In its quest to be an all-encompassing travel platform, Airbnb is intent on capturing the last-minute traveler. Today the company announced it will acquire HotelTonight, a mobile app expressly for booking week-of travel.
The terms of the deal were not disclosed. HotelTonight will remain an independent app, though the company may integrate the two platforms over time.
Booking last-minute travel on Airbnb isn’t always easy. Homes may be booked up or hosts may not be readily available to approve a trip. By contrast, HotelTonight can have a hotel room booked immediately. And there is a significant population that needs or wants to book a trip without much notice. Travelers with as little as a week of lead time can comprise as much as 24% of travelers depending on the region, according to a 2018 report from travel marketer Sojern. Airbnb says that on its platform, same-day bookings doubled year-over-year.
The deal is also an opportunity for Airbnb to expand the accommodations in its network. In 2017, the company acquired Canadian company Luxury Retreats to enter the luxury market. Last year, Airbnb made it easier for boutique hotels to list on its platform and launched a loyalty program for travelers. The company now hosts 6 million listings and some 48,000 boutique hotels. Bringing more hotels into its network will give Airbnb a steadier supply of accommodations year-round. HotelTonight’s focus on deal-finding means it can also maintain its reputation as an affordable travel platform.
Of course, Airbnb won’t be inviting all hotels onto its platform. CEO Brian Chesky has repeatedly maintained that he wants Airbnb to be a curated travel platform. When the company announced its hotel listing expansion last year, it was explicitly courting boutiques. That opens up an interesting opportunity for independent hoteliers, one that is likely to upset industry stalwarts.
Historically, independent hotels set themselves up as franchises in order to access a steady supply of bookings, hospitality consultant Bjorn Hanson says. But franchising, rather than operating an independent hotel, is quite expensive. “If you’re an owner, even if you pick one of the cheapest brands, you still have to pay 10% of revenue and as much as 16%,” says Hanson. As an example, the franchise fee to open and operate a Courtyard Marriott is $500 per room or $60,000, according to its website. Additionally, franchise owners are expected to plunk down between $7 million and $10 million to get their hotels up to standard (franchises have to obey strict rules around decor and operation).
With the proliferation of online travel agencies and now Airbnb’s further expansion into hotels, they have another option: Open an independent hotel and keep all the revenues. Savvy hoteliers can rely on such platforms for distribution rather than on the power of the brand it’s franchised under. And independents might be more popular than traditional brands. Data from Expedia in July 2018, indicated that indies had better overall revenue growth in the last two years than traditional big brands.
A final note on the acquisition: This is the second big announcement Airbnb has made this year. Last month it hired Fred Reid, former CEO of Virgin America, to lead global transportation. There has been long-standing curiosity about when the company will go public. Perhaps this is the a tee-up for a 2020 IPO.