Airbnb has signed an agreement to acquire last-minute hotel booking app HotelTonight for an undisclosed sum.
“We will offer guests an unparalleled last-minute travel experience that provides unique, memorable hospitality on every trip, on any schedule, at any time,” said Brian Chesky, Airbnb co-founder and CEO, in a statement.
HotelTonight has raised more than $115 million in funding and was last valued at $463 million in a funding around in 2017. HotelTonight lists unsold inventory from hotels and offers discounted rooms to travelers, often targeting business districts and urban areas.
“We started HotelTonight because we knew people wanted a better way to book an amazing hotel room on-demand, and we are excited to join forces with Airbnb to bring this service to guests around the world,” said Sam Shank, co-founder and CEO of HotelTonight. “Together, HotelTonight and Airbnb can give guests more choices and the world’s best boutique and independent hotels a genuine partner to connect them with those guests.”
Airbnb and HotelTonight will operate as separate entities. HotelTonight will keep its app and website.
The acquisition comes after the launch of its Airbnb Plus, a subsection of Airbnb’s service that includes boutique hotels and traditional bed and breakfasts. And the firm acquired high-end travel website Luxury Retreats for about $300 million in 2017.
The HotelTonight acquisition has the potential of the continuation of Airbnb’s disruption of the hotel market. In a 2018 paper, The Welfare Effects of Peer Entry in the Accommodation Market: The Case of Airbnb, Harvard Business School assistant professor Chiara Farronato and MIT postdoctoral fellow Andrey Fradkin analyzed the 10 U.S. cities that hosted Airbnb's largest market share in 2014. The local hotel industry in each city reported an average 1.5 percent net loss in revenue and a 1.3 loss in total nights booked after Airbnb established a presence.
"The benefits to travelers and the reduction in pricing power of hotels is really concentrated in particular cities during certain times," said study co-author Farronato. "When hotels are fully booked, Airbnb expands the capacity for rooms.”
In addition to access to more rooms, travelers reaped other rewards in places where Airbnb competed with hotels, the study shows. During busy travel times, guests enjoyed an average "consumer surplus" of $57 per night. This surplus didn't necessarily amount to more money in a visitor's pocket, but it did mean better accommodations at more reasonable prices, Farronato explains.
"Consumers don't always pay a lower price," said Farronato. "What changes is the quality of the listings. You might find a Fifth Avenue apartment or a place by the beach at a more reasonable price than you would if Airbnb wasn't an option. Or a listing might have additional amenities, like a kitchen. And if you still prefer a hotel room, competition from Airbnb means you'll pay a lower price for it."
