This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Airbnb's Valuation May Have the Hotel Industry Shaking

NEW YORK ( TheStreet) -- A new round of funding could value Airbnb at over $10 billion, signifying the company's role as a disruptive force in the hotel industry.

Private-equity firm TPG Capital is expected to lead the funding over the next few weeks -- negotiations are still in progress -- possibly bringing in up to $400 million for the property rental upstart.

The idea for Airbnb was conceived in 2008 by three Rhode Island School of Design and Harvard graduates who relocated to San Francisco, originally calling the site

Since its inception, Airbnb has become a leader in the share economy. The site is a destination for millions of tourists looking for cheap rooms, while giving homeowners a new source of income.

Airbnb's reach spans 160 countries with more than 600,000 listings, and the site has accommodated 11 million guests in its five-year history, according to the Wall Street Journal. The company said it had a record 250,000 guests in one night on New Year's Eve 2013.

The hotel industry has begun to take notice of the company's tremendous growth.

Airbnb has cut into the industry's market share by offering cheap prices and unconventional accommodations. For example, a person can stay in a large treehouse in Hawaii for under $100 a night, much less than comparable hotel prices in the area.

The novelty of the living arrangement, along with the cheap rates, has many tourists checking with Airbnb before looking into more traditional accommodations. Airbnb takes 3% from a host's booking fee and 6% to 12% from the fee charged overall to each guest.

The hotel industry has complained, saying that the site is not subject to the same regulation and tax structure that traditional hotels are, making the competition unfair.

Homeowners in New York and San Francisco have questioned the legality of Airbnb's practices regarding subletting property, and tenants say the site has diminished the supply of rental properties, driving up long-term rents.

Amid the criticism, current valuations of Airbnb make it worth more than Hyatt Hotels (H - Get Report), valued at $8.43 billion, and Wyndham Worldwide (WYN - Get Report), valued at $9.39 billion, signaling investors see the site as the possible future of travel stay.

TPG Capital's new round of funding indicates that a public offering may be in the company's future. That would give the site fresh capital to expand advertising and hire new employees.

As a public company, Airbnb could become a marquee name in the world of short-term travel accommodations. H Chart
H data by YCharts

At the time of publication, the author had no position in any of the stocks mentioned.

Follow @macroinsights

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
H $57.99 -0.67%
WYN $90.10 -1.35%
AAPL $132.65 1.82%
FB $81.91 0.47%
GOOG $555.37 -1.71%


DOW 18,037.97 -42.17 -0.23%
S&P 500 2,108.92 -8.77 -0.41%
NASDAQ 5,060.2460 -31.8390 -0.63%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs