Recent funding rounds secured by peer-to-peer accommodations
listing service Airbnb and car-hailing service Uber Technologies have given
them market values that dwarf far larger and more established companies within
the travel industry and have raised a few flags in the investment community.
Some analysts have wondered aloud if the two San
Francisco-based sharing-economy wunderkinds represent a new version of the
hyperinflated valuation that ultimately did in dot-com-bubble companies in the
early 2000s.
Airbnb last month secured an equity round of $1.5 billion
that valued the company at $25.5 billion, the Wall Street Journal reported.
Among lodging companies, only Hilton Worldwide’s $28 billion represents a
larger market value.
And while Airbnb’s market value is less than half that of
Priceline Group’s $60 billion, it is double Expedia’s $13.7 billion and more
than eight times HomeAway’s $2.99 billion.
Uber represents even more outsized expectations. In
December, it said it had secured a $1.2 billion funding round that Wall Street
valued at $41 billion. That would make the company the most valuable U.S.
transportation company (Delta Air Lines has a market value of about $36
billion) and the second most valuable U.S. company in the travel space after
Priceline.
Granted, neither Airbnb nor Uber has divulged their actual
market valuations, nor is there a great deal of information available to place
their estimated market values in context. Both companies are privately held,
and neither has published either revenue or earnings numbers.
In addition, both have already had more staying power than
many of the tech companies that crashed after being in business for two years
or less in the early 2000s.
Airbnb was founded in
2008, while Uber was founded a year later.
“More of these companies are ‘real’ compared to the dot-coms
from 15 years ago,” said Atmosphere Research Group travel analyst Henry Harteveldt.
Still, he said, “I’d want to see some hard, fast numbers from these companies,
including top-line revenues, customer volume, margins, repeat purchase rate,
etc.”
The key to any valuation multiple, of course, is a company’s
prospect for growth. Airbnb’s estimated 1.2 million listings put it slightly
ahead of HomeAway’s 1 million-property inventory (by comparison, Hilton and
Marriott International each have about 725,000 hotel rooms worldwide). Even so,
Priceline CEO Darren Huston was quoted earlier this month in the Guardian as
saying that the world’s largest OTA’s vacation-rental business alone was larger
than Airbnb.
Things are not likely to stay that way, however. The Wall
Street Journal estimates that by the end of the decade Airbnb could generate
$10 billion in annual revenue, putting it on par with Hilton’s 2014 revenue of
$10.5 billion and ahead of Priceline’s $8.44 billion in revenue last year.
The popularity of “alternative accommodations” websites like
Airbnb is growing rapidly. In a presentation earlier this month, Phocuswright
reported that last year the average percentage change in monthly unique
visitors to alternative accommodation websites jumped 24% from a year earlier,
compared with a 3% increase in hotels’ site visitors and an 8% drop in traffic
to OTAs.
Meanwhile, the percentage of OTA visitors shopping for hotel
rooms who cross-shopped with sites like Airbnb jumped to 15% in February from
4% last July, Millward Brown Digital said in a presentation earlier this month.
“Cross-shopping has increased,” Ryan Williams, vice
president of travel at Millward Brown Digital, said during the presentation.
“People are increasingly finding what they’re looking for on those competitive
sites.”
Uber’s growth has likely been more rapid, as the company
could generate annual revenue of $10 billion by the end of this year, Business
Insider reported late last year. Uber operates in more than 300 cities, and,
according to reports, recently hired its 1 millionth driver.
Still, the growth of the sharing-economy companies has not
been painless.
Airbnb has faced opposition from the hotel industry as well
as from cities like New York, where opponents have said Airbnb “hosts” are
flouting the city’s 30-day rental minimum law and are promoting illegal
lodging.
Uber has stirred even more contentious opposition. Many
cities have questioned whether Uber should be allowed to operate without
oversight similar to the taxicab industry, while French cabdrivers helped spur
anti-Uber protests that snarled traffic in Paris late last month.
Additionally, last month, in a move some say struck the
heart of Uber’s business model, a California superior court ordered Uber to
reimburse a former driver about $4,100 after ruling the driver was an employee,
not an independent contractor. And earlier this month, a California judge ruled
that Uber owed $7.3 million for failing to comply with California Public
Utilities Commission reporting requirements.
Uber is appealing both decisions.
Regardless, count at least one “new-bubble” company to show
growth rapid enough to scare some investors in competing older-line companies.
Last month, Deutsche Bank analyst Lloyd Walmsley gave a stock upgrade to
Expedia and a downgrade to Priceline, noting that the latter company had more
exposure to the vacation-rental market and was therefore more likely to be hurt
by Airbnb’s rapid growth.
“We only have bits and pieces of information on Airbnb’s
current performance and projections,” said Douglas Quinby, vice president of
research at Phocuswright. “Rather than ask, ‘Is there a bubble here?’ I think a
better question is, ‘Will Airbnb be able to achieve the kind of growth that
their investors are banking on?’”