Category Archives: Valuations

Expedia Owned HomeAway Driving Customers Away?

In December 2015, Expedia bought HomeAway / VRBO for a reported $3.9 billion dollars. Its been just over a year now, and customers are growing in frustration according to a variety of sources, as they appear to be copying Airbnb’s commission model by applying guest and service fees.

Kim Bergstrom writes a great article explaining what is happening with VRBO, HomeAway, Airbnb, FlipKey, TripAdvisor and Expedia Service Fees.

GeekWire also has an excellent article explaining how VRBO/HomeAway now stacks up and competes against Airbnb. An excerpt sums it up well:

One of the biggest changes is the introduction of a traveler’s fee — also referred to as a “service fee.” Travelers who book through the HomeAway checkout process are now charged a fee that averages between 4 percent and 9 percent of the rental amount, not exceeding $499, the company says. Airbnb charges a similar fee.

How Much Does Airbnb Charge?

The exact commission rates both the rental owner and guest pays to Airbnb is becoming more nebulous, we will try to break it down here, for approximately what the rates are as of 2017:

Here are quotes taken from the Airbnb website pertaining to fees and commissions, and our opinion on what it means.

Guest Service Fee:

Many guests are unaware they are being charged a fee just to book a rental unit using Airbnb. This fee does not go to the rental owner/manager, it goes to Airbnb. If one had to guess at what the average rate is, given the information provided, I think it is reasonable to speculate it at 10%.

“To help cover the costs of running Airbnb, we charge guests a service fee every time a reservation is confirmed. The amount of this service fee varies and is based on a percentage of the reservation subtotal (before fees and taxes).”

“The exact amount of the service fee is displayed before guests confirm a booking. Guest service fees are typically 6-12% but can be higher or lower depending on the specifics of the reservation.”

Host Service Fee:

Not only does the guest pay a fee, but also, so does the host, the rental unit owner/manager. Here is what they say about the Airbnb Host Service Fee:

“To help cover the costs of processing guest payments, we charge hosts a service fee every time a reservation is completed. The amount of this service fee is calculated from the reservation subtotal (before fees and taxes).”.

They do not list a range for what this fee is, they simply say to visit your account transaction history, and check how much was actually taken out.

I did one booking using Airbnb, rented a room, and as a host, I was charged just over a 3% commission, it seems they rounded up to the nearest dollar.

A 3% fee is not bad, so why not just publish that they charge a 3% fee? We will speculate, that the more bookings a host gets using Airbnb, the more this fee will increase. Hosts are less likely to complain about higher fees the more they make. If anyone has information confirming or conflicting with this guess, please let us know?

Therefore, we will speculate this fee is averaged out to be around 5%. But wait, there’s more:

VAT Fee:

Certain cities, countries and regions will be charged VAT fee’s. Sometimes both the host and the guest are charged.

“Airbnb charges VAT on its service fees for customers from the Albania, European Union, Iceland, New Zealand, Norway, South Africa, and Switzerland. In Japan, JCT applies to the hosts and the guests. Airbnb is also required to collect VAT on its services fees from all users who contract with Airbnb China.”

We won’t speculate on this number, as it is too variable, and it does not appear that any of it goes towards Airbnb’s business. But my guess is, if they are charging a VAT fee, if it pertains to your country, then probably both the guest service and host service fee’s will go up to account for the extra transaction work.

Conclusion:

We think a total fee of 15% per booking, paid by both guest and owner, is a pretty fair estimate of how much Airbnb charges. So essentially, if you book a 7 night stay at a rental costing $285 per night, you pay a total of $2000 for that stay… approximately $300 of that transaction will go to Airbnb.

 

 

 

Vacation Rental Founder’s Net Worth

Brian Chesky, co-founder of Airbnb is valued to be worth $3,300,000,000 according to Wikipedia. Joe Gebbia, the other co-founder is estimated to be worth $1,900,000,000. Airbnb was founded in late 2007.

Brian H. Sharples, founder of HomeAway and VRBO doesn’t have a billion dollar net worth, its more in the $30,000,000 range, but he does pull down a cool $6,000,000 a year in salary and bonus’s by some estimates, HomeAway.com was founded in February 2005.

Jeffrey Hock, CEO of Free-Rentals.com, the leading free vacation rental platform founded in 2004, congratulates the late-coming vacation rental platform founders for their success.

That said, since Free-Rentals is not a publically traded company, Mr. Jeffrey Hock is under no obligation to disclose his net worth.

Yet, one brave investigative journalist managed to obtain a photograph Mr. Hock’s walk-in-closet while lost in the South wing of his mansion looking for a bathroom. This picture is the only known indication of the Free-Rentals founders net worth. Godspeed Mr. Hock.

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Airbnb Revenues Exceed All Major Hotels

Now that Airbnb raised $100 million in new funding, and its valuation at twenty five and a half billion dollars, Marriott International has countered by purchasing Starwood Hotels for $12.2 Billon USD. The Priceline Group made its move by claiming to have listed 21 million rooms for rent.

According to Skift:

“Airbnb’s reported third quarter room nights sold (23.8 million), gross bookings ($2.2 billion), market cap ($25.5 billion) and revenue ($340 million) with major online travel agencies as well as TripAdvisor and HomeAway.

Airbnb’s $340 million in third quarter revenue has left HomeAway, which is being acquired by Expedia Inc. for $3.9 billion, far behind at $130.7 million in revenue. As with comparing Airbnb to hotel chains, gauging Airbnb (largely urban rentals of primary residences) against HomeAway (mostly vacation home rentals in resort areas) is choppy, at best.

Still, despite its projected 2015 operating losses, Airbnb’s revenue picture and traction is clearly on the upswing.”

Company Valuation/Market Cap Q3 Revenue
Marriott International $18.59B $3.6B
Hilton Worldwide $23.2B $2.9B
Accor Hotels $10.2B $1.58B
Wyndham $8.9B $1.56B
Starwood Hotels $12.4B $1.4B
Hyatt Hotels $6.9B $1.B
Airbnb $25.5B $340M
Choice Hotels $2.9B $241.5M

Source: Wall Street Journal, public documents

Value of .01% Stake in Airbnb?

MoneySo, just thinking out loud here, what is the value of a .01% stake in Airbnb? What a great question to ponder, let’s do the math.

According to the Wall Street Journal and CNN, Airbnb currently today July 11, 2015, has a valuation of $25 Billion USD.

So let me get out my calculator while I calculate .01% stake of $25 Billion dollars, wait, that won’t work, my calculator won’t fit in that many zeros.

Computer calculator puts it as follows: $25,000,000,000 X .0001 = $2,500,000.

A cool $2.5 Million USD. That would be nice eh?

While Free-Rentals is hardly Airbnb (yet), we were in this holiday rental industry years before they arrived to the scene. We are now seeking founding partners to help us gain a half million rental unit listing momentum, and we are giving out 0.01% blocks of stock equity in Free-Rentals to our members who help us make that happen.

Airbnb’s Valuation

imagesAirbnb is now valued at just over $25 billion dollars, which makes it more valuable than the hotel giant Marriott International, which has more than 4,087 physical properties in over 80 countries and territories around the world, and over 697,000 rooms (as of July 2014), and an additional 195,000 rooms in development, with a $21 billion dollar valuation.

CNN is calling it “crazy money“. Why? not just because they don’t own any physical buildings or rooms used for renting and sharing, but also because they lost over $150 million last year and are estimated to lose $200 million more in 2015, according to PrivCo.

According to The Wallstreet Journal;

Airbnb’s value would also eclipse that of rival travel site Expedia Inc. EXPE -0.11 % by nearly two times. Airbnb arguably commands a premium valuation due to its higher growth rate—roughly 90% projected over the past two years compared with 17% expected for Expedia, which analysts expect will have $6.5 billion of revenue this year. On the other hand, Expedia’s business makes money. Analysts forecast it will have earnings before interest, taxes, depreciation and amortization of $1.1 billion this year.

The current leader in hospitality, Priceline, has a market value of about $61 billion, and expects to generate $9 billion in revenue this year, according to analyst estimates, about 10 times Airbnb’s projection. Priceline’s expected Ebitda for the year is $3.6 billion.

The article goes on to say:

Airbnb generates revenue by taking a 3% cut of each booking along with a 6% to 12% service fee from Guests. To meet its lofty revenue targets, Airbnb would need to increase its share of the global lodging market from 1% to as much as 10% over the next five years, according to Douglas Quinby, an analyst with research firm Phocuswright.

So where is this all heading? It will be interesting to see what lies in store for Airbnb given its ambitious growth plans and its current valuation making it worth a whopping $24,000 USD for each of the 1 million property and room listings on their website.