Airbnb is to acquire HotelTonight in a deal worth a reported USD400m, after talks between the two had faltered earlier in the year.
The platform said that the deal would help it reimagine travel “by building an end-to-end travel platform that combines where you stay, what you do, and how you get there, all in one place”.
Brian Chesky, Airbnb co-founder, CEO & head of community, said: “A big part of building an end-to-end travel platform is serving every guest, whether they plan their trip a year or a day in advance.
Working with the incredible team at HotelTonight, we will offer guests an unparalleled last-minute travel experience that provides unique, memorable hospitality on every trip, on any schedule, at any time.”
The transaction followed last year’s decision by Airbnb to add boutique hotels to the platform and was the group’s largest acquisition to date, following 2017’s USD300m purchase of Luxury Retreats. The company said that the move had helped to bring new guests to Airbnb, “making our community larger and stronger”. Airbnb said that, once those new guests came to Airbnb, “they’re returning to book with our Home hosts: in fact, nearly 90% of guests who first used Airbnb to book a hotel room and returned to our platform for a second trip then booked a home”.
HotelTonight’s app and website will continue to operate independently, but Airbnb will consider eventually integrating its boutique hotels and bed-and-breakfast listings onto its site.
Sam Shank, co-founder & CEO of HotelTonight, said: “We started HotelTonight because we knew people wanted a better way to book an amazing hotel room on-demand, and we are excited to join forces with Airbnb to bring this service to guests around the world. Together, HotelTonight and Airbnb can give guests more choices and the world’s best boutique and independent hotels a genuine partner to connect them with those guests.”
Once the acquisition is complete, Shank will report to Greg Greeley, Airbnb’s president of homes, and lead Airbnb’s boutique hotel category.
At the International Hotel Investment Forum in Berlin earlier this month, Greg Greeley, president of Homes at Airbnb gave more insight into how the platform viewed itself, telling delegates: “People are going to places that are magical and they’re making a connection, they’re not having a commoditised travel event.”
HotelTonight’s investors have been looking at an exit for some time. The company was mooted for an IPO in 2017, after it hit its profitability target. HotelTonight launched in 2011, having raised USD80m in funding. In 2015, Barry Sternlicht, CEO, Starwood Capital, made an undisclosed investment in the company, describing it as “a refreshing alternative that should become a major participant in the future of hotel distribution”.
He added: “Booking windows are shrinking and customers are going mobile, trends which position HotelTonight perfectly for the future. But there’s something more that attracted me – it’s that HotelTonight is proving booking by booking that both hotels and distributors can win.”
Hotel Tonight took this funding and, at the end of 2014, expanded away from the shrinking booking window and into more traditional online travel territory by making its discounts available seven days out. At the time Shank said: “We’ve heard from our customers that we’ve changed the way they travel, and we wanted to give them more. By staying true to our great mobile experience but introducing the freedom to book up to seven days out, we are empowering people to plan less and live more, and we couldn’t be more excited about it.”
It was not clear what would happen to the chain hotels which use HotelTonight to access the market. Last year saw Airbnb write an open letter to boutique hotel and B&B owners in which it highlighted its lower fees “compared to OTAs that may charge commissions of up to 30%”. It added: “You have full control over when your inventory appears on Airbnb and you’re not competing against big chain hotels on Airbnb.”
HA Perspective [by Katherine Doggrell]: And so the mists clear slightly on the conundrum over what Airbnb is. Tom Page, global head of the hotels & leisure, CMS, commented: “The Airbnb acquisition of HotelTonight, together with the new option to select hotel rooms in their search function seems to be a significant statement of intent by Airbnb to move further into becoming a hotel OTA and not just a sharing economy player.”
And this would seem to be a good take. For all the kerfuffle over what a revolution Airbnb would be, it looks likely that it will become… a specialist supplier of accommodations-which-look-like-homes. Wary as we are of calling them actual homes while it remains impossible to gauge how many listings are investments and not primary residences. Airbnb has no incentive to be more transparent, so don’t expect any clarity there any time soon.
There’s no denying that Airbnb has had an influence for the good on the sector (unless you’re Hilton, which continues to deny the influence of Airbnb on the development of Motto) but it now looks to be finding its place. And this place is a little less interesting and a little less magical than many of us observers had hoped.
Additional comment [by Andrew Sangster]: If ever there was a doubt that Airbnb was simply another aggregator, spun out of the same cloth as the first wave of aggregators like Booking Holdings and Expedia, then this deal surely puts paid to that speculation.
Airbnb is different in that it aggregates supply. The first wave of aggregators, now 20 years old, aggregated demand.
This gives Airbnb a huge advantage in that it does not have the huge expenditure on performance marketing. The combined bill for Booking and Expedia was over USD10bn last year for marketing, Airbnb’s is likely to be a fraction of that (its currently unlisted status makes that harder to gauge).
It has long been alleged that Airbnb makes more money from so-called professional landlords (ones that don’t ever, or rarely, occupy the property they are letting) that it does out of people who are genuinely home-sharing. Thus, the myth of that this business is part of the sharing economy was exposed some time ago.
To repeat the point we have made several times: the first wave of aggregators are (comparatively) expensive due to the high marketing costs, the second wave, led by Airbnb, are more supplier friendly and significantly cheaper.
While I think the pressure to keep commissions low will continue for some time, Airbnb is now moving much more directly into a straightforward OTA model. It will find it increasingly hard to resist squeezing its suppliers, particularly once it becomes a listed company.
One other final point worth making is that the attractiveness of HotelTonight to consumers stems largely from its limited range of offers. This restricted range of suppliers (I’m trying to avoid the term curation) makes the consumer decision much less arduous. More of these types of marketing constructs seem inevitable as the big platforms become ever more unwieldy.