This may become the year of the Unicorn. Unicorns are privately held companies valued at over $1 billion, and many of these companies will be preparing IPO offerings.
Among the most compelling Unicorns is Airbnb. The company is a leader of the sharing economy.
At its current valuation, Airbnb is the third most expensive Unicorn, valued at $25.5 billion after its latest round of funding. It is behind only Xiaomi and Uber. The company's platform allows users to rent their homes and apartments, often for short periods.
Airbnb has pioneered what is known as the alternative accommodations space. It is an estimated $100 billion market of which the company controls a quarter. It operates in more than 190 countries.
It has taken business from major hotel companies by expanding options for travelers and renters. This has affected hotel stocks by lowering their occupancy rates.
Share prices for Starwood Hotels, Marriott International, Hilton, and Hyatt have all declined in the last year while Airbnb grew its business. Marriott is currently in the process of acquiring Starwood hotels for $12.2B, at least partly to fend off Airbnb. Expect more M&A activity within the industry as hotel giants adapt to the changing market.
Some investors are eagerly waiting for an Airbnb IPO. This is largely because the company doesn't own any of the properties that it serves. Its overhead is low.
Not only does the company pose a threat to hotel chains, but Airbnb has been affecting hotel booking companies Priceline, Expedia and Orbitz. At its current valuation, the company has become the most valuable in the entire industry. Raymond James has downgraded Priceline's stock due to concerns about competition from Airbnb and Expedia.
Airbnb has become a threat to Expedia. This spurred Expedia to acquire Airbnb's sole competitor and former public company, HomeAway for $3.9 billion. After the news broke, Expedia's share price increased over 5%.
Still, Airbnb faces significant challenges form local government, the hospitality sector and its lobbyists. Some people blame the company for the loss of jobs and tax revenues in such major markets as New York City. Some also say that it is behind high rents in New York and San Francisco.
Still, the company remains an attractive IPO candidate because of ongoing demand for its services. Its high valuation is justified.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.