Airbnb Inc. is a home-stay aggregator that helps people book accommodations to enjoy a homely atmosphere during travel. To aid development of new services, and fund growth initiatives, the company has obtained $1 billion debt facility from some of the largest U.S banks, sources familiar with the matter report.
The debt deal has been led by JPMorgan Chase & Co., Citigroup Inc., while Morgan Stanley and Bank of America also participated in the event.
Representatives of Bank of America and Citigroup have declined to comment on the matter. JPMorgan and Morgan Stanley representatives weren’t immediately available for a word either.
This funding gives Airbnb a cushion to spend money on global growth strategies and expansion beyond their pre-defined home-stay business. In addition to the aggregation service, the company is building a travel service on top. Reports also suggest that the company is spending a fortune on TV ad campaigns to promote the aforementioned travel service.
Well, the San-Francisco based company already had roots in the travel space, so this move was kind-of expected in the long term. The company now wants to position itself as a full-fledged travel manager rather than just a measly apartment aggregator.
While Airbnb hasn’t announced any plans for an initial public offering, but investment banks facilitate such debt facilities to build relationships. This relationship then turn into future business prospects like under-writing an IPO. Similar was the case with Facebook, who received $8 million in debt facility from a large groups of banks in 2013. The same investment banks then helped the social networking giant go public two months later.
Who will emerge as a leader!?
The growth story of Airbnb is the most talked about in the startup space. Failing to grasp the nerve of the users thrice gave the company insight into what’s exactly right and wrong in the home-stay space. Due to the impending opportunity that the company grabbed onto, it now serves over 30 million people every year. Airbnb now has more than 50 million people around the world who have listed their properties on the platform.
The home-stay aggregator was already causing havoc for online travel websites, whose hotel bookings have been declining switfly. But now that the platform is ready to grow beyond home aggregation and enter the travel space, so should key players like Expedia or MakeMyTrip feel threatened?
This surely adds one more competitor to the playground, but the experienced players don’t have much to worry about. MakeMyTrip accepts that it has found it difficult to attract hotel customers for years. But now reports that hotels and travel packages earn them about 50% revenue, while the remaining from air ticket sales.
Airbnb is still that naive school boy who hasn’t hit puberty yet. The company needs to develop friendly relations with air travel partners who might favor bringing more business to them.