Why is HotelTonight good for Airbnb?
Even though Airbnb was commonly known for its dominant position in the room-sharing market, the company has been aiming to become a mega travel enterprise. Besides hotels, Airbnb also competes directly with OTAs.
For example, Airbnb has begun selling hotel rooms for a while. At the time when Airbnb celebrated its 10th anniversary in 2018, there were over 24,000 boutique hotels listed on Airbnb, a growth of 520 percent over the previous year. Airbnb also hired an aviation expert last month to oversee the company’s new plan of transportation services.
According to The Wall Street Journal, adding more hotels to its listing has become one of Airbnb’s strategies to boost its growth before the IPO (initial public offering). Through the acquisition of an existing business – HotelTonight, Airbnb can gain immediate market penetration in the OTA market and very likely allow Airbnb to add more hotel listings to its platform.
How much is the deal?
Started in 2010, HotelTonight has already raised about $117 million in venture capital and made the Forbes Next Billion-Dollar Startup list in 2016. In 2017, HotelTonight had a valuation of $463 million, with estimated revenue of around $60 million in the year before.
According to Skift, this acquisition is closed at a value of a little bit over $400 million, with about half in cash and the other half in stocks. Because half of the acquisition cost is made up of Airbnb’s stocks, HotelTonight could have “a nice little exit” under the condition that Airbnb’s stock price will increase when it goes public, as most people expect even though Airbnb has not yet committed to doing so in 2019.
Last year, Airbnb had a value ranging from S22 million to $50 million, as estimated by Skift Research. Airbnb’s estimated revenue in 2017 was at $2.6 billion.
What’s next for HotelTonight and Airbnb?
While HotelTonight and Airbnb will maintain their operations as two separate entities, Airbnb suggested it would include some HotelTonight listings as part of the company’s larger platform in the future. It is hence not surprising to see more hotel listings will be added to Airbnb’s website soon. Likewise, it is also possible for HotelTonight to add Airbnb listings as part of its offerings, as what Expedia and Booking.com have been doing.
Where is the competition among Airbnb, hotels, and OTAs heading?
The battle among these three key players in the lodging industry is only going to heat up even more, especially when they are all selling the same products now. For example,
· Airbnb will soon add more hotels to its listings with the acquisition of HotelTonight, in addition to its recent inductions of Airbnb Plus and Beyond by Airbnb, the certified product types that provide similar hotel amenities.
· Hotels, such as Marriott and Hyatt, have also entered the room-sharing market; they are selling residential rentals too, as what Airbnb does.
· Also through acquisitions (e.g., Expedia acquired HomeAway.com for $3.9 billion in 2015), many OTAs invested big in room-sharing business. Travelers can now book residential homes on OTA websites. Coincidentally, Booking.com and Airbnb were fighting for the website with the most room-sharing listings last week.
Is acquiring HotelTonight a good deal for Airbnb? Why or why not? What will be Airbnb’s next move towards a travel enterprise?
Note: This post is also available on MultiBriefs.com and HospitalityNet.org; The picture was downloaded from Preferente.com.
While reading this article, my first thought was that Airbnb acquiring HotelTonight was a good deal and a smart business strategy for them to penetrate the market before going public. After reading the entire article, I realized that Airbnb was mimicking what other companies have already done. I was not aware that competing OTA websites have residential booking available. I feel both Airbnb and HotelTonight have a strong market share and name recognition that will make this a strong acquisition. Airbnb’s next move may be adding transportation options, grocery delivery upon arrival options, and/or bundle packages with restaurants, tours, and excursions. Transportation options could include private charter jets, car rentals, personal drivers, and more.
ReplyDeleteNicole Lee HRT3020.03
DeleteI find the merge of Airbnb with HotelTonight confusing and unreasonable. For starters, corporate hotels are not classified as a bed and breakfast as Airbnb had initially differentiated itself from the hotel industry to be by using the motto, “travel like a human.” Hotels are meant to give exceptional service, as Hyatt emphasizes, “care for people so they can be there best.” In addition, these parties contribute to the challenge with internal hotel bookings, where establishments are being charged a percentage of commission from OTA’s. Loyalty programs, for example Marriott Rewards, have captivated recurring guests by initiating points and benefits per stay. Having additional price fluctuation gives the consumer too much power, and as a result potentially fluctuate hotel point of sales.
ReplyDeleteHRT 3020 Section 1 Talin Manoukian
Drake Rubalcava HRT 3020.03
ReplyDeleteI was unaware that Airbnb was acquiring HotelTonight. I find it confusing that Airbnb would need to have HotelTonight considering that Airbnb is known for bed and breakfasts and people's homes. However it is smart that Airbnb is trying to branch out of their current market to reach more potential consumers. With Airbnb acquiring HotelTonight they can use their brand name to build up their brand name and strengthen the market of room sharing services. Overall is Airbnb acquiring HotelTonight a good choice? Only time can tell if the mass market consumers are for or against the deal and whether it will last or not.
I did not know that airbnb acquired Hotel tonight because I have never used it before. Being that airbnb is known for being the prime service for people to rent out part of their home to others it is a bit weird that they want hotel tonight. While maybe not the best move to most people, this is a good way to branch out their service to more potential customers. This also does allow for them to use hotel tonight to expand their own service of airbnb over people going to a hotel or motel for an overnight stay. This is an interesting move for the type of service airbnb is which is real homes and smaller places not hotels. I think this is going to be a huge step for airbnb to becoming more global and a bigger company to reach more people.
ReplyDeleteHRT 3020 Section 4 Joseph Gonzales