Airbnb wants to be more than just a room‑sharing enterprise
Monday, February 27, 2017
Airbnb started with the idea of letting people to rent out an unused bed, a bedroom or an entire house to travelers. So far, the platform has been very successful in attracting leisure travelers.
According to Airbnb's website, this room-sharing platform has now more than 3 million listings located in 65,000-plus cities around the world, and has hosted more than 150 million travelers. The market value of Airbnb is estimated at $30 billion, about the same as Marriott International that recently acquired Starwood Hotels.
A large number of travelers — and even Wall Street — are feeling happy about Airbnb's business model and its room-sharing concept, which sustains the company's phenomenal growth. Nevertheless, there are also many stakeholders of the lodging industry who get upset about Airbnb. Not only have we seen lawsuits against Airbnb on discrimination issues, but there is also an increasing amount of legislation aiming to put more restrictions on residential rentals.
Then, shall we expect a slowdown for Airbnb? It may seem that way, but it really does not matter what is put in front of the company. Airbnb is now ready to diversify its operations, aiming to become more than just a room-sharing website for leisure travelers.
In addition, even though few Airbnb listings offer 24/7 service that is usually found in hotels, certain Airbnb listings with unique features can still gain competitive advantages over hotels if they are marketed appropriately. For example, a corporate group might have great interest in renting a castle or a big house to host a retreat or do some team building activities (e.g., cooking in teams in a kitchen).
It's also clear that Airbnb wants to become a full-service travel company.
It is not surprising to see room-sharing websites, hotels and OTAs (online travel agents, such as Expedia and Travelocity) are fighting for business. Such competition, however, has pushed OTAs to work more closely with room-sharing websites.
Expedia, for example, just spent $3.9 billion in 2015 to acquire the room-sharing website Homeaway. Today, in just 18 months after the acquisition, travelers are now able to check out residential rentals as well as the available hotel rooms in a tourist destination through Expedia.com and Kayak.com.
Airbnb will not just sit by doing nothing, of course. The company is also actively acquiring new businesses, including two this month:
- Airbnb bought Luxury Retreats, which has over 4,000 properties around the world with concierge service.
- Airbnb acquired Tilt, a startup for peer-to-peer payments and crowdfunding (e.g., splitting bills among travelers), indicating that Airbnb is interested in group travel.
It is almost certain that more acquisitions by Airbnb will follow. According to a Bloomberg business report, Airbnb is sitting on $3 billion in funding and plans to start using it.
As acquisition has become a popular means for companies to respond to the shifting landscape in the marketplace, what company will be the next in Airbnb's acquisition list? An OTA or something else?
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