Airbnb has only been around for nine years, but it's becoming more and more likely that it's going to adhere to the mantras of the past—if you can't beat 'em, join 'em.
San Francisco-based Airbnb, which may go public in a relatively short time frame, is likely to use the cash on its balance sheet to make acquisitions to further compete in the travel industry and become a full-fledged travel services company, according to a report in Bloomberg.
The company, which has been valued at $30 billion by the private markets, may want to expand into areas such as luxury tourism, airfares and other related areas, which would be a smart thing, according to analysts.
“There are a variety of technologies they could acquire and a lot of niches they could pursue in addition to growing luxury,” said Henry Hartveldt, a travel industry analyst at Atmosphere Research Group in San Francisco. “They could go after niches that appeal to seniors that are looking to share their homes with roommates, students who are looking for a long-term rental, LGBT and other groups. They could also go into Asia, Africa and South America. The world is truly Airbnb’s oyster.”
Airbnb has started shopping already, with reports coming earlier this month that the Brian Chesky-led company was in talks to acquire Luxury Retreats, a Canadian-based luxury travel rental company. The purchase price, assuming the deal goes through, would be between $200 million and $300 million in cash and stock. (For more, see also: How Airbnb Is Trying to Get the Rich & Famous.)
Bloomberg also noted Airbnb is also looking to buy Tilt, a group-payments company, which has raised $62.1 million from venture backers, including Andreessen Horowitz (which also backs Airbnb) according to Crunchbase.
Taking on the Travel Industry
Such a move by Airbnb, which has raised $3.95 billion so far from investors, would further pit it against travel service industry giants such as Priceline Inc. (PCLN) and Expedia Inc. (EXPE), which dominate much of the space.
Hartveldt added that Airbnb could look to acquire a small travel agency, one that is generating over $250 million in airline ticket sales to help boost its business. It could also look to acquire a booking specialist, integrating hotel listings into Airbnb’s search results, or property management and payment tools used by hosts to “increase visibility and efficiency.”
Last November, Airbnb started a tours and experiences business in cities worldwide, as it further seeks to diversify its revenues away from home rentals and become more of a full-fledged travel services company. News of the tours and experience business was first reported by Recode. (For more, see also: Airbnb.)
By buying companies now, Airbnb would be doing so at a time when its revenues are growing, but profitability has only just started.
Airbnb told investors in 2015 it would generate $900 million in revenue, a nearly four-fold increase from $250 million in 2013, according to Fortune. However, profitability just occurred in the second half of 2016, according to Bloomberg.
Currently, Airbnb generates the majority of its revenue from its platform and its users. It takes a 3% cut of each booking and a service fee—ranging between 6% and 12%—from guests who use its platforms.