With HotelTonight buy, analysts see opportunity for Airbnb

With Airbnb looking to grow its burgeoning hotel inventory, most industry analysts agree that the company’s takeover of last-minute booking platform HotelTonight is a strategic win for the homesharing heavyweight.

“Airbnb has been trying to get more independent hotels on its platform for a while, and this was a smart way for them to dip their toes a little more into the space,” said Makarand Mody, assistant professor of hospitality marketing at the Boston University School of Hospitality Administration. He added that the purchase also gives Airbnb more competitive clout. 

“I think this is definitely a distribution synergy-based acquisition for Airbnb, and it’s really about the battle of the click,” Mody said. “When you look at what the OTAs, hotel companies and Airbnb are all doing, it’s basically just becoming a big distribution game.”

According to Simon Lehmann, CEO and co-founder of AJL Consulting, a private accommodation and vacation rental industry firm, the move also serves as a way for Airbnb to quickly augment its footprint ahead of a planned initial public offering.

“Airbnb will need to justify their expected IPO valuation,” Lehmann said. “And you can’t scale Airbnb by solely depending on hosts. So obviously, the next step is to start aggregating inventory.”

Airbnb announced earlier this month that it had agreed to acquire HotelTonight for an undisclosed sum, with media reports pegging the deal at between $400 million and $500 million. 

Launched in 2010, HotelTonight was originally introduced as a mobile app offering users the ability to book a room that same night at a discounted price. The platform later extended its booking window to seven days and eventually to 100 days, while also adding new features like multiroom booking capabilities. 

Airbnb, meanwhile, officially opened its homesharing-focused platform to hotels early last year, offering users access to boutique properties, bed-and-breakfasts and other hospitality venues like hostels and resorts. The company reported that the number of hotel listings on Airbnb more than doubled in 2018, with Airbnb users booking three times as many nights with boutique hotels in 2018 as they did in 2017.

Though the two platforms vary, Lehmann is confident that HotelTonight will fit comfortably within the Airbnb fold.

“The type of customer who uses HotelTonight is very similar to the Airbnb customer, as well,” he said. “He’s flexible, he’s looking for a good deal, he’s not too worried about what his accommodations will be like when he gets there. I think the user base that HotelTonight has could provide Airbnb huge leverage in terms of database and additional customers.” 

Lehmann added that unlike many of Airbnb’s core listings, HotelTonight’s inventory isn’t at the mercy of local regulatory challenges, which have intensified in key markets, including Paris and Miami, among others, in recent months.

Robert Cole, Phocuswright’s senior research analyst for lodging and leisure travel, also said he saw opportunities for crossover.

“I think they may be able to have situations where HotelTonight inventory could pop up in the Airbnb interface and vice versa,” Cole said. 

He also asserted that Airbnb will have to be careful when it comes to clearly delineating between its hotel and home listings. 

“It depends on the traveler and the purpose of the trip,” he said. “But the more Airbnb can understand that and then present the right unit or hotel to the right person at the right time, the better. And HotelTonight gives them access to a lot of very interesting hotel data to work with.”

Of course, the deal isn’t entirely without potential drawbacks. While Airbnb claims that nearly 90% of guests who first used Airbnb to book a hotel subsequently returned to book a home accommodation, home hosts who have invested in offering a more professional and premium experience — often earning Superhost or Airbnb Plus status — might find Airbnb’s recent focus on growing hotel inventory somewhat concerning.

Boston University’s Mody said, “I think Airbnb might be worried that they’ll see some leakage of hosts on their platform, particularly from those who hear this news and say, ‘You know what? What’s the difference now? Why should I list on Airbnb and not also be on some of the other platforms?’ We may start to see more cross-platform listings, because then it’s going to become a distribution game for hosts as well, much like [it is] for hotels.”

Likewise, as Airbnb’s model starts to more closely mimic that of a major OTA, Mody said, the company could also risk confusing customers and losing some of its carefully crafted cachet.

“The whole idea of Airbnb was, when it started, this sort of counter-culture platform where you could get something that was different from a hotel,” Mody said. “But now, if you’re going to find some of the same inventory on Airbnb that you do on an Expedia or Booking.com or another OTA, there is a likelihood that it’s going to be harder for users to figure out which is the best platform for them. 

“Right now, with Airbnb, you still mostly know what [type of accommodation] you’re getting. But once you start throwing hotels into the mix, I don’t necessarily know, as a consumer, what might be the benefit of booking on Airbnb versus Expedia.