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With Airbnb's IPO expected sometime in 2019, the competition has ramped up its efforts to combat the home-sharing "unicorn." In fact, Marriott International Inc. (NASDAQ: MAR) recently announced it's going to take on Airbnb in the home-sharing space. That's going to dull the luster of Airbnb stock after the IPO, despite it being one of the few profitable unicorns.
Since January, Marriott stock has surged 33.3% higher over the last four months, jumping from $101.74 to $135.63 a share. That includes a 9% gain in the last month alone.
Here's everything you need to know about Marriott's home-sharing plan, including why we can't recommend retail investors buy Airbnb stock at the IPO.
Why Airbnb Stock Won't Be Such a Great Buy Now
Services like Airbnb and Expedia Group Inc.'s (NASDAQ: EXPE) HomeAway were once dismissed by hotel giants. But now, companies like Marriott see them as a direct threat.
The Bethesda, Md.–based hotel company announced that it will have 2,000 high-end homes available for travelers to stay in as soon as next week. These homes are located in at least 100 different markets across Europe, Latin America, and the United States.
As the world's largest hotel operator, Marriott has the experience and cash flow to be an immediate contender in the home-sharing market. With its shift into home-sharing, it'll be one of the first major hotel chains to fully dive into the home-sharing rental market.
But this is just step one following the company's pilot run of home-sharing in Europe. With Airbnb's coming IPO, Marriott is accelerating its efforts to outshine any and all competition in the home-sharing space.
The way Marriott's new home-sharing service works is pretty simple. Guests will go to Marriott's website and book their home-rental reservations much like they would a hotel room. Travelers or guests that do this will earn loyalty points from Marriott that are redeemable with any of Marriot's 29 hotel brands, including Ritz-Carlton, W Hotels, and Sheraton.
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In the same vein as Marriott, Airbnb is ramping up its efforts to take on the traditional hotel industry as well. Back in March, Airbnb acquired Hotel Tonight Inc. as a first step into the boutique hotel industry. But Airbnb also invested in Oyo Hotels & Homes, an India-based hotel booking company.
Even so, hotels like Marriott have a distinct advantage against Airbnb. Right now, Airbnb has been under an increasing level of scrutiny from city governments around the world. Airbnb hosts illegally renting out their homes is a common practice governments are cracking down on.
Cities like Los Angeles, San Francisco, Santa Monica, Las Vegas, New York, Barcelona, Paris, and Berlin have all implemented heavy regulations on home-sharing. These regulations include the number of days allowed, home-sharing owners needing to live in the space they're renting out, and even requiring home-sharing owners to have business licenses and pay a fee.
Companies like Marriott would also have to abide by the same rules and regulations. But hotels already have a series of safety standards and quality requirements. So having a system in place to abide by these rules will be significantly easier for companies like Marriott.
As the home-sharing market continues to grow, the hotel industry sees it as a phenomenon that is here to stay. The world's largest – and most profitable – hotel company entering the competition is a bad sign for Airbnb.
And while we're a year out from the Airbnb IPO, that gives companies like Marriott plenty of time to weaken this "unicorn" before it even goes public.
Between the fierce competition in this market and the volatility of early IPOs, Money Morning cannot recommend buying Airbnb stock for now, at least not until we know the price and the value we're getting.
But if you're interested in buying Airbnb stock following its IPO, we have more information and investment opportunities for retail investors to potentially see double- or triple-digit gains here…
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About the Author
Daniel Smoot is a Baltimore-based editor who helps everyday investors with stock recommendations and analysis. He regularly writes about initial public offerings, technology, and more. He earned a Bachelor's degree from Towson University.