Airbnb is preparing to step more forcefully into the hotel market, a move that analysts at Bernstein say could materially boost growth and profitability.
Chief Executive Brian Chesky said at second-quarter results that the company is “going to be going significantly more aggressively into hotels,” an opportunity that he described as “really compelling.”
The global hotel market is roughly nine times the size of the short-term rental market and about 13 times larger than Airbnb’s current platform. Bernstein estimates that selling hotels could allow Airbnb to tap into nearly all of the $1.2 trillion global lodging industry.
The broker does not expect Airbnb to compete head-to-head with online travel agencies such as Booking or Expedia on hotel keyword advertising. Instead, it sees upside from improving Airbnb’s ability to convert searches into bookings, where it currently lags competitors by 15–20%.
For each 1% improvement in conversion, Bernstein calculates Airbnb would generate an additional 2% in EBITDA, given its high contribution margins.
“Even a 10% increase in conversion at very little incremental marketing cost would grow EBITDA 20%,” analyst Richard J. Clarke said in a note.
Beyond conversion, hotels are cheaper to service because relationships are more automated and customer service costs can be shared, meaning hotel distribution could be margin accretive.
For hotels, listing on Airbnb could provide incremental demand without the added cost of bidding against online travel agencies (OTAs) for search traffic. The platform’s 15% flat commission structure is also lower than the often higher, variable fees charged by incumbents.
Clarke noted that “hotels should welcome a new distribution channel” because it reduces the risk of cannibalizing direct bookings and increases visibility among Airbnb’s loyal customer base.
Airbnb has prior experience in this area. It acquired HotelTonight for around $400 million in 2019 and signed a distribution agreement with channel manager Siteminder in 2018.
By 2024, Airbnb was among the top 12 booking sites in all major non-Asian markets in Siteminder’s rankings, and ranked number five in the U.S., ahead of Hopper.
“It still lagged Booking and Expedia in all markets but does show that hotels listing on Airbnb do get a high number of bookings,” Clarke said.
Still, to be effective in hotel distribution, Airbnb may need to adapt its platform. Clarke pointed out gaps compared with Booking.com, such as limited rate card options, fewer details on property and room information, and a lack of flexibility in cancellation policies.
These changes could help address situations where Airbnb currently struggles to meet demand—for instance, offering just a handful of expensive options for one-night stays in some European destinations, while rivals list multiple hotels at much lower prices.
Bernstein framed this expansion as part of a well-trodden OTA playbook, noting Booking has expanded from hotels into alternative accommodation, while Airbnb is now attempting the reverse.
The broker rates Airbnb Outperform with a $165 price target. It argues that optionality remains central to the investment case, with hotels representing the next step in widening its lodging supply.
"We might finally get the breakfast with our Airbed," the note says.
Source :
https://www.investing.com/news/stock-market-news/deep-dive-on-the-hotel-opportunity-for-airbnb-4229398
