It's outrageous - no way is AirBnB "worth" more than Hyatt hotels!!!
not crazy
1. go look at Hyatt's financials. Back in 2010 fiscal year Hyatt only generated $66M of net income. Why? Because hotels generally have high operating leverage (i.e. high fixed costs) and low margins, so small downturns in demand for rooms can have a large impact on profits. And frankly, AirBnB is helping depress demand for hotel rooms.
2. now think about AirBnB's business. They take 3% of every booking and they probably have low incremental costs (just additional server capacity).
The article below says they booked 12-15M in rooms in 2012. At an average of $100/room night (probably conservative) .. that's ~$1B in bookings with $30M going to AirBnB.
We know AirBnB has grown rapidly ... and in the article they say they think they can serve 100 million in bookings per year ... which would equate to revenue of $300M. You can start to see how AirBnB could in fact produce as much profit as Hyatt without owning hundreds of properties.
Finally, don't bet against companies that combine economies of scale and customer captivity. I'd say that AirBnB has customer captivity because of the difficultly of establishing 'trust/credibility'. Once a user has established that credibility at one site I think they're fairly captive.
Anyway, time will tell. It's going to be fascinating to watch.
Hmmmm... 2010 was apparently much worse than 2011/2012.
#1 - Look at 2012/2011 [1] - "As of December 31, 2012, our worldwide portfolio consisted of 500 properties (135,144 rooms and units)".
Property has value, even without income. AirBnB has no such thing.
"[...]We primarily derive our revenues from hotel operations, management and franchise fees, other revenues from managed properties and sales of vacation ownership properties. For the years ended December 31, 2012 and 2011, revenues totaled $3.9 billion and $3.7 billion, respectively, net income attributable to Hyatt Hotels Corporation totaled $88 million and $113 million, respectively, and Adjusted EBITDA totaled $606 million and $538 million, respectively.[...]"
#2 - Your $30MM ($300MM) is before taxes, before expenses, before costs of expansion (servers, but also support, legal, etc etc) to get to the $300MM, and based on them not paying taxes, not adhering to local laws, etc etc.
In short: I think it's fair to state that the $10BB valuation is rather 'bubblelicious'.
Your $30MM ($300MM) is before taxes, before expenses
yes I'm aware of that. In my OP I was going to also say
"at $300M with a 20% net income margin (which would be one of the higher net income margins but not unheard of) AirBnB would be producing $60M of profit." but I figured most people would be able to infer that.
Anyway, think about it this way. TPG is leading the deal right? TPG is one of the top 5 PE firms in the country. While it's possible TPG is making crazy investments, I think the best base case assumption is the TPG is not making crazy investments. I mean these are seriously smart guys with a good track record.
So if we start from the position that TPG is sane, then we ask ourselves, how are sane people getting to a $10B valuation. And I think I gave the outline of how sane people might be looking at it and arriving at a $10B valuation.
Plus I'm old enough to remember when people thought it was crazy that Amazon was valued at more than Barnes & Noble.
Why is that crazy? How many guests does Hyatt serve per year? How many does AirBnB serve today? How many could AirBnB serve with continued growth for the next five years?
And of course the elephant in the room, how many will AirBnB serve if regulations are enforced? Also an open question of will AirBnB be commoditized and have its value spread across dozens, if not hundreds or thousands, of competitors across the globe?
Worth noting (for better or worse, depending on your viewpoint) is that Hyatt's valuation includes a ton of real estate in prime locations around the world:
Ya, seems pretty odd. We'd have to see AirBNB's revenue to to see if its really worth that price. As well, I believe HomeAway has a higher number of listings than AirBNB does.
Initially AirBNB had the advantage that it allowed for one-time postings of a property (as HomeAway would charge annually to post a property). But HomeAway has recently added per-booking fee if you are only posting once or twice a year.
At this point, I feel like AirBNB doesn't offer anything HomeAway already does. So unless AirBNB has some amazing growth potential or revenue, I don't see $10bn being likely.
AirBnB had 200k listings and claimed 3MM guests at the end of 2012. I do suspect the average AirBnB stay is shorter.
Do note, from the Hyatt 2012 10-K "As of December 31, 2012, our worldwide portfolio consisted of 500 properties (135,144 rooms and units)."
With availability of 300-365 nights a year, unlike AirBnB, this amounts to more than 40-49MM room-nights they can sell. Occupancy rates varies of course, but even at 70% average, that's a whole bunch more people than AirBnB.
not crazy
1. go look at Hyatt's financials. Back in 2010 fiscal year Hyatt only generated $66M of net income. Why? Because hotels generally have high operating leverage (i.e. high fixed costs) and low margins, so small downturns in demand for rooms can have a large impact on profits. And frankly, AirBnB is helping depress demand for hotel rooms.
2. now think about AirBnB's business. They take 3% of every booking and they probably have low incremental costs (just additional server capacity).
The article below says they booked 12-15M in rooms in 2012. At an average of $100/room night (probably conservative) .. that's ~$1B in bookings with $30M going to AirBnB.
http://www.businessinsider.com/airbnb-billion-revenues-2013-...
We know AirBnB has grown rapidly ... and in the article they say they think they can serve 100 million in bookings per year ... which would equate to revenue of $300M. You can start to see how AirBnB could in fact produce as much profit as Hyatt without owning hundreds of properties.
Finally, don't bet against companies that combine economies of scale and customer captivity. I'd say that AirBnB has customer captivity because of the difficultly of establishing 'trust/credibility'. Once a user has established that credibility at one site I think they're fairly captive.
Anyway, time will tell. It's going to be fascinating to watch.