Airbnb-HotelTonight - a deal at the right time for both

The deal for Airbnb to acquire HotelTonight will probably not be seen as an "OMG!" moment when the history of the sharing economy giant is written in years to come.

But the decision to buy the 2010-founded online travel agency for an undisclosed fee (unconfirmed speculation puts it at anything between $400 million and half a billion dollars) will certainly be considered an important marker in Airbnb's move to diversify the business.

Even if talks between the pair apparently cooled a little at the turn of the year, HotelTonight CEO Sam Shank (now head of boutique hotels at its new owner) and co. are now certainly part of a plan to push Airbnb into new areas and give the company some strategic gravitas ahead of going public at some point.

The deal should be viewed primarily as part of Airbnb's idea that it can now go up against the likes of Booking.com and Expedia - a direction that is both brave, complicated, perhaps expensive from a marketing perspective and will include more than buying the likes of HotelTonight (such as opening up the core platform for hotel distribution).

We asked a range of commentators for their reaction to the purchase...

Lorraine Sileo - senior vice president of research and business operations at Phocuswright

Airbnb has consistently said it wants to stay unique but all along has desired to branch out and become a full-fledged OTA, at least on the hospitality side.

Why not? It has the reach and its biggest rival, Booking.com, boastfully integrates private accommodation, hotels, motels and other lodging quite well.

HotelTonight, despite its admired history as a mobile-first, last-minute trendsetter (of course later becoming a full-on hotel OTA), will never catch up with Expedia and Booking, and always be considered a secondary OTA.

Most likely too niche to achieve a successful IPO. But it’s app is ubiquitous, easy and, yes, even fun to use.

HotelTonight has a great future but in this game of high-stakes technology and marketing spend, needed more backing. If not an IPO, the most obvious next step would be an acquisition. Good work on Airbnb’s part, especially since HotelTonight’s focus on independents fits its strategy quite well.

Robert Cole - founder of RockCheetah and Phocuswright analyst

The acquisition makes a lot of sense – a win for all parties involved.

An acquisition by Airbnb is probably the ideal exit for the HotelTonight team. Certainly looks like a win for Sam Shank as he will be leading Airbnb’s boutique hotel division – especially with the prospect of Airbnb going public.

This move allows HotelTonight to potentially access an even broader audience of their prime millennial demographic and get access to a vast amount of data and technical expertise that was previously beyond their reach.

Both companies have always had great mobile customer experiences, so there shouldn’t be any issues there - both are incredibly customer focused.

Airbnb can now compete on the same playing field as traditional hotel booking sites without subverting its branding or alienating its clientele by adding complexity.

While the Airbnb team could easily replicate the HotelTonight user interface, they now avoid the brain damage associated with acquiring hotel supply and building out new business processes.

As Airbnb gets more diligent curating its portfolio for properties meeting the needs of certain traveler personas - business, family, etc. -HotelTonight will be able to fulfill the needs of those who may be torn between staying in a home or a hotel, which may also offer benefits to the Airbnb for Work line of business.

Since most of HotelTonight’s inventory is comprised of independent properties, this is also a plus.

Between Hotel Tonight and Airbnb, there is now the potential for hotel owners to market rooms on Airbnb and the property as a whole on HotelTonight, which provides some interesting opportunities that other traditional hotel representation firms or soft brands of major chains can’t offer.

Additionally, having formal relationships with hotels could help with establishing mutually beneficial services, such as:

• Social centers for Airbnb guests to meet.
• 24-hour front desks that can enable key and package pickup or luggage storage.
• Food and beverage outlets delivering meals or catering events.
• Health clubs offering access to Airbnb guests.
• Housekeeping teams cleaning nearby homes and Airbnb tours and activities being marketed to hotel guests.

There are a lot of potential synergies that benefit the hoteliers, hosts, guests and Airbnb.

Perhaps most importantly, in some ways, HotelTonight was almost the antithesis of Airbnb. Airbnb offers a mind-numbing variety of lodging options in a destination – the variety can be simply overwhelming.

HotelTonight, on the other hand, offered a much smaller variety of options in a destination. In many ways, offering a highly curated selection of options, tailored to a guest’s particulate needs, is very attractive for many travelers.

If Airbnb can manage the delicate balancing act of earning the traveler’s trust to pair them with the perfect lodging option for their stay, Airbnb will successfully bridge the gap between shared accommodation and traditional hotels.

Martin Soler - partner at Soler & Associates

Getting access to Hotel Tonight’s inventory and contracted hotels is a quick way for Airbnb to rapidly grow their hotel offering.

It might just be the best way for both companies to move forward. Last-minute deals weren’t enough for HotelTonight as they grew from last minute to longer but still had a lot of work to shed the last-minute-only identity.

Airbnb needs hotel inventory to scale growth (and profitability) before their upcoming IPO. Here both brands can win and quite rapidly too. Plus it gives Airbnb the talent and technology integrations they need to work with hotels and hotel distribution suppliers.

But Airbnb still has work to do to make booking a hotel on their platform a habit. Today when someone "books an Airbnb" they’re not talking about a hotel room.