctly in its investor deck, surpassed that of Choice Hotels, which traces its roots to 1939, franchises more than 6,300 properties and has a presence in 35 countries.
Airbnb Versus Hotels by Revenue Q3 2015
|Company||Valuation/Market Cap||Q3 Revenue|
Source: Wall Street Journal, public documents
Comparing Airbnb to major hotel groups is admittedly an apples to tomatoes exercise, given their disparate room types and Airbnb’s projected $150 million operating loss for 2015, according to the Wall Street Journal’s numbers. But Airbnb’s strengthening revenue stature shows how it is becoming a growing force in the lodging industry and one not easily dismissed.
We’ve written in the past that it is likely that one day Airbnb will broaden its platform to include hotels in order to give its user base more choice. After all, both business and leisure travelers have different lodging needs, depending on their whims and the situation.
And the discussion is getting under way regarding whether Airbnb will become the next big hotel distribution channel. Airbnb, which is intensifying efforts to increase vacation rental listings on its site, could become a relatively cheap distribution channel for hotels, giving them leverage against online travel agencies.
Mark Hoplamazian, the CEO of Hyatt Hotels, which invested in home-sharing site Onefinestay, was questioned about the prospect of distributing through Airbnb during Hyatt’s third quarter earnings call.
Hoplamazian said the talk of distributing through Airbnb was premature but added: “… you see the incidence of even in some selected cases branded inventory showing up on even Airbnb’s platform, typically in the context of a timeshare or a branded residential property. So, I would say that the lines are blurring and there’s a lot of cross-channel distribution going on. And I think we’re only seeing the beginning of that, I think this will grow in incidence and complexity over time.”
In the chart above, Airbnb’s private valuation at $25.5 billion — which did not increase with the just-reported $100 million raise — exceeds the market caps of all the major chains, including Hilton Worldwide’s otherwise leading $23.2 billion. Private valuations tend to be somewhat exuberant, though, and there are many people who believe that Airbnb’s current $25.5 billion valuation wouldn’t hold up if it were to execute an initial public offering today.
Skift also compared Airbnb’s reported third quarter room nights sold (23.8 million), gross bookings ($2.2 billion), market cap ($25.5 billion) and revenue ($340 million) with major online travel agencies as well as TripAdvisor and HomeAway.
Airbnb’s $340 million in third quarter revenue has left HomeAway, which is being acquired by Expedia Inc. for $3.9 billion, far behind at $130.7 million in revenue. As with comparing Airbnb to hotel chains, gauging Airbnb (largely urban rentals of primary residences) against HomeAway (mostly vacation home rentals in resort areas) is choppy, at best.
Still, despite its projected 2015 operating losses, Airbnb’s revenue picture and traction is clearly on the upswing.
Airbnb Versus Booking Sites by Q3 2015 Revenue
|Company||Room Nights||Gross Bookings||Valuation/Market Cap||Q3 Revenue|
Source: Public documents
Airbnb’s third quarter revenue ($340 million) is in the conversation with TripAdvisor’s ($415 million), which has traditionally been an advertising business for online travel agencies and hotels, but also offers vacation rentals and recently became a hotel-booking site.
Although their respective businesses are very different, Airbnb’s third quarter revenue of $340 million was 17.9 percent of Expedia’s $1.9 billion and 11 percent of the Priceline Group’s $3.1 billion. Expedia and the Priceline Group sell lots of other things beyond hotels and vacation rentals.
In terms of room nights booked, Airbnb’s 23.8 million in the third quarter stood as 38.7 percent of Expedia’s 61.5 million room nights and 20.5 percent of the Priceline Group’s 115.6 million room nights.
That’s why Expedia Inc. is acquiring HomeAway, the Priceline Group is touting its 21 million bookable rooms, and Wall Street analysts are questioning hotel-chain CEOs on the prospect of selling hotel rooms through Airbnb, a scenario that would have been considered laughable a couple of years ago.