Billionaire Real Estate Mogul: Airbnb Will Lead to Hospitality Industry Consolidation

Airbnb, a startup that allows individuals to rent rooms in their homes, will soon close a $1 billion funding round at a $24 billion valuation. Its meteoric rise in popularity – both from consumers and investors – has turned the hospitality industry on its head. Now, billionaire real estate investors like Thomas Barrack and Sam Zell are worried, according to a recent Fortune article.

The challenge is that at $24 billion valuation, Airbnb will be worth nearly 10 times more than HomeAway, Inc. AWAY. It will also be worth more than Marriott International Inc MAR, with Hilton Worldwide Holdings Inc HLT in its sights.

The Airbnb valuation is also rich. That valuation would equal 27 times its projected 2015 revenues. HomeAway, the closest competitor in terms of business model, trades at just six times its 2015 revenue. That valuation is the result of a much faster growth rate, however.

In the Fortune article, Barrack suggested that even with this runaway valuation, "you're going to see a hotel manager merge with Airbnb." He added, "If you look at the hospitality industry … you have to adapt to the regulatory environment, the tax environment, all of the local handicap requirements … keeping full-time employees. […] You can't compete." Barrack did not suggest which hotel manager might be the most vulnerable.

Year to date, Hilton has performed the best of these equities, gaining 6.5 percent. HomeAway has added 3 percent, while Marriott International shares slipped nearly 5 percent. Marriott's recent underperformance, however, is overshadowed by its 2014 performance, where the stock gained nearly 60 percent.