Ahead of IPO, Airbnb’s consumer sales surpass most hotel brands

NOTE: Bloomberg Second Measure launched a new and exclusive transaction dataset in July 2022. Our data continues to be broadly representative of U.S. consumers. As a result of this panel change, however, we recommend using only the latest posts in assessing metrics, and do not support referring to historical blog posts to infer period-over-period comparisons.

IPO anticipation looms large for Airbnb, the online platform for short-term vacation rentals that’s currently valued at $31 billion. With the growing popularity of its peer-to-peer rental model, Airbnb has become a top contender in the hospitality industry. Its annual sales surpassed Hilton’s in 2018, based on data from U.S. travelers that excludes business spending. Airbnb is also gaining on Marriott, which padded its lead in late 2016 by acquiring Starwood hotels.

Airbnb also handily beats out its main competitor in the peer-to-peer rental market. From 2012 through 2014, Airbnb and HomeAway had nearly equivalent annual sales but, in the years that followed, Airbnb has grown faster. (HomeAway’s sales also include spending on rental platform VRBO, which HomeAway bought in 2006.) Annual sales at Airbnb increased twelvefold from 2013 to 2018.

Second Measure on Airbnb IPO: Airbnb's 2018 annual sales surpassed Hilton.

Sales at Airbnb include both its short-term rentals and “experiences”—a way to book tours and other local activities—which rolled out in late 2016. Though Airbnb has seen staggering growth since 2013, even six years ago it was far from a fledgling startup. The company reached unicorn status in 2011 and was valued at $10 billion by 2014. Airbnb’s IPO had been expected before 2020 although, in a recent interview, Airbnb cofounder Nathan Blecharczyk would not confirm a 2019 IPO.

Airbnb heads toward IPO with sales tripling in the past three years

Hotel guests are increasingly likely to consider Airbnb for their travel. In 2018, 12 percent of major hotel customers also made a booking with Airbnb, up from 1 percent in 2013. (The seven hotel groups included in this analysis include more than 50 subsidiary brands, ranging from Days Inn to Ritz-Carlton.) And while Airbnb has tripled its sales in the past three years, hotel chains have collectively seen sales grow just 11 percent.

Second Measure on Airbnb IPO: In 2018, Airbnb captured 19% of the market against major hotel chains and HomeAway.

All travel accommodation providers are susceptible to off-season effects, with sales expectedly dipping in the fourth quarter. In 2013, major hotel brands InterContinental Hotels Group (IHG), Hilton, Marriott, Choice Hotels, Wyndham, La Quinta, and Hyatt collectively accounted for 94 percent of spending against competitors Airbnb and HomeAway. Last year, those hotels captured just over two-thirds of spending as peer-to-peer rental platforms have carved out more of the market.

Airbnb looks to broaden offerings with HotelTonight acquisition

Airbnb is shaving away potential sales from the hotel industry while also moving into its business. Pressure is mounting for Airbnb to diversify its offerings as inventory shortages and regulatory battles in key markets—including New York City—strain its original peer-to-peer model. Airbnb recently struck a deal to acquire HotelTonight, a platform for finding last-minute hotel rooms at a discount. Last year, 26 percent of HotelTonight customers also booked with Airbnb.

Though HotelTonight’s 2018 sales were less than one-tenth of Airbnb’s (excluding business spending), the acquisition signals Airbnb’s willingness to move into new segments of the travel industry, helping justify its mammoth valuation. With its IPO around the corner, Airbnb faces direct comparison against publicly traded platforms—like Expedia—that offer end-to-end travel services, from lodging to flights and ground transportation.

Likewise, competing travel platforms have moved into the peer-to-peer rental space that Airbnb pioneered. Expedia is the parent company of Airbnb competitor HomeAway. And Booking Holdings offers short-term rentals via Booking.com, in addition to owning Kayak and Priceline. But it’s hard to quantify how Airbnb’s sales stack up against rival platforms. Because some travel sites redirect consumers to a primary service provider—like American Airlines or Hilton—for booking and payment, the resulting purchases are not attributed to the search aggregators.

Airbnb gaining popularity in Central U.S.

Last year, though Airbnb held 19 percent of market share nationwide amongst the biggest hotel chains and HomeAway, its performance varied widely by state. Against top competitors, Airbnb claims roughly a third of spending for travelers from states like New York, Vermont, and Oregon, while it claims the lowest share amongst West Virginian travelers—just 12 percent.

Historically, Airbnb’s popularity has skewed heavily toward the coasts. In 2012, over half of all customers came from just California, New York, and Florida combined. Last year, that share dropped to roughly a third of customers as Airbnb’s prominence in the Central U.S. has risen. For this analysis, location is determined by a traveler’s home state, not his or her destination.

Airbnb has been building its nationwide presence, as shown in the dramatic increase of travelers based in some Midwestern and Rocky Mountain states. In the Dakotas, Wyoming, and Idaho, Airbnb’s customer base has essentially quintupled—or more—since 2015.

Second Measure on Airbnb IPO: Nationwide since 2015, Airbnb’s customer base has nearly tripled.

Nationwide since 2015, Airbnb’s customer base has nearly tripled, while its annual sales per customer have also risen slightly. On average, Airbnb customers each spent just over $1,000 last year, up 7 percent from 2015.

Forty percent of Airbnb’s 2017 customers booked again within a year

Overall, Airbnb customers are somewhat more likely to return to the platform each year than the average patron of the top three hotel brands, although that trend diminishes over time. In the fifth year after their first booking, between 19 and 26 percent of hotel customers returned for another stay, on average, with Hilton and its subsidiaries having the most loyal customers. At Airbnb, 28 percent of customers booked again five years later.

Second Measure on Airbnb IPO: 40% of Airbnb’s 2017 customers booked again within a year.

And Airbnb’s retention has been improving over time. While average first-year retention across the largest three hotel chains—Marriott, Hilton, and IHG—has fallen between 24 and 29 percent over the past six years, it has risen steadily at Airbnb, with 40 percent of Airbnb customers from 2017 returning to the platform sometime within the next year.

Airbnb’s increase in available listings over recent years may play a role in making it easy for customers to return for subsequent trips. Currently, Airbnb has over five million listings worldwide, a million more than reported in August 2017. Though, if Airbnb continues to grow its customer base while facing a shortage of hosts, it may struggle to keep customers coming back.

For more on Airbnb as it prepares its IPO, get in touch about starting a demo.
Oh, and we’re hiring.