7 ms·

I always see these people commenting on how they don't see the value in Airbnb. I've gotta say, after staying at a few places, I don't see the value anywhere el

I always see these people commenting on how they don't see the value in Airbnb. I've gotta say, after staying at a few places, I don't see the value anywhere else. * Hilton Worldwide has yearly revenues of $9.7b. * Marriott International has yearly revenues of $11.8b. * Best Western has yearly revenues of $6b. Now, I don't know what their current revenues are. Based on how many people from all over the US I've spoken to that use them frequently already, I'd assume they're growing at a decent clip. Furthermore, they have virality on their side, where their competitors just plain don't. It takes years to open a new hotel. If Airbnb wants to deploy to Casper, WY, they only have to make the effort insofar as basic background checks. If they want to do a stronger deployment, they find maid services and anything else they might need to support local hosts. Furthermore, as much as there are local law issues in places like NYC against them, I don't anticipate those lasting long or having a large effect on their revenues. The same way that if you're in Uber's way you get painted as being anti-jobs, Airbnb gets to say the same thing. And that's in the few places that have them. I think they've got a long way to grow. I look at $13b, and part of me thinks that might even be soft, especially if they look into starting their own hotels, to provide a higher 'minimum' to a given city, which allows Airbnb to maintain itself as a premium brand(as yet, I've never stayed or heard anyone else staying anywhere that wasn't a much better deal than anything else nearby), even if their prices don't reflect it. Remember: These valuations aren't for what a company is currently worth. Otherwise, there's no point to investment. They valuations are for where they see the company going, and more probably, growing past.

supergirl 12y ago
what about future competition? what's to stop 100 other people starting similar websites?
- joelrunyon 12y ago
  Critical mass.
  - jonknee 12y ago
    What would stop someone from putting their property up on multiple websites?
    - prostoalex 12y ago
      It's a rational decision for most sellers. There's a bunch of properties listed on AirBnB, HomeAway and VRBO (latter two being owned by the same company). For buyers I'd guess existence of previous transactions and reviews is a quality signal, as opposed to a site where you can get scammed by a dishonest seller.
      - joelrunyon 12y ago
        There's also the niche differential. VRBO & Homeaway tend to be more for vacation rental properties (not all, but that's the trend).
- rwmj 12y ago
  Sadly, network effects. The same reason that eBay doesn't have any serious competitors, despite the awful experience they offer.
  - canvia 12y ago
    What's so awful about eBay? I have always been able to find pretty much exactly what I want at a reasonable price.
    - avalaunch 12y ago
      It's great for buyers. It's awful for sellers. They charge massive fees and offer virtually no protection against buyer fraud.
    - jliptzin 12y ago
      Try selling
- chimeracoder 12y ago
  Airbnb already negotiates with individual cities to charge taxes for certain rentals (look at Portland). As soon as they're big enough, they will start supporting these taxes and pushing for laws that require collection, as it makes it more difficult for others to enter the market the way they did.
- smackfu 12y ago
  The more relevant question is, what business plan is going to let someone with a similar website attract customers? You have to find a weak point in Airbnb. Maybe focus on particular underserved cities. Maybe only allow amazing properties and aggressively poach them from Airbnb. Maybe try to enforce a common high-end experience by providing hosts with branded physical goods. Maybe piggyback on an existing hotel brand. Maybe market to the business market exclusively (worked for LinkedIn.) Just some quick ideas, and maybe not viable, but just cloning Airbnb isn't going to get you far.
  - Throwaway12830 12y ago
    Agreed. However, no one is going to compete with Airbnb anytime soon. To compete, you can't just be a little better, you need to be a lot better. Reason being, people have accounts on Airbnb, they have feedback, and they're familiar with the experience. If a slightly improved HN is released by someone tomorrow, we don't all jump ship, because we're invested in the current community. For us to leave, it would need to profoundly improve on the experience or offer incredible content. Likewise, to compete with Airbnb you would need a completely different approach or business model, or have a selection of apartments that are far beyond Airbnb in quality and affordability. Airbnb pushes out updates frequently, their site offers a great experience to the user, and they have a solid team of developers that stay ahead of the game. They're going to be here for a while.
smackfu 12y ago
Remember when you are looking at hotel chain valuations that they generally don't own the hotels, but just franchise the brand. There are other large companies involved that own the hotels.
- atwebb 12y ago
  While that can be true, some get a fair amount of money out of their owned (or ones they actively manage) properties. Franchisees are quite important and contribute a lot in fees (lots of fees...) as you point out but don't discount the still owned properties, many of which are significant buildings by themselves.
- rokhayakebe 12y ago
  Expand, please.
  - smackfu 12y ago
    The hotel business has the separate concepts of "operator" and "owner". The operator is the brand you know. The owner is some property ownership company that contracted a particular operator to build and run their property. The branding is so thorough that you generally don't see any indication of the actual owner, except in the rare cases where a property changes brands. Just take a look at this list of the top 25 hotel owners: http://nreionline.com/research/real_estate_top_hotel_owners_0701 http://nreionline.com/research/real_estate_top_hotel_owners_... A few are the brands themselves, since they are the owner/operator for some properties. But many are companies you have never heard of that own hundreds of hotels.
    - rokhayakebe 12y ago
      Interesting, I only heard of 1 of out of those companies previously.
devinmontgomery 12y ago
>Remember: These valuations aren't for what a company is currently worth. Otherwise, there's no point to investment. They valuations are for where they see the company going, and more probably, growing past. Nit pick: a valuation is what a company is currently worth. That current worth us just based on anticipated future cash flows.
- hnnewguy 12y ago
  >Nit pick: This isn't a nit-pick, it's a very important point that is sometimes overlooked by the less financially-inclined. So often people will argue for some obscene valuation based on the fact that the company is growing rapidly. Well, the whole point of a valuation model is to capture these elements and estimate a price you're willing to pay today for all that future growth. Of course, that's way easier said than done, especially in a fast growing start-up. But these are sophisticated investors, who are trying not to leave any money on the table.
  - rokhayakebe 12y ago
    VC: "I am going to buy these goods at $1,000 because that is what they will be worth in the future." You: "Great, how much will you sell them for when they are worth that $1000" VC: "$2000" You: "And who will buy it at that price when they worth only half" VC: "Let Wall Street worry about that"
    - devinmontgomery 12y ago
      It's more like: VC: "I am going to buy these goods at $1,000 today because I expect to be able to sell them for $1,100 in one year". How they arrive at the $1,100 is based on the amount of risk there is and the return they could get on a zero-risk investment. Seriously, finance seemed like mumbo jumbo to me to too before I learned about it. But it's actually pretty interesting. This is the calculation for present value.
JonFish85 12y ago
"Furthermore, as much as there are local law issues in places like NYC against them, I don't anticipate those lasting long or having a large effect on their revenues." If this is true, it will also apply to their competitors, right? Either the prices of Marriott will fall if/when they stop charging some crazy-expensive taxes on their guests, or AirBnb will have to start paying/charging for those taxes. One way or another, it'll change. Right now, one of AirBnb's advantages is that they are ignoring zoning restrictions and the like; either those restrictions will go away or they'll have to play by those rules. To me, the biggest thing AirBnb has going for them is that they are choosing to play fast-and-loose with the laws, and hoping that they can grow fast enough to change them (similar to Uber). That gives them a huge advantage against the established businesses who have to play by the rules. Marriott can't just say "we're going to build a giant hotel in this area that isn't zoned for it", but AirBnb can hide behind its hosts because presumably they hold all the liability. I imagine there will be some pushback at some point where AirBnb presumably makes most of their money: in big metropolitan areas. In Boston, where I'm at, these are generally illegal/against rental policies. People tend to look the other way for now, but at some point it might become a bigger issue. For me, personally, when I was setting up my condo association, myself & the other owners specifically wrote it into our documents that AirBnb and short-term-rentals are NOT allowed without prior authorization. On a separate note, I wonder what percentage of the hotel revenue is business travel. I know in companies I've worked for in the past, they had some pretty good deals set up with hotel chains, so no matter where you traveled, you stayed at whatever the preferred chain was.
- grandalf 12y ago
  You are partially right, but the main value of AirBnB is that opens up a larger supply of rooms. Hotel prices often fluctuate wildly -- a room may cost $59 one week and then a few weeks later cost $299 because a trade show is in town, etc. Cities like New York have an insufficient supply of hotel rooms to meet demand. There are often no hotel rooms in NYC available for last-minute booking for under $400/night. With AirBnB, even if everyone paid all the taxes, there would still be thousands of extra rooms available in NYC, many of which would be cheaper than $400 per night. Hotels are a nice idea if you need the sheets changed every day, the room cleaned every day, porters to bring up the luggage, a pool, a front-desk to call to ask how late the pool is open, etc. AirBnB also ads value by offering lots of other permutations. I stayed at an AirBnB in DC and was asked to put my own sheets on the bed (there were freshly laundered sheets in the closet). Upon leaving, I was asked to remove the sheets I used and put them in a basket. The 10 minutes it took me to do those things effectively saved me $100 on the stay, and yes I probably avoided $10 in taxes too.
jonknee 12y ago
Well, those hotel brands you cite are all legal businesses. Airbnb is illegally operated in most of its large markets. The illegal risk is currently put on the backs of its hosts, but that could easily change (either way--there could be a legal breakthrough with upside for Airbnb, but it's a municipality by municipality grind). That makes the value quite hard to pin down, a bad court case or two could severely harm Airbnb. It's not likely that there will be a court case that makes tax paying and code abiding hotels illegal, which makes hotel chains much easier to value.
pyrophane 12y ago
> Furthermore, as much as there are local law issues in places like NYC against them, I don't anticipate those lasting long or having a large effect on their revenues. The same way that if you're in Uber's way you get painted as being anti-jobs, Airbnb gets to say the same thing. And that's in the few places that have them. I don't see the law in New York city going anywhere. If anything, it is only going to be enforced more aggressively. While it isn't clear that that will be enough to dissuade everyone who is currently operating one or more illegal hotels using the service, I would not be surprised if the vast majority of the "entire place" listings currently found on Airbnb in NYC disappear over the next year as it becomes an increasingly risky thing to do. Of course, I don't imagine that having a huge impact on Airbnb's operations overall unless many other cities do the same thing.
glenra 12y ago
I'm glad it works for you but as far as I can tell the difference between Airbnb and a hotel is that when you make a reservation at a hotel you actually have a reservation. Meaning you can then just show up and expect the room to be there when you arrive. Whereas with Airbnb you are tying up your money and time based on a mere hope that a room might be available and that the host might respond and tell you so and tell you how to find/access it. Sometimes the host says "sorry, the calendar is wrong - that room's not available". Sometimes the host doesn't reply at all, in which case Airbnb releases the deposit back but you've lost a day or two and now there's less availability. So far I think I'm 0-for-3.

supergirl 12y ago

what about future competition? what's to stop 100 other people starting similar websites?

joelrunyon 12y ago
Critical mass.
- jonknee 12y ago
  What would stop someone from putting their property up on multiple websites?
  - prostoalex 12y ago
    It's a rational decision for most sellers. There's a bunch of properties listed on AirBnB, HomeAway and VRBO (latter two being owned by the same company). For buyers I'd guess existence of previous transactions and reviews is a quality signal, as opposed to a site where you can get scammed by a dishonest seller.
    - joelrunyon 12y ago
      There's also the niche differential. VRBO & Homeaway tend to be more for vacation rental properties (not all, but that's the trend).
rwmj 12y ago
Sadly, network effects. The same reason that eBay doesn't have any serious competitors, despite the awful experience they offer.
- canvia 12y ago
  What's so awful about eBay? I have always been able to find pretty much exactly what I want at a reasonable price.
  - avalaunch 12y ago
    It's great for buyers. It's awful for sellers. They charge massive fees and offer virtually no protection against buyer fraud.
  - jliptzin 12y ago
    Try selling
chimeracoder 12y ago
Airbnb already negotiates with individual cities to charge taxes for certain rentals (look at Portland). As soon as they're big enough, they will start supporting these taxes and pushing for laws that require collection, as it makes it more difficult for others to enter the market the way they did.
smackfu 12y ago
The more relevant question is, what business plan is going to let someone with a similar website attract customers? You have to find a weak point in Airbnb. Maybe focus on particular underserved cities. Maybe only allow amazing properties and aggressively poach them from Airbnb. Maybe try to enforce a common high-end experience by providing hosts with branded physical goods. Maybe piggyback on an existing hotel brand. Maybe market to the business market exclusively (worked for LinkedIn.) Just some quick ideas, and maybe not viable, but just cloning Airbnb isn't going to get you far.
- Throwaway12830 12y ago
  Agreed. However, no one is going to compete with Airbnb anytime soon. To compete, you can't just be a little better, you need to be a lot better. Reason being, people have accounts on Airbnb, they have feedback, and they're familiar with the experience. If a slightly improved HN is released by someone tomorrow, we don't all jump ship, because we're invested in the current community. For us to leave, it would need to profoundly improve on the experience or offer incredible content. Likewise, to compete with Airbnb you would need a completely different approach or business model, or have a selection of apartments that are far beyond Airbnb in quality and affordability. Airbnb pushes out updates frequently, their site offers a great experience to the user, and they have a solid team of developers that stay ahead of the game. They're going to be here for a while.

smackfu 12y ago

Remember when you are looking at hotel chain valuations that they generally don't own the hotels, but just franchise the brand. There are other large companies involved that own the hotels.

atwebb 12y ago
While that can be true, some get a fair amount of money out of their owned (or ones they actively manage) properties. Franchisees are quite important and contribute a lot in fees (lots of fees...) as you point out but don't discount the still owned properties, many of which are significant buildings by themselves.
rokhayakebe 12y ago
Expand, please.
- smackfu 12y ago
  The hotel business has the separate concepts of "operator" and "owner". The operator is the brand you know. The owner is some property ownership company that contracted a particular operator to build and run their property. The branding is so thorough that you generally don't see any indication of the actual owner, except in the rare cases where a property changes brands. Just take a look at this list of the top 25 hotel owners: http://nreionline.com/research/real_estate_top_hotel_owners_0701 http://nreionline.com/research/real_estate_top_hotel_owners_... A few are the brands themselves, since they are the owner/operator for some properties. But many are companies you have never heard of that own hundreds of hotels.
  - rokhayakebe 12y ago
    Interesting, I only heard of 1 of out of those companies previously.

devinmontgomery 12y ago

>Remember: These valuations aren't for what a company is currently worth. Otherwise, there's no point to investment. They valuations are for where they see the company going, and more probably, growing past. Nit pick: a valuation is what a company is currently worth. That current worth us just based on anticipated future cash flows.

hnnewguy 12y ago
>Nit pick: This isn't a nit-pick, it's a very important point that is sometimes overlooked by the less financially-inclined. So often people will argue for some obscene valuation based on the fact that the company is growing rapidly. Well, the whole point of a valuation model is to capture these elements and estimate a price you're willing to pay today for all that future growth. Of course, that's way easier said than done, especially in a fast growing start-up. But these are sophisticated investors, who are trying not to leave any money on the table.
- rokhayakebe 12y ago
  VC: "I am going to buy these goods at $1,000 because that is what they will be worth in the future." You: "Great, how much will you sell them for when they are worth that $1000" VC: "$2000" You: "And who will buy it at that price when they worth only half" VC: "Let Wall Street worry about that"
  - devinmontgomery 12y ago
    It's more like: VC: "I am going to buy these goods at $1,000 today because I expect to be able to sell them for $1,100 in one year". How they arrive at the $1,100 is based on the amount of risk there is and the return they could get on a zero-risk investment. Seriously, finance seemed like mumbo jumbo to me to too before I learned about it. But it's actually pretty interesting. This is the calculation for present value.

JonFish85 12y ago

"Furthermore, as much as there are local law issues in places like NYC against them, I don't anticipate those lasting long or having a large effect on their revenues." If this is true, it will also apply to their competitors, right? Either the prices of Marriott will fall if/when they stop charging some crazy-expensive taxes on their guests, or AirBnb will have to start paying/charging for those taxes. One way or another, it'll change. Right now, one of AirBnb's advantages is that they are ignoring zoning restrictions and the like; either those restrictions will go away or they'll have to play by those rules. To me, the biggest thing AirBnb has going for them is that they are choosing to play fast-and-loose with the laws, and hoping that they can grow fast enough to change them (similar to Uber). That gives them a huge advantage against the established businesses who have to play by the rules. Marriott can't just say "we're going to build a giant hotel in this area that isn't zoned for it", but AirBnb can hide behind its hosts because presumably they hold all the liability. I imagine there will be some pushback at some point where AirBnb presumably makes most of their money: in big metropolitan areas. In Boston, where I'm at, these are generally illegal/against rental policies. People tend to look the other way for now, but at some point it might become a bigger issue. For me, personally, when I was setting up my condo association, myself & the other owners specifically wrote it into our documents that AirBnb and short-term-rentals are NOT allowed without prior authorization. On a separate note, I wonder what percentage of the hotel revenue is business travel. I know in companies I've worked for in the past, they had some pretty good deals set up with hotel chains, so no matter where you traveled, you stayed at whatever the preferred chain was.

grandalf 12y ago
You are partially right, but the main value of AirBnB is that opens up a larger supply of rooms. Hotel prices often fluctuate wildly -- a room may cost $59 one week and then a few weeks later cost $299 because a trade show is in town, etc. Cities like New York have an insufficient supply of hotel rooms to meet demand. There are often no hotel rooms in NYC available for last-minute booking for under $400/night. With AirBnB, even if everyone paid all the taxes, there would still be thousands of extra rooms available in NYC, many of which would be cheaper than $400 per night. Hotels are a nice idea if you need the sheets changed every day, the room cleaned every day, porters to bring up the luggage, a pool, a front-desk to call to ask how late the pool is open, etc. AirBnB also ads value by offering lots of other permutations. I stayed at an AirBnB in DC and was asked to put my own sheets on the bed (there were freshly laundered sheets in the closet). Upon leaving, I was asked to remove the sheets I used and put them in a basket. The 10 minutes it took me to do those things effectively saved me $100 on the stay, and yes I probably avoided $10 in taxes too.

jonknee 12y ago

Well, those hotel brands you cite are all legal businesses. Airbnb is illegally operated in most of its large markets. The illegal risk is currently put on the backs of its hosts, but that could easily change (either way--there could be a legal breakthrough with upside for Airbnb, but it's a municipality by municipality grind). That makes the value quite hard to pin down, a bad court case or two could severely harm Airbnb. It's not likely that there will be a court case that makes tax paying and code abiding hotels illegal, which makes hotel chains much easier to value.

pyrophane 12y ago

> Furthermore, as much as there are local law issues in places like NYC against them, I don't anticipate those lasting long or having a large effect on their revenues. The same way that if you're in Uber's way you get painted as being anti-jobs, Airbnb gets to say the same thing. And that's in the few places that have them. I don't see the law in New York city going anywhere. If anything, it is only going to be enforced more aggressively. While it isn't clear that that will be enough to dissuade everyone who is currently operating one or more illegal hotels using the service, I would not be surprised if the vast majority of the "entire place" listings currently found on Airbnb in NYC disappear over the next year as it becomes an increasingly risky thing to do. Of course, I don't imagine that having a huge impact on Airbnb's operations overall unless many other cities do the same thing.

glenra 12y ago

I'm glad it works for you but as far as I can tell the difference between Airbnb and a hotel is that when you make a reservation at a hotel you actually have a reservation. Meaning you can then just show up and expect the room to be there when you arrive. Whereas with Airbnb you are tying up your money and time based on a mere hope that a room might be available and that the host might respond and tell you so and tell you how to find/access it. Sometimes the host says "sorry, the calendar is wrong - that room's not available". Sometimes the host doesn't reply at all, in which case Airbnb releases the deposit back but you've lost a day or two and now there's less availability. So far I think I'm 0-for-3.