For several years now I have written a quarterly trends article looking at what has happened over the prior three months in the vacation rental industry and sussing out the implications for those involved in the space. As anyone who has read my pieces now knows, a trend that continually comes up is that of “consolidation.” As more and more money pours into the space, the big get ever bigger.

This is a trend that goes back at least to the late 1990s with ResortQuest’s strategy of rolling up vacation rental managers (VRMs). It is one that gained speed in the mid-2000s with HomeAway’s aggressive listing site and PMS roll ups (~35 acquisitions), eventually leading somewhat poetically to HomeAway itself being acquired by Expedia. And the longevity of this trend is being borne out today by many others—from TripAdvisor to Wyndham, from Vacasa to Airbnb, and from Vacation Rental Pros to hotel chains like Accor continuing to buy up smaller fry.

And so rather than just recap the most recent deals that occurred and rehash the continuation of the consolidation of the vacation rental industry, I thought I would do something different this time around: I figured I’d go out on a limb and predict in the most speculative manner possible what some of the upcoming blockbuster deals might be.

Without further ado, here we go.

 

Airbnb Acquires a Vacation Rental Management Company

Airbnb’s desire, and given the amount of money it has raised to date, obligation—to continuously expand is no secret. The company has already completed more than a dozen acquisitions to date.

The biggest and most interesting by far, however, is its recent purchase of Luxury Retreats for hundreds of millions of dollars. This expansion of its listing and booking business makes sense, and it shows Airbnb’s intention to get more involved in the luxury end of the market.

But could the company take this a step further, and look to get its hands dirty by expanding into actual on-the-ground management?

Such a move is not as crazy as it might first appear.

Airbnb’s first foray into the management space was the “Sonoma Select” program last summer. Reports suggest that it was not only a success; the company also saw much higher margins from that business than its traditional one.

When you combine this with Airbnb’s more explicit push to professionalizing its marketplace through its “Find a Superhost” feature, the logical conclusion is that Airbnb itself could eventually fill in as this professional.

As any of you reading this know, however, the on-the-ground operations are by far the most difficult part of the business, the hardest to predict, and the hardest to standardize. And that is why, if this is a route Airbnb takes, the acquisition of a vacation rental management company, or many, would make sense.

So who would be the target(s)?

Companies like Sonder or Pillow would make sense if Airbnb wants to keep to its bread and butter of urban rentals.

If instead Airbnb wants to make a big splash, acquiring a company like Vacasa would certainly make some waves.

If on the other hand Airbnb wanted to follow their Luxury Retreats acquisition with a more luxury brand vacation rental management company, companies like Utopian or Invited Home start to look more appealing.

Or will Airbnb go in the opposite direction? Now that they’ve made a big move into the luxury distribution space, will they expand into the other direction (e.g., hostel distribution)? If so, the acquisition of a site like HostelWorld.com could be next.

 

The Inverse: A Big Vacation Rental Management Company Buys a Distribution Site

If the logic for Airbnb, a distribution site, moving into the VRM side of things makes sense, then so too does that for a VRM getting into distribution.

You need not be a travel expert to have heard of all the battles hotels fight with OTAs (Online Travel Agencies) in their attempt to capture more of their bookings directly on their own sites. And what better way to save those OTA fees than to have your own? Lower or no fees mean higher margins for your business.

Indeed, I can’t exactly claim this is a very creative prediction considering Wyndham’s recent purchase of Wimdu. And so if the move made sense for Wyndham, could it also be on the cards for Vacasa (with its ~$40 million in investment dollars), TurnKey (with its new $21 million in investment dollars), or Vacation Rental Pros (with its $27 million in new debt)? Perhaps.

But who would they buy?

As you know, there is no dearth of “also ran” listing sites out there. While many have ended up in the arms of companies like HomeAway (now Expedia) or TripAdvisor, and we have already mentioned Wyndham’s purchase of Wimdu, there are still many out there looking for their exit.

One, or more VRMs may be the savior they are looking for now that Expedia bought HomeAway and may have iced, if not killed, their initial exit strategy.

 

A Vacation Rental Management Company Buys An Urban Short-Term Rental Management Company

The single biggest trend driving growth in the “alternative accommodation” sector over the past year or two has been the growth of professional management in urban short-term rentals.

Based on the growth and the amount of money being made in this space, companies like Sonder, Pillow, Stay Alfred, and BookUrban have all been raising big money to expand in the space.

At the same time, traditional VRMs have a history of running a business that looks a lot like what is needed in urban areas. They know how to work with owners, how to deliver amazing experiences to guests to keep them coming back, and how to do all of this while making a profit.

As more traditional VRMs see these new model companies take off, and see the opportunity the urban markets provide, could they look to hitch a ride on the rocket ship by purchasing one of the STRMs (short-term rental managers) outright? Probably.

 

The Inverse: A Short-Term Rental Management Company Buys a Vacation Rental Management Company

As mentioned above, many of these STRMs having been raising a lot of money—as in tens of millions of dollars each. Given that, could one or more of them use some of these funds to expand into tradition vacation rentals via the acquisition of one or more VRMs?

The idea that one of these newly founded companies could acquire a more established business may seem ludicrous, but remember how AOL was able to leverage investors’ excitement for its new-model tech business via its inflated share price, and leverage that to buy the legacy Time Warner business?

It could happen, though we all know how that deal turned out…

 

Getting Really Speculative: Airbnb Has Billions. Where Will They Spend It?

With its recent round bringing in an additional $850 million to the coffers of Airbnb, all eyes are on what the tech darling plans to do with it. And with Brian Chesky explicitly saying that in the future he expects less than half of Airbnb’s revenue to come from its existing business of short-term rentals, where might the company look next?

Airbnb & Flights

The most obvious area is flights, and this is not just because Airbnb has already said it plans to get into the space. If the idea really is to become something akin to the “Amazon of travel,” then owning not just where travelers stay, but how they get to where they are going makes a lot of sense. Most people think this just means a booking engine for flights, but Chesky has already said that he is thinking “much bigger” than that.

So what about buying an airline?

Crazy? Perhaps not once you realize Airbnb is valued at $31 billion, while JetBlue’s market cap is just over $7 billion.

Airbnb on the Ground

Ok, so you are at the airport, but how do you now get to your Airbnb? Could the company look to get into the ground game via a rideshare company?

The most well known player in that space is no doubt off limits. If Airbnb’s $31 billion valuation is high, Uber’s $70 billion valuation makes it virtually untouchable. But though they are the most well-known, Uber is by no means the only game in town. Lyft is out trying to raise money at a $6 billion valuation, and if Airbnb wanted a smaller bet in the space, companies like Juno or Via could be appealing.

Airbnb & Food

So you got to a new city, have a place to stay, and successfully got there. Where are you going to eat?

This is not entirely a new question for Airbnb. As far back as 2014 Chesky was encouraging hosts in San Francisco to cook meals in their homes and invite strangers over to eat. If the company wanted to expand more aggressively in this business, an acquisition could make sense.

Companies like EatWith, Meal Sharing, and Gnammo all seem to fit with the community-like ethos of Airbnb, making them good potential targets for the company.

What To Do While You’re There

Ok, so you got to your destination, have a place to stay, and know where you are eating. What do you do during the day?

Trips” is Airbnb’s most obvious answer here, and it seems to be growing quickly. Could kimkim or another travel agent be next?

That being said, sometimes you need to get some work done when you are traveling. Given that, a push into “Airbnb-ing” office space could be a natural extension. With companies like Breather and Knotel already successful in this area, again, an acquisition could be a good way for the company to get a quick start in an attractive new market.

 

Absurdist Conclusion

All of which leads us to the most extreme conclusion possible. If you take Airbnb’s exhortation to “Don’t just go there. Live there.” literally, you can’t live somewhere without a job, right? So could Airbnb help you get that job?

Acquiring an on demand job platform like Upwork could help them do just that.

But even then, you aren’t really “living there” yet are you? To truly live there, you need to live there. So could Airbnb get into the home buying market?!

I mean, Zillow’s market cap is currently under $6 billion.

Seems crazy.

Or does it?

Previous Post

Next Post