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Should Airbnb be worth more than Hyatt Hotels?

Airbnb, a company with a worldwide portfolio of social contacts, yet few physical assets, has a market value at $10 billion according to Wall Street Journal. WSJ – March 21, 2014 Airbnb Is in Advanced Talks to Raise Funds at a $10 Billion Valuation.

In contrast, Hyatt Hotels, a company with over 500 hotels worldwide, derives 60% of its business from the 25% of upper-upscale and luxury hotels in the global portfolio the company owns or leases. Long-term management contracts and physical assets ensure a steady revenue. Hyatt Hotels has a market cap value of $8.4 billion.

The Wall Street Journal article has an infographic showing the market cap value of major hotel chains. 

Hotel company valuations

A Reuben Brewer article on the financial website Motley Fool offers a good comparison of the business models for Airbnb and Hyatt Hotels.

While Airbnb’s systems could, theoretically, be deployed anywhere around the world, Hyatt is already doing just that. And Hyatt caters to wealthy travelers and business people that are willing to spend money—not cutting corners to try to save some dough.

Reuben Brewer article on Motley Fool (April 24, 2014)

Airbnb may be the next Expedia or Amazon. While Airbnb is still a private company, Wall Street thinks the consumer to consumer business will seek an IPO listing which has led to the $10 billion value being tossed around the financial news sites.

Is Airbnb too big to fail?

Personally, I have not given Airbnb a try yet. Two summers living in Irish BnBs, while a wonderful experience for most stays, was my motivation for getting into hotel loyalty programs in the first place.

At least I know my stays at two Hyatt Regency hotels next week will provide me privacy and a private bathroom. Also, complimentary breakfast in the morning as a Diamond elite member and a few thousand bonus points to help pay for another future hotel stay award.

Will Airbnb start a loyalty program?

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7 Comments

  • Bob April 26, 2014

    Another example that our financial system is filled with “funny money”.

  • Dwondermeant April 26, 2014

    Rick you have become one of my favorite bloggers of all time
    Thank you for this timely post
    I have been looking at various ways to invest in this company
    In fact the investment group loaning these folks have invested in a number of young growing
    companies like Über and Chobani yogurt that is expanding and growing its product line
    When we look at the hotel companies what do we have?A mature tired industry that have gutted their programs overpriced redemptions and skyrocketed daily room rates
    Just look at the fools from Blackstone Hilton 100k for a single night in New York?
    I believe over time just like the brilliant über option there is going to be a backlash to how hotel companies managed their business with greed and there will another serious form of new competition
    Just look at the revolution of taxi alternatives
    Business must grow reinvent and capture a customers loyalty that’s done delivering a quality product at fair market pricing and delivering a value over price gouging
    If hotel companies can no longer offer this fairness as they have typically done in the past
    Someone or something else will take some of their place and market share

  • Trent April 26, 2014

    I agree completely on the valuation issue – Airbnb’s valuation seems inflated, especially compared to successful brick and mortar hotel chains like Hyatt.

    I will say that we have had success with Airbnb on travels to Europe. I am a loyal Hyatt customer here in the US and stay almost exclusively at its hotels. But we have enjoyed all of our Airbnb experiences in Italy, France, Greece and Turkey. We only rent places where we have a private apartment or house and rely on the customer reviews to guide us. We’ve had minor inconveniences, usually stairs, and sometimes the beds aren’t as comfortable as they would be at a Hyatt. But staying in local neighborhoods and having more space for us and our son more than makes up for those minor issues. The submersion into culture doesn’t necessarily apply when we are at home in the States. Accordingly, we usually stay at Hyatt’s here and use points to upgrade to bigger rooms.

    So don’t undersell the business model…it has potential for growth and it is a valuable tool for local property owners and their communities who might not otherwise have a way for travelers to find them.

  • farnorthtrader April 26, 2014

    Couldn’t agree more. I am in the business of managing vacation rentals and utilize very similar services through Homeaway, Tripadvisor, and OwnerDirect. While each provides value, as does AirBnB, there are already lots of competitors in the space and virtually no barriers to entry, so anytime AirBnB starts to make some extra money, new competitors will come in and take it away. Rather than Expedia or Amazon, AirBnB is more likely the next Groupon or Living Social, operating in similar markets, although even those have more significant barriers to entry than the vacation rental listing market.

  • Lark April 26, 2014

    Trent is right on.

    Renting a property – home or apartment – with local neighbors on both sides, local stores and cafes to walk to, and your own kitchen makes for a much different experience than staying in a hotel.

    Hotels still have their place, of course, but we are looking exclusively to airbnb for 10 days in Italy this summer.

    I think based upon reading your work here Ric, that you will like many aspects of airbnb too.

  • HaleyB April 26, 2014

    You can search for whole home/apartment rentals only.
    It is very much not a hotel experience, but in many ways it is much more private.

    As for value. Huge user base, no properties to maintain or on site staff to pay. They pay a handful of CS agents, a few IT guys, insurance, and they rent server space from Amazon or Rack Space or one of the other providers that offers this service.

    Understanding what that means is important. There is no real limit to how quickly they can ramp up both in terms of users/renters and properties. How fast can Hyatt build a hotel? What does that cost?

    Compare their site to the others. Now compare them on a smart phone.

    Homeaway is never as fast as AirBnB. If I get stuck by a delay or cancelled flight I can book a bed before the airplane doors open. I’ve done it twice with excellent results. I’ve used Homeaway mostly to rent timeshares from owners, I’m not sure AirBnB allows that, I guess I’ll go check.

  • Ben April 27, 2014

    I have stayed in Airbnb apartments several times, with another happening in 6 weeks or so. Each time has been awesome.

    The last one I did was a cute 1 bedroom houseboat in Amsterdam on a quiet canal near the Rijksmuseum, and spent less than any halfway-decent hotel in town (even Hotwire/Priceline) and using any points I had would have been a terrible value comparing the price of the houseboat (less than 0.4 cents/point in Club Carlson for example)

    My next one is a gorgeous apartment for 3 of us in the old Quebec part of Quebec City with a deck with panoramic views. We are paying about the same as booking 2 rooms at a 3* hotel through Hotwire, which I believe is a mile outside Old Quebec (assuming I’m guessing the hotel correctly).

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