AirBnB is poised to become more valuable than Marriott, Starwood, and Expedia. At first glance, the valuation looks rich, but the data suggests it might be right.

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AirBnB is reportedly raising a $1B round at a $24B valuation, a jump of 140% over its last reported 2014 valuation. If the deal is successful, it would make AirBnB the third-most valuable unicorn company in the world after Xiaomi and Uber. We believe some unicorns are not appropriately valued (Dropbox being a case in point). So we compared AirBnB’s valuation numbers against those posted by several related or comparable public-market companies. Specifically, we looked at Marriott, Starwood, Expedia, Wyndham, and HomeAway.

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AirBnB would rank first in valuation when compared to these companies, just above Marriott, which sports a market capitalization of $21.1B. AirBnB would be 8x as valuable as HomeAway, its most similar competitor, which trades at around $31 per share for a market cap of less than $3B. Wyndham, Expedia, and Starwood all trade at valuations between $10B and $14B.

Airbnb versus chart

 

When we look at multiples, AirBnB does look very richly valued at $24B. Its multiple would be more than quadruple the size of HomeAway’s, which has a price-to-sales ratio of 6.6. The other companies all have multiples between 1.6 and 2.5 price-to-sales. (To pin down AirBnB’s multiple, we used CB Insights’ private company valuation and valuation multiple search.)

Airbnb versus price to sales

 

While AirBnB’s multiple may seem high, AirBnB’s revenue growth is also far higher than that of its public-company peers. AirBnB had estimated revenue of $423M for 2014, and projected revenue of $900M for 2015, or 113% year-over-year revenue growth. For comparison, the latest YoY revenue growth figures for HomeAway and Expedia were 24% and 20%, respectively. Wyndham and Marriott are seeing revenue growth in the single digits, and Starwood’s revenue is actually shrinking. Of course, in absolute numbers AirBnB’s revenue is still a fraction of what’s generated at the public companies. Expedia, Wyndham, and Starwood are each generating more than $5B of revenue annually.

Airbnb vs competitors revenue2

 

If we combine the price/sales (PS) and revenue growth rates (G), we get what we’ll call a PSG ratio which puts the companies on similar footing. By this measure, we see AirBnB falls into a reasonable range compared to these public-market peers.

Price to Sales to Growth Airbnb

 

And beyond revenue or valuation, it’s clear AirBnB is quickly becoming a known entity among travelers and a more established, mainstream brand. Interest in the service is increasing rapidly. As the Google Trends chart below shows, the term “AirBnB” recently surpassed the search term “Marriott” in Google search popularity.

Airbnb competitors news

 

With consumer interest growing and sales growth in the triple digits, AirBnB doesn’t look like a bloated unicorn to us.

 

Want more data on AirBnB and similar companies? Check out our venture capital database below.

  • https://twitter.com/abdulnusrat Abdul Nusrat

    I don’t think Google search term data, while makes your point, is that comparable. Since airbnb properties can only be booked via airbnb you’d expect more and more people to be searching for that term. While marriot can be booked via 3rd party booking websites, never resulting in a search for the word “marriot”.

    If you look at other hotel name terms like best western, Hilton etc. That have all seen a drop.

    With the rise of 3rd party booking + price comparison sites, consumers have less of a reason to search for the word directly perhaps? Where as with Airbnb there is no choice but to look it up.

    But definitely agree that Airbnb valuation isn’t crazy.

  • Nikhil Krishnan

    That’s a good point Abdul. I think one thing that might suggest, however, is that hotel chains are a commodity. People use third party booking systems because there’s no loyalty to those specific hotel chains, whereas for AirBnB the brand itself is what’s important.

  • Mihir Bhalla

    I agree with you Nikhil.

  • Siddhartha Jain

    While PSG is an interesting metric, there are two major faults with using it as a single metric for justifying valuation:
    1) The calculation of the term PSG is faulty. The valuation looks reasonable when a 1-year forward growth rate is being used. But AirBnB’s growth is decelerating (base effect and business model maturity). Valuations are based on long-term growth. Assuming a more reasonable 3-year or 5-year forward growth rate would make more sense.
    2) The term PSG ignores bottom line completely. All the buzz around Airbnb is its own assertion that they will hit a revenue of US$10 bn. by 2020 and will be profitable at that time. The company, according to its own numbers, will have to grow its topline at 62% annually while becoming profitable. A little extreme variant of S-curve, no? Even if you disregard that, paying $24 bn. for a company that will generate sufficient profits to justify its valuation 10 years later, does not make investment sense. If the 5-year forward growth is priced in, where is the value growth for investors going to come from?

    Let me not get started that where is this additional US$9 bn. of revenue going to come from? New markets or snatching away from likes of Marriott? All in all, a very clickbaity article more than substance. Am a fan of CB insights but this is definitely a huge disappointment.