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Earlier this month, Skift published a comprehensive look at Airbnb’s Road to an IPO, or initial public offering on the stock market.
While the story primarily focused on all of the many things the company is doing (and needs to do) as it pursues that inevitable IPO, it wasn’t necessarily a story about what it takes for a company like Airbnb to go public.
Indeed, what Airbnb is doing right now in its efforts to become a “super brand of travel,” or a new breed of online travel agency (OTA), speaks to the very future of travel. Already, we’ve seen the company expand into tours and activities with the November launch of its Trips business, adding to its already robust 4-million-listing-strong Homes business. CEO Brian Chesky has also hinted the company may soon enter the flights sector as well. It’s a glimpse of what we as travelers can expect to see and to experience in the next few years as platforms like Airbnb continue to evolve and to attempt to solve the many pain points we still experience when we travel.
Here are some of the biggest takeaways from the piece:
1. Airbnb isn’t in any rush to go public just yet for a number of reasons.
Andrew McConnell, co-founder and CEO of Rented.com noted the company’s “cash pile” of an estimated $3 billion frees Airbnb up from having to raise a lot of money. The fact that the company has made few major acquisitions — approximately a dozen in the last five years — also means it has more pocket change with which to spend or invest.
Not only that, should Airbnb go public, it’ll be “more in the public eye, if that’s even possible given how publicly looked at they are now,” McConnell said. “The more they have to publicly disclose, the more they may not want to do it just yet.…As a privately owned company, they can do things more under the radar. There are less disclosures about what’s succeeding or what’s not and what initiatives they’re pursuing, so they can truly diversify their business in more of a stealth manner. Once they go public, some of those veils start falling off.”
2. Regulatory battles aren’t going away anytime soon.
Depending on whom you talk to, Airbnb is either winning or losing its regulatory battles worldwide.
Critics of Airbnb’s public policy strategies say that the company’s approach to working with cities is often too little, too late and whatever progress it has made has been more reactionary than proactive.
Those who believe the contrary, like Eric Goldman, a professor at Santa Clara University School of Law and an expert on legal issues relating to websites, think that Airbnb will eventually prevail despite all the battles.
“All of the regulatory crackdowns for Airbnb are not really bad news for them,” Goldman said. “They’ll figure it out, they’ll navigate and shut the door on anyone else who wants to compete with them. It’s a tough position for them to be in because regulators are gunning for them, but they could also be in a winning position. I think they’re setting themselves up as a winning model for the future, and every time Airbnb strikes a deal [with a city], they are putting a little more distance between themselves and their competitors, who just can’t catch up.”
What will be important to watch going forward is whether Airbnb’s regulatory models in Chicago, New Orleans, and, soon, San Francisco will not only address regulators’ concerns but also manage to keep the company’s profits up.
Another case to keep a close eye on involves property management company Aimco’s lawsuits against Airbnb. Aimco’s argument is that Airbnb is a short-term rental broker directly involved in the business transactions between its guests and hosts, and therefore not immune from liability under the federal Communications Decency Act. This is the same law that protects sites like eBay and Craigslist from being liable for what’s advertised on their platforms.
If Aimco is successful in its suits, the implications for how Airbnb continues to do business could be substantial. Goldman asked, “Do landlords then have to opt out of Airbnb? Or does Airbnb have to do pre-screenings to validate that the sublease is permitted? Airbnb might be less upset if it can continue doing what it does now and just remove listings if or when someone complains. But if they have to do work to validate the listing isn’t part of an illegal sublease, that could be a big problem for Airbnb.”
3. Airbnb sees instant booking as a win-win that lets the company combat discrimination and make money more easily.
Since publishing our story on August 2, Airbnb recently released new numbers about its portfolio. As of August 10, the company now has a total of 4 million listings, 1.9 million of which are instantly bookable.
Airbnb’s Instant Book feature directly addresses issues of discrimination by not allowing hosts to reject a guest’s request, except under special circumstances or by citing a specific reason. And as an added benefit, it’s also helping the company appeal to vacation rental managers and grow its vacation rentals business.
4. But Instant Book has also become an inflection point for Airbnb’s relationship with its host community.
While some hosts have openly welcomed the benefits of opting into Instant Book, including showing up first in searches now that Instant Book listings are the default search setting on the Airbnb site, others deplore it.
Moreover, many hosts are upset with what they see as a lack of support or services for hosts being provided by Airbnb. They don’t feel that Airbnb is doing enough to address their concerns, or to support them in regulatory battles.
“You need to still feel valued as a host,” one host told Skift. “Right now, I don’t feel like they’re doing that at all. Hosts built the business for them. Without hosts, they wouldn’t have a business.”
5. Expect Airbnb to invest heavily in growing its accommodations business in the following sectors: luxury, traditional vacation rentals, and business travel.
As home sharing becomes more mainstream, Airbnb will need to ensure that it has more than enough supply to meet demand and give the company a competitive edge. But appealing to the luxury market and to traditional vacation property managers might be tricky.
“It’s kind of a Jekyll and Hyde split of deciding how much they do want to work on that,” said McConnell, the Rented.com CEO. “With vacation rentals, you have to accept that it’s not a shared space; you’re renting a home. It’s different from [Airbnb co-founders] Joe [Gebbia], Brian [Chesky], and Nate [Blecharczyk] having a few airbeds in their apartment. It’s a business. These managers aren’t expecting to deliver a totally personalized, hanging- out-with-the-owner type of experience.”
In other words, these “hosts” would be a stark contrast to the middle-class families and individuals whom Airbnb so often portrays in its marketing materials and advertising. And these hosts are also brand agnostic when it comes to choosing which platforms they use to advertise their listings.
6. Early signs seem to indicate that while Airbnb’s Trips are expanding, it’s not the most profitable part of the business right now.
Trips has been CEO Brian Chesky’s passion project for quite some time, but multiple sources have informed Skift that the introduction of the product was a point of contention among Chesky and other Airbnb leaders, some of whom thought entering into the tours and activities market would be too risky and not nearly lucrative enough. Tours and activities experts also warn that this sector of the travel business can be particularly challenging for anyone.
7. Keep an eye out for what Airbnb’s $13 million investment in dining app Resy will mean.
We’re watching to see what Airbnb intends to do with its investment in Resy, arguably the biggest competitor to challenge Priceline’s OpenTable. It’ll be interesting to see if and how Airbnb incorporates Resy’s tech into its own platform to expand its in-destination offerings and trip planning capabilities.
8. Airbnb’s most valuable asset is its brand.
When you think about the real value of Airbnb, beyond that staggering $31 billion valuation, it’s not just about the number of listings, Trips, or arrivals it’s generated in its nine-year life span that makes it so valuable: It’s the brand.
It’s also the buzz, whether warranted or not. There will inevitably be disparities between the original, budget-friendly Airbnb and the version of the future that includes luxury properties and professionally managed apartments. Airbnb will need to embrace the qualities that established the brand in the first place while maturing on the road to an IPO.