Althouse: Airbnb is, apparently, worth more than Hyatt.

March 21, 2014

Airbnb is, apparently, worth more than Hyatt.

$10 billion.

Why build all those buildings when you can build all that with your mind?

38 comments:

Bob Ellison said...: I hope they dedicate some of that money toward fighting the inevitable regulatory hammer. Hotels, cab companies, and the like will try to kill these new businesses, much as newspapers and TV news folks have tried to kill blogs.; 3/21/14, 8:39 AM
SteveR said...: Taxes. Yeah that's a problem. There's no way to make money that some agency doesn't want a chunk of, especially with vehicles and properties. Then there's insurance companies and liability issues. Maybe they'll get an extension or something.; 3/21/14, 8:42 AM
MadisonMan said...: Used airbnb to find a house overseas for a couple days next month, my first time.

I don't see a downside.

Maybe I should rent out my house for football games. Seems like a nice way to make money. Of course, Madison has already taken steps for a cut of the pie, as if my $9K+ property tax isn't enough.; 3/21/14, 9:16 AM
Anonymous said...: valuations of dotcoms are wacko.

At least I can see that airbnb has a logical, fee driven business model, unlike many of those Underpants Gnome business plans...; 3/21/14, 9:29 AM
Joe said...: The problem is that there is a very low barrier to entry in this market--Airbnb isn't doing anything that someone else can do just as well with relatively little capital.; 3/21/14, 9:47 AM
Michael K said...: Was it once called "Pets.com?"

I simply can't see these valuations.; 3/21/14, 9:49 AM
The Crack Emcee said...: "Why build all those buildings when you can build all that with your mind?"

True dat.; 3/21/14, 10:01 AM
SteveR said...: vrbo; 3/21/14, 10:02 AM
Scott said...: Somebody ought to attempt to rank major companies based on cash flow and then compare it to their market cap. That would be an interesting study. I just don't know where the valuation comes from.; 3/21/14, 10:05 AM
David said...: Apparently.; 3/21/14, 10:17 AM
Mitch H. said...: Well, the thing is, brick and mortar assets have maintenance costs. Depreciation. Employees. Insurance. Costs up the wazoo. Airbnb doesn't *own* anything, it's just a clearinghouse. It's all upside, I guess? They must have mondo big insurance if they're at all liable for the inevitable craziness of putting random people in random people's houses, with all the opportunity for damage, crime, and high weirdness, right?; 3/21/14, 10:59 AM
Titus said...: I am way into uber-it's fab.; 3/21/14, 11:36 AM
Michael said...: Hyatt does not own many of the assets that bear its name. For the most part the hotels are managed by Hyatt under long term management contracts for owner/investors who built and own them. Some are franchised in which case the owners operate the properties themselves and pay royalties to Hyatt. Hyatt, and all commercial hotels, are subject to strict local and Federal laws governing everything to the decibels of fire alarms to the number of handicap rooms to the requirement that all pools have lifts to enable handicapped guests into the pools. The regulators as well as the tax authorities will have their pants in a wad over Airbnb just as they have over Uber. Uber has been brash and very successful in overcoming the taxi lobbies and well they should. They offer quick service with the push of an iPhone app, arrive in minutes, present a bill including tip upon exit of the car via email and in cars that are clean and driven by sober people who only talk if you wish.

Airbnb and Uber are here to stay regardless of the pushback.

Joe: So start one up and see how far you get! Go for it. Huge barrier to entry to catch up with a firm that is now well known with the customer base they have. The technology is a bit tricky as well. Download Uber and give it a try and then decide how easy it might be for you to crank one up.; 3/21/14, 12:04 PM
Amexpat said...: Even more useful is AIRPNP (airpnp.co) a worldwide share toilet site. Prices seem to go for around 5 bucks a pee.

With over a trillion yearly pees in the US alone, the prospects for their revenue stream is impressive.; 3/21/14, 12:08 PM
Danno said...: Not trying to support Airbnb, but has anyone looked at the details underneath Hyatt to see if they own hotels (or owned by franchisees?) or in what combination? It is possible that Hyatt's value consists of intangible assets rather than real estate.; 3/21/14, 12:08 PM
Michael said...: Danno: See my comment above; 3/21/14, 12:27 PM
Bill R said...: I'm happy my 401(K)is up but clearly, the end is near.; 3/21/14, 12:57 PM
Bob Ellison said...: Amexpat, good one.; 3/21/14, 1:59 PM
nina said...: I'm a frequent user of Airbnb. They provide a valuable service: not only do they match people with (typically) less expensive space, but they offer some security and for this they charge a fee: they collect your money upfront and they hang onto it until you've had 24hours to inspect/live in the premises to make sure they are as described. In addition, users review their stays and hosts review the users. For me, I've had nothing but good outcomes. I'm not surprised hotels are worried.; 3/21/14, 2:53 PM
Joe said...: Michael, you misunderstand. I'm not saying Airbnb is a bad idea--it actually sounds like a great idea--but I don't see the valuation. Without patents or something to prevent a deep pocketed competitor from entering the space, Airbnb investors are on very shaky grounds.

I also wonder how long it will take the traditional hospitality industry to lobby for "customer friendly regulations" with the intent to shut out Airbnb and competitors.; 3/21/14, 5:20 PM
Deb said...: Nina, I am glad to hear that. I plan on using Airbnb on my next trip to Israel.; 3/21/14, 5:21 PM
Joe said...: Also, Michael, there is no huge barrier to entry for a competitor to Airbnb. Unless it's a genuinely gigantic amount of money, cost isn't a barrier; patents, zoning, inventions, development time, etc. are barriers.

Years ago I worked at a very high volume web site. Every quarterly meeting, the CEO would stand up and tell use to remember that we weren't doing anything someone else couldn't do with money and time. He would add that the moment we stood still, we'd be run over. (They are still the number 1 site in that niche, but almost went bankrupt trying to diversify into things just outside of that niche, which is another hard learned lesson for businesses and one I've seen repeated many times.); 3/21/14, 5:26 PM
rhhardin said...: Competition takes the profit out of every business eventually, leaving it with below average returns, unless it goes the crony capitalism route to prevent it.; 3/21/14, 6:43 PM
Michael said...: Joe. The barrier is not in buying a few computers and devising code, it is in arranging inventory of scale. Think Facebook. The article makes clear that the valuation is preliminary and perhaps heady. I have raised early stage capital for similar endeavors in resort rentals and have been involved in the sale of one to a public company with loads of capitall. Harder than it looks. Airbnb has accumulated a loyal following of renters and that is the ticket to their success.; 3/21/14, 7:07 PM
Freeman Hunt said...: I hope Hyatt keeps building their buildings because I like to stay in them. In fact, I stayed in a Hyatt Place last night. I've never tried Airbnb. The intimacy of another person's house. A stranger's house.; 3/21/14, 8:22 PM
Freeman Hunt said...: Right after typing that I thought, "Hey wait, Airbnb might be perfect for [a certain trip in the works]." So now I'm browsing it.; 3/21/14, 8:30 PM
Joe said...: Michael, I've been to the site. It isn't hard to make it. Google could implement it in an afternoon. The offerings are pitiful; getting customers simply takes some money and advertising--NOT big barriers to entry.; 3/22/14, 12:09 AM
Michael said...: Joe. Have you ever seen an ad to join Airbnb? To put your home or a part of it in inventory? No?

This is not an afternoon's work or Google or Microsoft (Expedia) both of which are dying for content would have done it long ago. Expedia tried for years to get into the real time booking business for condos and homes in resorts. See ResortQuest, see Steve Case's resort homes company. Decades, not afternoons.; 3/22/14, 8:22 AM
Michael said...: Joe. Have you ever seen an ad to join Airbnb? To put your home or a part of it in inventory? No?

This is not an afternoon's work or Google or Microsoft (Expedia) both of which are dying for content would have done it long ago. Expedia tried for years to get into the real time booking business for condos and homes in resorts. See ResortQuest, see Steve Case's resort homes company. Decades, not afternoons.; 3/22/14, 8:23 AM
Trashhauler said...: It is likely that investing in some of these sites is similar to the 17th century Dutch tulip craze.; 3/22/14, 9:07 AM
Michael said...: Trashhauler. Similar in what way? We have seen the madness of crowds in the south seas bubble and the tulip craze and the dot com bubble of the late 1990s but how are Uber and Airbnb like any of thise things?; 3/22/14, 9:22 AM
Michael said...: Trashhauler. Similar in what way? We have seen the madness of crowds in the south seas bubble and the tulip craze and the dot com bubble of the late 1990s but how are Uber and Airbnb like any of thise things?; 3/22/14, 9:23 AM
Anonymous said...: As I write this, I am lying in a stranger's bed, rented over AirBNB. This is my first time trying it. The location is fabulous, two blocks from the beach in a hugely expensive, desirable, and famous California community. The price is modest, and the facilities are first rate.

And yet... I feel very uncomfortable. If I wanted, I could rifle through her underwear drawer or financial records. Her personal hygiene items are in the bathroom, and her laundry that she forgot to take out of the dryer is in a heap in the corner of her bedroom. Does she expect me to fold it? Put it back in the dryer when I leave? Let it lie in a heap? I'm not sure I like this. I feel like a voyeur. At least with VRBO, you are getting second homes that people have set up with owner's lockers where all reminders of them are securely stored away between their visits.

I could NEVER rent out my house like this. I wouldn't even want a good friend to have the run of the house like this. Maybe if I had a pool house or casita that was always reserved for guests, with a separate entrance and key...; 3/22/14, 11:25 AM
Joe said...: Michael, yes I've seen the site and the ads and they aren't difficult. It's nothing more than a fancy Craig's list. There is NOTHING fancy about what Airbnb is doing. Nothing complicated.
Why do you think this it is so?

Your argument that company X tried this and failed, therefore Airbnd is worth billions is silly. Company X tried and failed because they couldn't monetize this crap. Do you understand how marginal this business is?

Airbnd will either go public and then crash and burn or will be bought and the company will wither because it can't scale to it's valuation.

Why don't I do it? Because it would be a giant waste of time and money in the long term since it has no future. This type of business is either a work of love or an IPO con. How you can't see that mystifies me.

I suppose I should start a company and get you involved since you are a sucker and a good sock puppet.; 3/22/14, 11:52 AM
Amexpat said...: I've seen the site and the ads and they aren't difficult. It's nothing more than a fancy Craig's list. There is NOTHING fancy about what Airbnb is doing. Nothing complicated.

I just registered and booked my first room. I was impressed with the process. They asked for a scanned passport or license for verification and then sent a confirmation code to my phone. Along with this, most of the hosts and guests have recommendations and references. Not fail safe, but a lot more secure than Craig's list or some budget accommodations that I've stayed out.

They seem to have a loyal following with an element of idealism. That's worth something, but of course nowhere near their absurd market valuation.; 3/22/14, 12:06 PM
Amexpat said...: @Skookum John

I suspect I'll be experiencing the same thing in a few days time. But what the heck, it's good to get out of your comfort zone every once in awhile.; 3/22/14, 12:13 PM
Michael said...: Joe. I did not try and support the valuation. My point is that if this is easy and you have an ounce of energy then you should go for it. You apparently have software in your background so why not compete yourself. I know it wouldnt be the usual challenge for you but it would profitably prove your point.

I make my business in raising capital for people and have extensive experience in lodging. Never seen you comment on this blog so dont know what you do or your experience as an investor. I do know that you are not a careful reader based on this absurd contention: "
"Your argument that company X tried this and failed, therefore Airbnd is worth billions is silly". Any reader would know that i made no such argument.

I dont think you know what sock puppet means.; 3/22/14, 2:54 PM
Michael said...: Joe. I did not try and support the valuation. My point is that if this is easy and you have an ounce of energy then you should go for it. You apparently have software in your background so why not compete yourself. I know it wouldnt be the usual challenge for you but it would profitably prove your point.

I make my business in raising capital for people and have extensive experience in lodging. Never seen you comment on this blog so dont know what you do or your experience as an investor. I do know that you are not a careful reader based on this absurd contention: "
"Your argument that company X tried this and failed, therefore Airbnd is worth billions is silly". Any reader would know that i made no such argument.

I dont think you know what sock puppet means.; 3/22/14, 2:55 PM