Airbnb, according to Techcrunch and others, is planning a mega-round raise at a $1 billion+ valuation, and validated social travel in one swoop. It redefines what a “hotel room” is, even one year ago the only viable short term rental space for the masses. Airbnb allows anybody to rent out living space – a refurbished basement, an in-law, or even a guest room – and relies on a social reputation system of references, reviews and personal connections to ensure both renter and host are reliable and trustworthy. It opens up a brand new segment of the hospitality industry that will inevitably grow and expand the supply of short term (and eventually long term) rental inventory.
Before Airbnb, the owner of a rentable space could realistically only offer monthly leases, and deal with the contractual legalities and problems of landlord tenant issues that may come with it. Airbnb creates a branded exchange for property rental that solves the arduous process of finding reliable tenants, up to now the province of Craigslist and classifieds. Now rental can be accomplished piecemeal, almost always at a better daily rate than what could potentially be received from monthly tenancy. Rental inventory increases because any space, even a guest room in an apartment, can become a virtual hotel room.
AirBnB opens up revenue opportunities for commercial property owners/managers that have rentable property but up to now did not have the distribution opportunities of an exchange to attract short term tenancy. Vacant properties and developments in overbuilt tourist areas in, say, Florida and California can be converted to rental property, even ad hoc bed and breakfasts quickly. For example, I’ve proven that I can easily rent out my previously difficult to rent no-kitchen in-law space in San Francisco for $70 per night, for potential monthly revenues of $2,000. At $70, it’s half the price of a three-star hotel room, and next to Golden Gate Park, where there are few hotels. This changes “cap rates” by augmenting revenue streams, particularly in cities and areas with high tourist or traveler demand, like resorts and college towns. Property managers can source more revenue for their clients simply by managing rental inventory on Airbnb, and charging commissions to do so. Expect new affiliate businesses – property management applications, Airbnb profile designers, local cleaning and other hospitality services – to serve a new virtual hotel room industry.
Finally, Airbnb socializes travel. The attraction and comfort of staying in the homes of friends and acquaintances becomes easier to accomplish when applied across Facebook’s social graph. Last month, Airbnb introduced Social Connections, a social discovery application that basically identifies friends of friends for rental and home stay. Airbnb is an aiming for the tipping point of adoption when travelers, both business and pleasure, can find like-minded people through their social networks at every “port of call”.