Danny King
Danny King
January 2017 may have marked the first time a hospitality provider -- in this case, luxury hotelier Trump International Hotels -- had the official backing of a sitting U.S. president. Unofficially, though, Airbnb had Trump Hotels beat by 10 months in the presidential endorsement game.


So said Leigh Gallagher, the assistant managing editor at Fortune and author of the newly released book "The Airbnb Story: How Three Ordinary Guys Disrupted an Industry, Made Billions ... and Created Plenty of Controversy" (Houghton Mifflin Harcourt).

Airbnb CEO Brian Chesky, having joined then-president Barack Obama last March on a trip to Havana as part of a delegation of American entrepreneurs marking the reopening of U.S.-Cuba business relations, was singled out in onstage remarks by the president, who highlighted Chesky's relative youth, Airbnb's innovativeness and the company's then-estimated market value of $25 billion -- "with a b!" Obama emphasized.

The Obama reference is one of a number of notable passages, recollections and anecdotes in the 214-page book, which points out that the privately held company, which continues to be led by the three men -- Chesky, Joe Gebbia and Nate Blecharczyk -- who hatched the idea in a San Francisco apartment in 2007, is at once a success story and very much a work in progress.

For industry-watchers, the headline-grabber might be the financial projections that Gallagher, citing Airbnb investors she didn't identify, disclosed toward the tail end of the book.

Airbnb has stated that it continues to double its business each year. While the company does not disclose financial figures, last year it was estimated to have generated $1.6 billion in revenue (fees from guests and commissions from hosts) and $156 million in earnings before interest, taxes, depreciation and amortization (EBITDA).

To put those numbers in perspective, Marriott International, the world's largest hotel company, generated $17.1 billion in revenue last year, and with a full year of Starwood Hotels under its belt, it is likely to approach $23 billion in revenue this year.

Closer to Airbnb's scale is Hyatt Hotels, which generated $785 million in EBITDA from $4.43 billion in revenue last year.

However, as with most tech companies in or near Silicon Valley (Airbnb is still based in San Francisco), the story is all about exponential growth. Airbnb turned profitable during the second half of 2016, and the company is projecting that 2017 will be its first full year of profitability.

By the end of the decade, the company will generate $3.5 billion in annual EBIDTA from $8.5 billion in revenue, Gallagher writes, citing investors.

As a result, Airbnb continues to attract both funding and opposition with approximately equal enthusiasm. The company earlier this month completed its sixth round of equity financing, totaling $1 billion. That investment boosted Airbnb's cumulative equity funding to more than $3 billion, giving the company a market capitalization of about $31 billion, according to a source close to Airbnb.

To put that in perspective, Marriott's market value as of earlier this month was about $33 billion, and Hilton's was about $19 billion.

Airbnb's decision last year to arrange $1 billion in debt fed rumors that the company was preparing to go public. But according to the same source, it has no intentions on doing so anytime soon.

Despite that kind of enthusiasm on the part of equity investors, Airbnb increasingly finds itself embroiled in contentious relationships with both the traditional hotel industry and many municipalities.

Front and center is New York, which remains by far Airbnb's largest U.S. market. Last month, the city began enforcing a law enacted last year designed to stop illegal, short-term rental listings. So far, the enforcement has not hurt Airbnb, since just one of its hosts was fined in February, while most of the remaining fines were levied on an owner of single-room-occupancy properties who didn't list his units on Airbnb.

Barcelona, Berlin and, ironically, Airbnb's hometown, San Francisco, were the other cities Gallagher listed as the most vigilant when it came to curbing the growth of Airbnb unit availability.

Airbnb opponents may have gained some ammunition earlier this month in the form of a report compiled by consultant CBRE Hotels and distributed by the American Hotel & Lodging Association (AH&LA). (CBRE used data from Airdna, a company that provides analytics to vacation-rental entrepreneurs and investors.)

AH&LA distributed the report to bolster its long-held claim that Airbnb facilitates landlords operating "illegal hotels." It asserted that Airbnb hosts who operate two or more units generated $1.8 billion in bookings for the year ended September 2016. In Airbnb's 13 largest U.S. markets alone, hosts with 10 or more units generated $175 million in revenue.

In addition, both the AH&LA and some of its local partners said that Airbnb was generating results far more nefarious than its "Belong Anywhere" motto would suggest. In a webcast announcing the report's findings, Peter Cohen, co-director of San Francisco's Council of Community Housing Organizations, said Airbnb's growth had fueled real estate speculation in which investors were shrinking the city's housing stock by buying units for the sole purpose of renting them out short term on Airbnb.

On the same webcast, John Stern, chairman emeritus of the Nashville Neighborhood Alliance, said that some formerly active neighborhoods were turning into midweek "ghost towns" because of the proliferation of property owners who only rented out their Airbnb-listed homes to weekend visitors.

"Airbnb likes to paint a pretty picture of its operations," said AH&LA CEO Katherine Lugar. "This data conclusively shows that is just a fairy tale now."

Airbnb responded by calling the study "misleading" and "inaccurate."

In true CEO fashion, Chesky, in multiple interviews with Gallagher for her book, never wavered from the script, proclaiming that the company's 2020 goal is to maximize "how many people can experience belonging, in a deep, meaningful, transformational way."

Judging from the rock-star treatment Chesky received during his opening address at the Airbnb Open conference in Los Angeles last November, Airbnb hosts and guests have bought into that goal with a cultish devotion, lending credence to Gallagher's oft-referenced theory in her book that missionaries are far more valuable to a company than mercenaries.

Airbnb also appears to be hedging its bets by entering the in-destination excursions market. Last November, the company debuted its Trips feature, as part of which the company broadened its offerings of single-day and multiday excursions.

Launched with about 500 experiences in 12 cities -- including tours led by a food anthropologist giving interactive excursions of an East Los Angeles marketplace and a jazz pianist leading a music-based Havana excursion -- Airbnb said Trips would be available in 50 cities by sometime this year.

With that in mind, Gallagher said, renting homes "might ultimately represent less than half of the company's revenue."

What this means for travel professionals remains unclear. On one hand, Airbnb last month acquired Montreal-based luxury-rentals service Luxury Retreats for a reported $300 million, the company's largest acquisition to date. In an interview with Travel Weekly late last year, Amr Younes, Luxury Retreats' vice president of revenue optimization, vowed "to find a way for agencies to exist in this sharing economy."

Still, since the acquisition there has been no word on how the buyout will impact agent commissions on those luxury properties. Beyond that, with Airbnb hosts having collectively welcomed about 140 million guests as of the end of last year, the company so far has been based on the premise of a one-to-one relationship between host and guest, with little use for retail intermediaries.
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