Will Airbnb's $30B Valuation Hold If Profits Are Lost Pending Regulatory Hurdles?

Airbnb’s latest $850M round of funding has raised the company’s value to $30B—quite the leap from the $25.5B valuation given the home-sharing company in December.

The unicorn is up there with rapidly growing startup Uber—recently valued at $66B—and co-working giant WeWork. But in light of recent legal and regulatory hurdles in NY and S.F. that could potentially hurt company profits, many industry experts wonder whether the company’s $30B value will hold.

“The awareness of the company, regardless of its fundamentals, has been incredibly strong,” Colliers national hospitality and leisure group leader Bryan Younge tells Bisnow. “Airbnb has been a staple of conversations pertaining to lodging trends in the US, and there are a variety of opinions out there regarding its impact on existing hotels in various markets and where the company might be going.”

But, Bryan (pictured with his family) says as home-sharing companies like Airbnb continue to take root, it will likely be the guinea pig for the industry, bearing the brunt of government and city officials’ regulations as the sector determines standards for these hotel alternatives.

“New York and San Francisco are taking leadership in establishing regulation on businesses like Airbnb, and this energy ought to translate into similar efforts throughout most of the rest of the country,” Bryan tells us. “The problem is that regulation on lodging accommodations straddles city, state and federal jurisdictions.”

NY Restricts Advertising

NY officials are passing around a bill that could restrict Airbnb users from advertising short-term listings available for less than 30 days. In an interview with Bloomberg, CEO Brian Chesky advocated for NY users, saying the ad ban would greatly diminish income for the middle class.

“The vast majority of people in NY are sharing the homes they live in, so I think telling a middle-class family who depends on Airbnb to pay the rent or mortgage that they can’t advertise their home on Airbnb is really ultimately going to not be best for NY,” Brian told Bloomberg. “And I think that Gov. [Andrew] Cuomo will ultimately— I’m hoping that he will see that.” 

There’s No Place Like Home?

The company filed a lawsuit against its hometown of S.F. earlier this year, combating a measure Airbnb says is illegally using the company to help enforce the city's housing law regulations.

Currently, people can rent out their homes as long as they’re registered with the city, but enforcing registration has been tricky for city officials. S.F.'s Board of Supervisors recently passed a law restricting home-sharing websites like Airbnb from allowing unregistered homes to be listed—failure to do so potentially resulting in up to $1k per day in fines for every unregistered listing.

“The company has raised significant capital the likes of which should be able to handle the legal hurdles that seem to be rapidly surfacing—and will continue to proliferate,” Bryan tells Bisnow. “This sort of regulatory pressure might limit new membership in the near term, but in the long term, new Airbnb units will be regarded as new lodging supply that is directly competitive with hotels.”

Continued Expansion

Airbnb currently has 1.5 million listings available in nearly 200 countries. The firm declined to comment on the investors in its Series F funding, nor did it specify what the new round of funding would be used for.

It’s likely we’ll see Airbnb continue to venture into new investment opportunities similar to the new tourist hub and housing community it’s developed in Japan. The small housing development in Yoshino, Japan, will double as a community center and a tourism hub. Airbnb users will be able to book rooms on the second floor of the lodging development, and the lower levels will serve as a community center for visitors and local residents.

“Currently, the competitive pressure of Airbnb units seems to be moderate, and limited to core markets or markets with a significant tourism component,” Colliers’ Bryan tells us. “[At present] few are accustomed to this type of lodging experience and the concept is still in its adolescent phase. However, it might just be a matter of time when word-of-mouth and the familiarity of Airbnb-subscribed properties reaches critical mass and is a truly disruptive force in the industry.”