Airbnb valued at $13B ahead of staff stock sale • Hacker News Board

Re: Airbnb valued at $13B ahead of staff stock sale

#51

Post by grandalf » Fri, Oct 24, 2014, 3:45 PM UTC

johnnybazooka wrote: post #49

netcan wrote: post #43

Earlier quoted context omitted.

AirBnB also does something that I'm not sure how to generalize in a term. It allows operating at a different scale. Replacing 5 500 person businesses with 2500 1 person businesses can unlock all sorts of efficiencies (the same is true of the reverse). AirBnB can allow individuals to do the work of providing accommodation part time, after work, as students, working mothers, retired people. We often mention disruptive…

There is a fundamental problem with your argument. The condos and apartments people rent out on Airbnb are built by developers. So as Airbnb becomes more popular, developers will recognize the ability for tenants to profit from renting out units. In response, they will try to capture that profit on the front end by raising the selling point of the unit. Practically, the increases in property value Airbnb generates wi…

You are correct that AirBnB increases the value (and thus the price) of housing units. However this does not refute his argument.

Since AirBnB allows the rental of full units, individual rooms, and even shared rooms, it makes housing more affordable. Now, someone can afford a 2BR and plan on renting out one of the rooms a few nights a month to help afford the rent.

If there were massive competition, the price of renting a room on AirBnB for one night would approach 1 30th of the monthly rent price. Right now people typically rent a flat for one year. Why is that? Why not rent an AirBnB for 3 months and then try living in a different neighborhood? All these options are enabled by AirBnB and all of this extracts more value from existing infrastructure.

Re: Airbnb valued at $13B ahead of staff stock sale

#52

Post by grandalf » Fri, Oct 24, 2014, 3:47 PM UTC

netcan wrote: post #48

JonFish85 wrote: post #39

Earlier quoted context omitted.

"Hotel prices often fluctuate wildly -- a room may cost $59 one week and then a few weeks later cost $299 because a trade show is in town, etc." You don't think this will happen with AirBnb, similar to "surge pricing" with Uber? Continuing with supply & demand, at times of great demand, prices will rise no matter if it's a hotel or AirBnb, even if there is a great deal more supply, there will always be huge bursts of…

Regarding low-mid range, This isn't my experience at all. My experience is that for certain types of travel (eg, meeting friends for a weekend in some fun city) and AirBnB apartment is more fun, IE higher quality than any normal hotel option. Obviously if you compare a midrange apartment to a rockstar suite in a 5 star hotel AirBnB doesn't win but for most fair comparison I value the apartment more than the hotel. Wh…

Excellent point. I too prefer staying in someone's comfortable home over a hotel room. Other than at very high end hotels, there are frequently little annoyances (air conditioning cranked up, noisy fans, noisy housekeeping in the morning, excessive use of insecticides, low quality mattresses, small or nonexistent refrigerator, no kitchen, etc.) that detract from the experience.

Re: Airbnb valued at $13B ahead of staff stock sale

#53

Post by johnnybazooka » Fri, Oct 24, 2014, 4:03 PM UTC

grandalf wrote: post #51

johnnybazooka wrote: post #49

Earlier quoted context omitted.

There is a fundamental problem with your argument. The condos and apartments people rent out on Airbnb are built by developers. So as Airbnb becomes more popular, developers will recognize the ability for tenants to profit from renting out units. In response, they will try to capture that profit on the front end by raising the selling point of the unit. Practically, the increases in property value Airbnb generates wi…

You are correct that AirBnB increases the value (and thus the price) of housing units. However this does not refute his argument. Since AirBnB allows the rental of full units, individual rooms, and even shared rooms, it makes housing more affordable. Now, someone can afford a 2BR and plan on renting out one of the rooms a few nights a month to help afford the rent. If there were massive competition, the price of rent…

Right, it makes existing infrastructure more affordable. But for new infrastructure, any income generated is priced into the value, making the "profit" from renting it out less substantial.

Re: Airbnb valued at $13B ahead of staff stock sale

#54

Post by netcan » Fri, Oct 24, 2014, 4:14 PM UTC

johnnybazooka wrote: post #49

netcan wrote: post #43

Earlier quoted context omitted.

AirBnB also does something that I'm not sure how to generalize in a term. It allows operating at a different scale. Replacing 5 500 person businesses with 2500 1 person businesses can unlock all sorts of efficiencies (the same is true of the reverse). AirBnB can allow individuals to do the work of providing accommodation part time, after work, as students, working mothers, retired people. We often mention disruptive…

There is a fundamental problem with your argument. The condos and apartments people rent out on Airbnb are built by developers. So as Airbnb becomes more popular, developers will recognize the ability for tenants to profit from renting out units. In response, they will try to capture that profit on the front end by raising the selling point of the unit. Practically, the increases in property value Airbnb generates wi…

That's taking it deep. Luckily most of our economies run on price systems. :)

First, just because you're making more doesn't mean developers can charge more. Building is a fairly competitive industry. Land is usually the thing that can increase in value in response to rising demand.

Overall when thinking about housing prices the thing to consider is supply. Housing stocks take time to build up and there are all sorts of forces preventing them from increasing. That's really a different discussion but my personally opinion on it is that housing costs go up where and when the government and the citizenry want it to.

Rising house prices are a weird pathology. They help credit markets, which everyone is fond of (banks, developers & home buyers directly; retail and any consumer spending focused industry indirectly). Homeowners feel wealthier when their property increases in value, even though the house is still the same house and they have no way of realizing those gains without moving to a different town.

Re: Airbnb valued at $13B ahead of staff stock sale

#55

Post by grandalf » Fri, Oct 24, 2014, 4:33 PM UTC

johnnybazooka wrote: post #53

grandalf wrote: post #51

Earlier quoted context omitted.

You are correct that AirBnB increases the value (and thus the price) of housing units. However this does not refute his argument. Since AirBnB allows the rental of full units, individual rooms, and even shared rooms, it makes housing more affordable. Now, someone can afford a 2BR and plan on renting out one of the rooms a few nights a month to help afford the rent. If there were massive competition, the price of rent…

Right, it makes existing infrastructure more affordable. But for new infrastructure, any income generated is priced into the value, making the "profit" from renting it out less substantial.

That may be true, but why would anyone invest in new infrastructure if it didn't seem like a better option than buying existing infrastructure?

Both alternatives include the additional value that AirBnB creates and I'd expect both to result in increased investment in housing across the board, both new construction and improvement.

Re: Airbnb valued at $13B ahead of staff stock sale

#56

Post by glenra » Fri, Oct 24, 2014, 5:18 PM UTC

quaunaut wrote: post #8

I always see these people commenting on how they don't see the value in Airbnb. I've gotta say, after staying at a few places, I don't see the value anywhere else. * Hilton Worldwide has yearly revenues of $9.7b. * Marriott International has yearly revenues of $11.8b. * Best Western has yearly revenues of $6b. Now, I don't know what their current revenues are. Based on how many people from all over the US I've spoken…

I'm glad it works for you but as far as I can tell the difference between Airbnb and a hotel is that when you make a reservation at a hotel you actually have a reservation. Meaning you can then just show up and expect the room to be there when you arrive. Whereas with Airbnb you are tying up your money and time based on a mere hope that a room might be available and that the host might respond and tell you so and tell you how to find/access it.

Sometimes the host says "sorry, the calendar is wrong - that room's not available". Sometimes the host doesn't reply at all, in which case Airbnb releases the deposit back but you've lost a day or two and now there's less availability.

So far I think I'm 0-for-3.

Re: Airbnb valued at $13B ahead of staff stock sale

#57

Post by glenra » Fri, Oct 24, 2014, 5:37 PM UTC

grandalf wrote: post #31

JonFish85 wrote: post #28

Earlier quoted context omitted.

"Furthermore, as much as there are local law issues in places like NYC against them, I don't anticipate those lasting long or having a large effect on their revenues." If this is true, it will also apply to their competitors, right? Either the prices of Marriott will fall if/when they stop charging some crazy-expensive taxes on their guests, or AirBnb will have to start paying/charging for those taxes. One way or ano…

You are partially right, but the main value of AirBnB is that opens up a larger supply of rooms. Hotel prices often fluctuate wildly -- a room may cost $59 one week and then a few weeks later cost $299 because a trade show is in town, etc. Cities like New York have an insufficient supply of hotel rooms to meet demand. There are often no hotel rooms in NYC available for last-minute booking for under $400/night. With A…

Airbnb seems like a terrible choice for last-minute booking because it's based on the notion of hosts responding via email in their spare time. When you book a room in a hotel you have reserved a room and don't need to do anything more except show up but when you book a room via airbnd you have merely made an inquiry and won't know whether you've reserved a room until you possibly get an email back after some non-deterministic amount of time.

Selection bias says the most responsive hosts will get booked early so the bookings that still show as available at the last minute tend to be less responsive hosts. A room that's still showing up as available at the last minute might be doing so because the host went on a hiking trip and forgot to update the calendar rather than because it's actually available.

Re: Airbnb valued at $13B ahead of staff stock sale

#58

Post by devinmontgomery » Fri, Oct 24, 2014, 5:49 PM UTC

rokhayakebe wrote: post #41

hnnewguy wrote: post #34

Earlier quoted context omitted.

> Nit pick: This isn't a nit-pick, it's a very important point that is sometimes overlooked by the less financially-inclined. So often people will argue for some obscene valuation based on the fact that the company is growing rapidly. Well, the whole point of a valuation model is to capture these elements and estimate a price you're willing to pay today for all that future growth. Of course, that's way easier said th…

VC: "I am going to buy these goods at $1,000 because that is what they will be worth in the future." You: "Great, how much will you sell them for when they are worth that $1000" VC: "$2000" You: "And who will buy it at that price when they worth only half" VC: "Let Wall Street worry about that"

It's more like:

VC: "I am going to buy these goods at $1,000 today because I expect to be able to sell them for $1,100 in one year".

How they arrive at the $1,100 is based on the amount of risk there is and the return they could get on a zero-risk investment.

Seriously, finance seemed like mumbo jumbo to me to too before I learned about it. But it's actually pretty interesting. This is the calculation for present value.

Re: Airbnb valued at $13B ahead of staff stock sale

#59

Post by seanflyon » Fri, Oct 24, 2014, 6:13 PM UTC

johnnybazooka wrote: post #53

grandalf wrote: post #51

Earlier quoted context omitted.

You are correct that AirBnB increases the value (and thus the price) of housing units. However this does not refute his argument. Since AirBnB allows the rental of full units, individual rooms, and even shared rooms, it makes housing more affordable. Now, someone can afford a 2BR and plan on renting out one of the rooms a few nights a month to help afford the rent. If there were massive competition, the price of rent…

Right, it makes existing infrastructure more affordable. But for new infrastructure, any income generated is priced into the value, making the "profit" from renting it out less substantial.

You are ignoring the concept of competition. Housing is not the most competitive market due to restrictions both natural (limited space) and artificial (zoning), but there is still competition.

Re: Airbnb valued at $13B ahead of staff stock sale

#60

Post by seanflyon » Fri, Oct 24, 2014, 6:22 PM UTC

bane wrote: post #20

DougN7 wrote: post #2

Does it seem like we're in another Internet bubble to anyone else?

Here's the fun part, if I start a company and get my friend to invest $1 for 0.0000001% of my company. What's my company's "valuation"? "Valuation" is such a terrible term, all it really means is "the ROI expected by the investors". We try to make it very complicated with analysis of term sheets and growth rates and all that, but it's just a gamble on the part of the investor. The only difference between gambling and…

> Here's the fun part, if I start a company and get my friend to invest $1 for 0.0000001% of my company. What's my company's "valuation"?

This is a great point, but valuation is still a meaningful term, it refers to how much someone thinks the company is worth. Your friend bet $1 that your company is worth more than $10,000,000. We tend to trust people's opinions when they put their money where their mouth is so we pay attention to valuations, but we also need to consider how much money they put where their mouth is.