The Wall Street Journal is reporting that Airbnb is in advanced talks to raise a massive funding round in the neighborhood of $400 to $500 million at a valuation of $10 billion. The article points out that such a valuation would make the company more valuable than Wyndham, Hyatt and the InterContinental, all worth between $8 and $10 billion.
While those hotel chains are probably feeling less of the hurt from Airbnb than the hotel lobbies claim, the article does point to the proliferation of listings in the sub $200 range that are eating into the mid priced hotels’ business.
Sean Hennessey, chief executive at Lodging Advisors, a hotel consulting firm, said that the economy-priced hotels have been hit the hardest. In New York, for example, he said that 80% of the Airbnb listings were for $200 a night or less. He estimates that the 416,000 Airbnb guests who visited New York for the 12 months ending in July 2013, cost the city’s hotel industry about one million room nights.
One aspect of the funding round that is an emerging trend is the fact that it appears some of the raise will come from private equity and hedge funds that don’t want to wait until the IPO. In the last 12 months 22 companies have raised money at valuations a billion or higher. And with public markets improving, there’s greater investor confidence that post IPO performance will support pre IPO valuations.
With an influx of capital, we may well be nearing doom for Airbnb competitors like Wimdu. The money would accelerate Airbnb’s expansion as well as allow it to market, advertise, and lock up more talent. The WSJ reports that revenue doubled last year to $250 million. A $10 billion valuation puts the company at 40X revenue, which is about where Twitter’s valuation hovers. We’ll call that healthy.