Airbnb Brings In New Billions

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AirBnB Brings In New Billions

 

Airbnb is not a small startup that can be casually dismissed.  It’s a snowball, now almost the size of the hotel industry.

 

AirBnB might not have all that much to worry about after all.  New partnerships with travel management companies and even airlines are solidifying the company’s longevity in the vacation rental industry.  So far, legislation to prohibit or regulate the site has been slow to be adopted or enforced.  Santa Monica did just receive the first payout from AirBnB for violations to city regulations.  But that sum pales in comparison to the boost they are receiving from their new revenue stream, AirBnB for Business.

AirBnB for Business is AirBnB’s corporate platform it has been slowly and quietly building.  But that unassuming off-shoot might be a game changer for the hotel industry.  The company announced in July that it is partnering with three of the largest travel management companies, American Express Global Business Travel, Carlson Wagonlit Travel, and BCD Travel.  The new partnership will allow their business clients to book travel accommodations directly on AirBnB.

So far, hotels haven’t been too concerned about AirBnB as the impact on their booking rates has been fairly minor.  Most consider AirBnB to cater to college students, young people, and families who are looking for a unique experience or want to avoid corporate establishments.  Much of the clientele for large hotel chains is business travels who traditionally have more particular needs and are often obligated to hotel loyalty programs or corporate partnerships.  Now that AirBnB is building its business division, it could mean some stiff competition for the hotel industry.

Turning focus from casual vacationers to business travelers may mean big bucks for the San Francisco startup.  AirBnB is already valued at $25.5 billion.  Yes, billion.  And the company’s three new partners bring in billions per year in sales.  AmEx GBT boasts clients such as IBM, Microsoft, and McKinsey, and did $30 billion in sales in 2015.  Carlson Wagonlit followed with $24.2 billion in sales in 2015, 92% of which came from corporate bookings.  BCD Travel brought in $23.8 billion in sales in 2015.

AirBnB’s partnership with AmEx GBT, Carlson Wagonlit, and BCD Travel gives them access to their clients and their client’s money.  AirBnB will be listed as a “preferred supplier” with these travel management companies, allowing clients access to negotiated rates and business expenditure tracking. 

Expansion into the business sector doesn’t stop there.  Lufthansa quietly began listing airline seats on AirBnB as well.  This is the first time we have ever seen plane tickets listed on a home rental site.  What will they think of next?

With all the billions flowing in from new business deals, the payout of fines for violating local ordinances is barely a drop in the bucket.  Here in California, Santa Monica just collected $20,000 in fines from AirBnB, the first payout by the company.  The settlement comes a little more than a year after the strict short-term rental legislation the city passed last June.  Santa Monica residents are prohibited from renting rooms when the owner is not present, must register for a business license, and are subject to a 14% hotel tax.  Three full-time staffers were hired to review online listings for violations.  Each violation can be assessed a $500 fine.  Nearly 900 fines were issued this year, over 600 of them directed at AirBnB.

City officials say the payment of fines by AirBnB is a win.  They assert that although the sum seems insignificant, the fact that the company paid is more impactful, especially since AirBnB still publicly opposes the ordinance.  But in the larger context, $20k doesn’t seem to make any kind of impact at all.  Not only is the sum inconsequential in relation to AirBnB’s revenue, but it’s not even enough to pay for the three additional staffers needed to police the ordinance.  So it seems AirBnB is still making out pretty well, despite some lawmaker’s efforts.

 

 

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