
Airbnb raises $1B at $31B valuation, became profitable in 2016 - sloanesturz
http://www.cnbc.com/2017/03/09/airbnb-closes-1-billion-round-31-billion-valuation-profitable.html
======
jliptzin
I used to use airbnb quite often (as a traveler), but I have to say it's lost
its appeal for me. First, it's really not much cheaper than a hotel in most
cases (some cases more expensive). Second, it's a hassle when you're on
vacation to have to arrange in advance a specific time to pick up the keys to
the place. Then, what happens if you happen to lose the keys (happened to me
once)? What happens if it's in the middle of the night in a foreign country?
This could be a nightmare. On top of that, you're expected to leave the
apartment like you never stayed there or face bad reviews (even with a $100+
cleaning fee)! Seriously, one time I got stuck with a terrible review because
I left a dirty pan in the sink (had to rush to the airport, I figured the $100
cleaning fee would cover what minor things I had left behind, but guess not).

So now I've pretty much gone back to hotels. You can come any time of day or
night, not have to worry at all about losing keys, and you can leave the place
a raging mess if you have to (though I am usually a very clean person). Airbnb
makes the whole travel experience far more stressful for me.

~~~
abandonliberty
AirBnB is a now usually a terrible deal for guests and increases resident
rental shortages/costs by illegally converting residential units into
commercial rentals.

When they started, they were great for guests. Now there's an abundance of
guests and a shortage of hosts, so the system is strongly tilted in favor of
hosts.

\- Hosts always get rebuttals on reviews

\- Guests cannot comment when their stay is cancelled before arrival

\- Guest reviews are public which discourages honest feedback

\- Dealing with a problem is nearly impossible (how do I take a picture of the
fact that my 'apartment' is a hotel room? And why can't I talk to anyone?)

\- AirBnB's compensation for a failed stay is a 10% re-booking bonus which
doesn't begin to cover the additional cost, time, and stress of having to find
a new place at the last minute at 10pm because your flight was 6 hours delayed
and the one you booked with great reviews was misrepresented

In some markets AirBnB can be the last/best option, but I do my best to avoid
financially supporting them if there is a reasonable alternative.

[https://www.google.ca/search?q=airbnb+isn't+worth+it+anymore](https://www.google.ca/search?q=airbnb+isn't+worth+it+anymore)

~~~
FanaHOVA
> Guests cannot comment when their stay is cancelled before arrival

It's automatically posted as a review on your behalf.

> Dealing with a problem is nearly impossible (how do I take a picture of the
> fact that my 'apartment' is a hotel room? And why can't I talk to anyone?)

By taking a picture with your phone and contacting support?

There's reasons to dislike Airbnb, but these surely aren't some of them. I've
had ~20 stays at Airbnb and never had any of these issues.

~~~
knieveltech
ah yes, the time-honored "My experiences don't match yours so clearly yours
are invalid" argument.

~~~
FanaHOVA
Your "no message when host cancels" clearly shows that you have no experience
at all, so why talk about it?

~~~
knieveltech
My what? I think you think I'm someone else.

------
kilroy123
I'm not surprised to see Airbnb became profitable. They've expanded
everywhere. I nomad around and always use Airbnb, I've booked places on
several continents.

However, I'm definitely feeling the effects of their growing pains. For
example, many people have bought places to only rent on Airbnb full-time. Most
of these people suck at being an hotelier. It's clear people get lazy and are
just trying to make money.

Think about how many hotels you've stayed at that were less than stellar? It's
hard to have a good hotel with full-time staff. It's much harder when it's
just you on the side, renting some place. I've been to many horrible Airbnb's
that I had to checkout of early, and go find a new place last minute.

Unless, they fix this and get more people to review honestly. I think they're
going to run into a lot of problems.

~~~
dragonwriter
> Unless, they fix this and get more people to review honestly. I think
> they're going to run into a lot of problems.

I don't airBnB, but a friend who does was recently berated by a host after
leaving a 4-star review; that host claimed (don't know how true this is) that
many hosts will refuse to rent to you again if you leave anything but a 5-star
review.

That and other things I've seen and heard about airBnB reviews suggest to me
that there a structural problems that are likely to make it problematic for
them to become honest and useful in general, even on top of the usual problems
in numeric/star rated reviews that come from cultural differences in how
people rate when given such a scale even when the actual substantive opinion
is the same.

~~~
Tloewald
The whole system of review curation that infests online markets is a problem
waiting to be solved. Right now we basically have to parse reviews on the
4.4-5.0 scale because anything outside that is meaningless.

It's amazing to go read a novel rated 3 stars (because it operates outside
this loop) and find it transcendently good.

~~~
nradov
Instead of asking customers to give numeric star ratings, perhaps a better
option would be a short list of Yes / No / Unsure questions. Were there clean
sheets on the bed? Were there any cockroaches? Did the appliances work? Etc.
Such questions are more objective and less prone to inflation.

~~~
ansgri
Booking.com does it, btw. And I strongly prefer it.

~~~
mosselman
Surprised there is only one mention of Booking.com here. It is an
indispensable tool for booking my vacations. The reviews are very useful and a
lot more accurate than things like yelp. I have glanced at other websites, but
nothing gives me the reassurance of the legitimacy of the reviews that
booking.com does.

------
sloanesturz
A shame that they didn't raise this money through an IPO. I'm afraid of how
long unicorns are staying private: it's a big bummer for their employees and
early investors. It'll be a tough sell for early employees of the next batch
of unicorns if Uber, Airbnb, Palantir, Dropbox, etc. stay private for 10-15
years or more!

~~~
jlgosse
I'm not saying this is the case with this round in particular, but it's not
unheard of for early employees to take money off the table in a round like
this

~~~
maineldc
There was a very "insider baseball" moment in 2011 with regards to AirBNB and
a well known investor "discussing" taking money off the table. Note, the
investor was basically saying that if the founders get some liquidity, you
should offer the same to employees. I will never forget how much that raise my
esteem him. [0]

So yes, if they were willing to do it in 2011, I am sure that they are doing
it in this round too.

[0] - [https://techcrunch.com/2011/10/01/chamath-palihapitiya-
airbn...](https://techcrunch.com/2011/10/01/chamath-palihapitiya-airbnb-
liquidity-everyone/)

~~~
conanbatt
To me it sounds like an argument the investor would make to leverage founders
not getting equity.

Investors get paid before employees. What if airbnb had answered to him "we
will do that, but also, you cannot make any money at all until employees get
it, otherwise this shady way of things will harm you long term".

~~~
maineldc
Well, the investor made it quite clear in his note that he wasn't disagreeing
with taking money off the table:

> My basic principle on this stuff is that if you want liquidity, that’s fine,
> but you should make it available to everyone.

~~~
conanbatt
Coupling one concession to a requirement makes its harder for it to happen:
"Sure, I will give you a salary raise if you can commit to working any
saturday i tell you to".

Think also that the least money the founder gets off the table, the investor
gets lets capital into his investment itself, he is interested in getting as
much money into the business itself, not into the founders pockets.

Arent the investors preferences clear in this point? HE prefers the founder
not to get money off the table, and puts a requirement on it.

Another way to put it, he recommends a course of action, but is he the one
adding extra money so that course of action goes to his preference? If he is,
then by all means its at least a great gesture.

Addition: and also, think of it the other way around. What if a founder told
the investors "you are not getting any money unless my employees are getting
money as well". Becuase thats not how the deals are structured nowadays.

------
xbeta
My experience tells me Airbnb is in big trouble.

Last year around Nov, I tried to book a Lake Tahoe cabin for 2 families (1 is
mine, another is a friend's) for a simple trip for our young children.

I booked via Airbnb few days in advanced. The day before driving to Tahoe, we
even called Airbnb to confirm that the listing is OK. The host accepted, but
didn't answer to any of our questions.

The next morning when we woke up, we packed everything, then out of bad habit,
I opened up the app and checked again. I was caught on surprised that the host
cancelled, just 4 hrs before our suppose arrival time. We were very shocked
and pissed. I was booking for a friend's family and it was very embarrassed. I
immediately contacted Airbnb support, and all they call do for me was to give
me $100 back for my NEXT reservation. And they couldn't do anything about my
existing. I thought they would put a penalty on Airbnb's host who cancelled on
us in less than 24 hrs, but they said they don't have such policy. I was upset
because I knew they had such policy for the renter. They also mentioned the
best they can do is to find me the next 10 houses to book in the similar
location, but cost 3x more as it is bit last minute. They did not anything
else to help me.

I was very upset and went to Homeaway.com and found something immediately,
even cheaper than the original reservation I had with Airbnb.

My story was a clear first-hand witness on how I believed Airbnb failed at
customer service, and will be very difficult to become a successfully company.

~~~
knn
Sorry you had that bad experience (I would be pissed too), but the logic of
(you having a singular bad experience therefore company will likely die) is
next to baseless.

~~~
sytelus
No. The point is that there is zero protection for customers getting cancelled
by the host at last minutes. This would be about the worst thing that can
happen on your hard earned vacation, especially if you are traveling with
families. Customers can't even leave a review! All the while there is
asymmetry that customers will be punished if _they_ cancelled at last moment
on host.

------
beefman
We haven't had a recession in 8 years, and the postwar average time between
recessions is 6 years.[1] The stock market's overall PE ratio is well above
average.[2] With Box and Snap, the market demonstrated it is starving for tech
IPOs -- even if a company is losing money and entirely based on a millennial
fad.

So why in the name of sweet baby Jesus would investors, founders, or anyone
else delay an IPO at this point? Can anyone explain it?

[1] [http://www.nber.org/cycles.html](http://www.nber.org/cycles.html) [2]
[http://www.multpl.com](http://www.multpl.com)

~~~
harryh
Not an answer to your question but semi-relatedly Scott Sumner had a post this
week where he predicts that recessions will be significantly rarer in the
future.

[http://www.themoneyillusion.com/?p=32350](http://www.themoneyillusion.com/?p=32350)

It's interesting to think about.

~~~
sytelus
These predictions are pointless. Economy is not driven by extrapolating past
charts, it's driven by outlier events. The thing about outlier events is that
no one can predict what they would be, except that they are bound to happen. A
magnitude 9 earthquake in Northwest, fraud in big company, scandal in
administration, or war with Iran - all these can totally change economic
outlook.

~~~
harryh
His assertion is that the Fed is now better at controlling the money supply to
more quickly respond appropriately to outlier events.

Recessions are always and everywhere a monetary phenomena.

------
rpearl
I've definitely had mixed experiences with AirBnB. When it's genuinely someone
renting a spare room on the side, it tends to be a neat experience; I had
several of those traveling in Australia solo and it was a good way to get to
know the area. I also had positive experiences in Rome and LA with similar
arrangements.

When it's just landlords short-term renting a furnished apartment on the side,
the experience tends to be subpar. The worst experience I had was in Chicago,
when it was clearly a condo owner breaking the terms of the HOA for their
building--they told us to say that we were 'just visiting' the occupants of
the apartment, not to unlock the door if an actual resident was nearby, etc.
The general feeling of "sneaking around" was unpleasant.

It's a mixed bag--the original idea of home _sharing_ is a great experience,
but clearly not the most profitable aspect of their business. I wonder if they
could figure out ways to support that better...

------
sperling75
The hogging of VC funds by airbnb, uber, and many other not startups is super
unhealthy for the startup ecosystem. The public markets will eventually punish
these companies for valuations that lack transparency. Airbnb is on the way
out with their current short term renting business in most large cities. It's
illegal and the quality of service is suffering dramatically. Supply side
quality is on the way down. Demand side quality is terrible too. To justify
their valuation they are opening up the gates to terrible customers. I get it,
they may go into other markets with all this money like the long term rental
business or tours business or airline flights.. maybe hotels? Reality is they
are not going to be great or better at any of these things than the current
companies in those markets and certainly not by any significant degree to own
the market.

~~~
sperling75
If you are down voting why not offer some opinion so it can be a discussion..

~~~
untilHellbanned
Upvoted but sadly you can't take YC prodigy and downvote. It's a lose-lose
propositon kinda like staying in an airbnb. Say something nice about YC or
don't say something at all.

~~~
sperling75
Small minded to think or act like a cabal

~~~
untilHellbanned
Small mindedness sadly doesn't prevent wealth and power accumulation.
Depending on your view, YC or Trump both prove this.

------
xiaoma
Have their early employees been able to cash out yet or are they basically
trapped into either losing their hard earned options from work done years ago
or staying still more years at the company?

~~~
metaphorm
they can always exercise their options, buy the stocks, pay the taxes on them,
and then just sit on illiquid assets until the IPO or their own deaths.

oh...it's not a very appealing prospect you say? well, hmmm, errr, awkward.

------
ptenk
My AirBnB experiences have all been poor, despite staying exclusively at 4.5/5
star reviewed properties. The lack of service isn't worth the extra savings or
superior hardware. Hotels are so much more comfortable due to the constant
service/follow up in case anything goes wrong.

------
mfringel
I'll admit, I'm pretty amazed that AirBnB has succeeded.

I never thought that injecting even more uncertainty into travel was a winning
proposition, but they've clearly found a willing market.

Perhaps a better way to look at it is "There was an underserved market that
had a higher tolerance for uncertainty, and AirBnB seized the opportunity."

------
swampy61
I'm finished with Airbnb as the places get shabbier with each booking. Linens
are threadbare, kitchens have dirty/stained pots & utensils and suddenly 4-6
flight walk ups without a mention in the listing. Zero customer service to
boot. I'll pay the few dollars extra for a hotel.

------
saycheese
Airbnb's growth as it relates to stays to per a night has been 500k since at
least 2014 and as recent as mid-2016. In 2015, they stated they wanted a
million stays per a night by 2016.

Any reason to believe Airbnb is really growing?

------
rampage101
I helped my parents rent an AirBNB where the people owning the house were
still living there but it said nothing about this in the ad. After the owner
gave us the keys, a few hours later somebody opened the door, and I seriously
thought it might be a robber or something. Turns out it was the son of the
owner who was living there, and basically my parents were renting a single
room inside of their house. It was very uncomfortable for everyone.

------
Tiktaalik
I wonder if they’ll still be profitable as more and more cities become aware
of the negative side effects of Airbnb use and implement various sorts of bans
on types of commercial Airbnb activity.

A researcher at UBC estimated that commercial operators were responsible for
generating 77% of Airbnb revenue in Vancouver. The City of Vancouver is
planning on legalizing Airbnb, but will ban commercial operators that rent out
entire residences. This will likely significantly reduce the amount of
commercially operated Airbnbs in the city and this could result in
significantly less revenue that Airbnb generates from Vancouver.

If this researchers’ numbers are at all reasonably accurate, and other cities
have similar levels of commercial activity, and the trend of cities banning
commercial operators catches on, that would be a major impact on Airbnb
revenue.

[http://www.theglobeandmail.com/news/british-
columbia/vancouv...](http://www.theglobeandmail.com/news/british-
columbia/vancouvers-top-airbnb-earners-are-commercial-hosts-
research/article30324477/)

------
omurphy27
I spent 12 months as a digital nomad in SE Asia and AirBnB was a godsend for
me.

If you're checking in at some place you've never been to in the middle of the
night, then of course a hotel is a better option. Likewise if you can't be
bothered to tidy up a bit before checking out, then a hotel is the way to go.
Personally, for short stays, like a few days or a weekend, I'll go with a
hotel. But for anything of a week or longer, AirBnB is terrific.

Through AirBnb I was able to book very nice condo apartments, with awesome
amenities (rooftop swimming pools, brand new gym facilities etc) and very
gracious local hosts who showed me things I never would have been able to
discover on my own. Moreover, with AirBnb I don't have to worry about
landlords ripping me off like I would if I actually signed a rental contract
in a foreign country.

I think most of this criticism is rather petty. AirBnb isn't a hotel or hostel
replacement and it isn't supposed to be.

------
ganfortran
If they are already profitable, why raise money again?

~~~
ucaetano
You can be profitable but still be burning cash in a few different ways.
Profitable looks only at profit, not at cash flow, so it only means that
"booked revenue in a year > booked costs in a year". Keep in mind that capital
expenses are not costs, but are cash expenses. Also, some revenue in a given
year might not be a cash transaction, because even if you booked it in that
year, it might take much longer for you to actually get paid.

Some of the ways to burn cash:

(1) Expand operations: hiring people, hiring external services, leasing
offices, leasing capacity, etc. All that happens far before any additional
revenue comes in.

(2) Capex: capital expenses (buying servers, equipment, etc.) require cold,
hard cash (or debt, which "costs" more than equity for a startup, so it is
better to do equity funding).

(3) Working capital (current assets - current liabilities): some companies
have positive (they receive the revenue cash before dispensing the costs cash)
working capital, using their customers' money to expand the operations, others
have negative working capital, requiring external funding to expand their
operations.

My guess is that (2) and (3) don't apply for AirBnB, they are not a capital-
intensive business, and as they get paid when the booking is done but pay out
when the guest arrives, their working capital might actually be positive. So
they probably need it to expand operations.

~~~
throw_away_777
That is a pretty strange way of defining profitable where you are losing
money.

~~~
stale2002
Think of it this way. Imagine if airbnb took its 1 billion dollars and bought
bars of gold, and put those bars of gold in a vault.

Is airbnb losing money, because it now has 1 billion dollars less in cash, and
1 billion dollars more in gold bars?

No, it is not.

~~~
ucaetano
Actually, IIRC (and correct me if I'm wrong) for accounting purposes, gold
counts as "cash & cash equivalents", so if it bought $1B in gold bars,
AirBnB's cash wouldn't change.

~~~
dudurocha
Gold as a commodity (bonds). Gold bars are not liquid.

~~~
ucaetano
Bonds can be considered cash equivalents if they have short maturity.

Gold is highly liquid, and from what I've read, it can be considered (in
bullion) cash equivalents, except for banks, that due to Base 3 regulations
can only consider part of their gold holdings as cash equivalent for liquidity
purposes.

------
nstj
> That's EBITDA profitability, according to the Wall Street Journal, meaning
> that expenses like taxes are not included [0]

So it's profitable - as long as you exclude such meaningless items as
"interest, tax, depreciation, amortisation". Nice.

[0]: original post.

------
yueq
Expedia's market cap is at 19B today. 31B is much more valuable than it.

~~~
notahacker
Every time I see AirBnB's latest valuation, I compare it with Sabre (bigger,
higher value hotel room inventory... and they've also got a profitable airline
distribution and consulting business). SABR market cap is around $6bn

------
mosselman
So when we say '$31B valuation' what does that mean in real money? Lets say
that I am the founder of airbnb, how much of that money could I get when I
sold the business?

------
bedhead
I booked a spare room in London a couple years ago in the Mayfair
neighborhood, a quite expensive area. The woman who owned the flat wasn't the
one in the photo, and a number of things about the flat seemed rather odd.
Long story short, she was a prostitute.

~~~
Symbiote
> Mayfair

You can upgrade your description to "most expensive area in central London".
It's the final, £400 property on the London version of the _Monopoly_ board,
and is still worthy of that position.

The woman would probably prefer the term "high class escort". I think it's
supposed to mean you can have a conversation afterwards.

Example -- NSFW, obviously:
[http://www.hautegirlslondon.com/](http://www.hautegirlslondon.com/)

------
taytus
And they are still being called a startup...

------
beedogs
Another company that shouldn't be allowed to exist.

------
Travellersrest
Airbnb is a "disruptor" apparently and a Unicorn. What did they disrupt? The
housing market for sure in certain cities. 90 day booking restrictions for
example (London), banned in Berlin etc.

The Airbnb service startups now have limitations on their business plans and
on the ground issues, residents abuse and legal challenges. This is disruptive
and not necessarily a good thing.

Airbnb has opened up new tourist routes and brought income to airlines and
local businesses, so the economic contribution has been interesting.

But what is the real message. "Live like a local". I know personally that even
if you live in a foreign land for several years it's hard to live a like a
local. Its smart marketing, the offer of shared spaces and local people. This
was the shared house approach it all started with. This is long gone. Head off
to airdna.co and check out the stats on whole apartments. It's a misnomer and
still carries through in the press.

Is it better than a hotel? Depends: If its more space and similar price then
maybe, always depends on this vs location, its quality, is it really licensed
or allowed, and how convenient is entry.

You can of course have parties that hotels may frown on! Hotels have front
desks, are quality controlled and for most business people so much more
convenient with bars and breakfasts. They also tend to have well organised
support and be in convenient locations, You can always use Uber to get a cheap
taxi though...Uber and Airbnb, neat merger.

As this thread shows all the latter can be a problem and hence the "SuperHost"
status.

Do Airbnb love Super Hosts? Yes of course. Reviews pay booking dividends . But
Super Hosts don't always let their places all year and being smart cookies
realise being paid at checkout, being charged a commission and the guest
paying up to 12% extra could mean more money in their pocket if they did it
direct.

Many are direct marketing too and certainly doing rebookings direct. Do Airbnb
see this as a problem? Of course, they want 24/7 and all the margin. This is
why they hate leakage and try to force instant book and convenient
cancellations. This is also guest centric and owner impossible for so many.
The two are hard to equate. Booking.com's mantra "Most rooms with free
cancellation" is the killer, but does NOT apply 90% of the time to their
rental inventory. Clever marketing again!

Airbnb also want to ensure quality inventory and no come-back. Hard with a
thousands of unstandardised accommodation. Bad review police-ing is expensive!

Do Airbnb want to be in the main holiday rentals seasonal space? Yes, they
just bought Luxury Retreats for $200m, but even this is a slippery fish as
these are mainly managers and owners who market everywhere and want/need
maximum margin. It's an unusual play but maybe just paying to understand the
market more. Trying to forcing any form or control on these properties may
well see further industry rebellion.

Add in the Trips launch and other revenue streams and you can see
strategically they realise a zenith is approaching on the main models and
which company needs so much litigation?

Best prices? Lots of comments on this. The best price is always likely to be
direct, price parity slipped out the backdoor years ago. The "Guest Service
Fee" is not charged direct. Imagine paying $2000 and then seeing a further
$200+ as a service fee. Look under the question mark at checkout, it's their
fee not the accommodations. This is beginning to annoy people (a lot).

They could often just book direct with a little searching. It may take 10
minutes, and that's $1200 per hour work! Even lawyers struggle to get that!

The big brands: Expedia (inc HomeAway), Booking.com, TripAdvisor, Airbnb,
essentially offer the same thing and thousands of properties are advertised on
all of them simultaneously as they sit out front and use the guest fees to pay
Google Search (the real controller).

The smart guests are using them to identify great places and then phoning and
emailing direct (using Google again) but saving money and getting more
information.

Ref:
[https://www.smarthosts.org/posts/BnTAS2ujKWfNw47TW/airbnb-s-...](https://www.smarthosts.org/posts/BnTAS2ujKWfNw47TW/airbnb-
s-getting-a-lot-of-negative-comments-on-a-popular)

------
nakedrobot2
This feels like another example the new gilded age, where the spoils of
capitalism stay at the top.

------
maxxxxx
They should stop calling companies like Airbnb "startups". They are big
companies now and should be treated as such.

~~~
alehul
Working for a company like Google, FB or even Airbnb or a questionable
'startup' is still much different than working for any other type of company.
It's even markedly different than working for tech companies that would never
be referred to as startups, such as Samsung, AMD or even HP.

These large companies (FB, Google, etc) may no longer be bootstrapped and
employees may no longer have versatile roles, but they still resemble what
we'd call 'startup culture.' It seems reasonable to define a startup based on
culture rather than size, though it's not so etymologically sound.

edit: If you disagree, please comment why rather than downvote! This is a
question I've heard people discuss extensively and would appreciate input or
an opposing perspective.

~~~
CPLX
But we have a phrase for that already, those things are called "tech
companies"

~~~
alehul
Then we'd have to group in rather standard, traditional Samsung-like companies
though, which seem to be just as different work experiences from FB or Google
as FB or Google is different from newer, smaller startups.

~~~
Retric
Samsung is not a Tech company, it's a multi-national conglomerate.

 _It comprises numerous affiliated businesses,[1] most of them united under
the Samsung brand, and is the largest South Korean chaebol (business
conglomerate)_
[https://en.wikipedia.org/wiki/Samsung](https://en.wikipedia.org/wiki/Samsung)

Microsoft/Google are multinational companies but their core business has
remained. Samsung on the other hand did food processing, textiles, insurance,
securities and retail and only got into the electronics industry after close
to 30 years.

------
rs86
1b @ 30b is very weird.

------
curiousDog
Does this mean they're about to IPO? I should probably interview with them
ASAP then.

~~~
sloanesturz
I think it's the opposite.

