Skift Take

... And here comes Airbnb Lux.

As expected, Airbnb acquired Montreal-based Luxury Retreats International in an effort to help it expand in high-end vacation rentals and travel services, it announced today. This follows earlier reports on talks between the two companies.

No official price was disclosed but estimates are that Airbnb purchased Luxury Retreats for anywhere from $200 million to $300 million.

According to the release announcing the deal this morning: Luxury Retreats CEO Joe Poulin will join Airbnb and lead luxury homes, reporting to Airbnb co-founder and CEO Brian Chesky, and the Luxury Retreats team will remain based in Montreal.

As the companies put it: “Luxury Retreats offers high-quality listings, world class concierge service and a range of amenities and the acquisition will complement Airbnb’s work to provide a variety of homes and experiences to travelers, particularly those visiting traditional vacation destinations.”

Luxury Retreats provides concierge services and access to its support team for guests, as well as having dedicated villa specialists. It currently has a network of more than 4,000 homes worldwide.

Chesky says in a statement he has spent countless hours with Poulin and his team. That level of interest in the serviced and luxury end of vacation rentals suggests Chesky and his team may have similar companies in their sights to acquire.

Skift reported a week ago that Airbnb has been in talks to buy Luxury Retreats.

The Beginnings of Airbnb Lux?

For months now, rumors have swirled that Airbnb may debut a new Airbnb Lux product category on its platform and now, with the acquisition of Luxury Retreats, that could very well become a reality.

Over the Christmas holiday, Chesky also alluded as much when crowdsourcing ideas for the company via Twitter.

Not only that but the company’s numerous marketing endorsements with high-profile celebrities over the past year also seem to suggest the company’s willingness to move more toward the luxury space. Recently, for example, Airbnb paid for Lady Gaga’s multi-million-dollar home that she stayed in while performing at the Super Bowl in Houston.

Expansion into the luxury category seems like a natural extension for Airbnb at this point. Now that it’s achieved a tremendous amount of scale with more than 3 million listings worldwide, it’s only natural that the company would look to continue expanding its reach and diversifying its business.

That diversification officially began in November when the company debuted Airbnb Trips, its foray into tours and activities. During that launch, Chesky also hinted at the possibility of more services being added to the Airbnb platform, including but not limited to flights, grocery delivery, transportation, restaurant reservations, and more.

Most Wanted: Luxury Vacation Rentals

Airbnb also isn’t alone in its pursuit of entering the luxury vacation rental market. Earlier this month, AccorHotels, which already owns onefinestay, announced its intention to acquire Atlanta-based Travel Keys, which operates a somewhat similar model to Luxury Retreats.

The sudden interest in the luxury vacation rental market among larger entities like Airbnb and AccorHotels is best explained by the following reasons: higher margins and fewer regulatory issues.

“For Airbnb, the reasons for this type of acquisition are several-fold,” said Madelyn Byrne, CEO of Paris Perfect, another company that operates in the high-end apartment rental space, similar to onefinestay. “It brings them a new customer who’s more higher-end, and it brings consistency in terms of properties, as well as good on-the-ground management.”

Byrne also believes this acquisition is more about acquiring talent and experience instead of technology. “Airbnb has an amazing booking platform — it doesn’t need any help with that. They have great contact with clients but what they are missing is that consistency. For example, we manage more than 100 properties in Paris that are all of similar quality; if something, God forbid, does happen, we have a dozen other properties we can offer them right then and there. With Luxury Retreats, they hope to automate everything and to have that inventory that you can know and trust means a lot.”

With Luxury Retreats, Vacasa CEO Eric Breon sees many synergies with Airbnb, too. “Luxury Retreats is just on the periphery of vacation rental management. Generally, they don’t have on-the-ground staff working at homes, but they generally work with high-value homes that generally have their own staffs.

“Their model is really more of a booking service and marketing aspect with that local staff that’s employed directly by the owner of the property. It’s definitely a high-margin business to be in if you have the eyeballs, which Airbnb certainly has. With commission rate in the 20-percent range, there’s a lot of potential margin there. It’s a small segment but a lot of margin is there.”

Breon also said that focusing more on the traditional vacation rental was inevitable for a company like Airbnb. “I think it was very exciting how Airbnb created that new segment of inventory — the primary owner occupied. But they tapped that out pretty quick. Not that many people want to necessarily stay in someone else’s homes in that way. It’s not typical or always necessarily preferred for business trips or vacations for some folks. Traditional vacation rentals will still be popular going forward.”

Onefinestay CEO Evan Frank, whose company is also planning to enter the more traditional luxury vacation rental market this year, said that there’s plenty of room for companies like his own, as well as AccorHotels and Airbnb, to make their mark.

Frank said, “The thing that’s so interesting is that distribution channels for homes have not really been built yet. All of a sudden, HomeAway is quoted as saying this is a $100-billion market, the vacation rental market. It’s quite fragmented. There’s no one, real, distribution channel that all of these homes go through and the way these properties are actually sold is still very much being figured out and that story is not yet written.

“So, when I see these distribution companies being acquired, I think it’s really about the know-how to really be able to sell this very new accommodation product, which has really only come up over the past five to 10 years.”

Frank, when asked if working with traditional vacation models was also less restrictive with regard to regulatory concerns, said, “yes.”

And if Airbnb’s current regulatory battles in cities such as New York, Barcelona, Paris, and Miami are any indication of the challenges that lie ahead, making more of a concerted effort to expand in the traditional vacation rental market, and to chip away at the market share of other competitors like HomeAway and VRBO, seems like a perfectly good move to make.

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Tags: airbnb, luxury, Luxury Retreats

Photo credit: Airbnb has acquired Montreal-based Luxury Retreats. Luxury Retreats / Luxury Retreats

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