Value investing

Filling in the Alternative Lodging Industry’s Missing Piece

Hotels have long been the mainstay for travelers, but the rise of Airbnb has forever changed the industry. The number of U.S. travelers who have used private accommodations has risen from less than 10% in 2010 to more than 30% just five years later, according to Phocuswright. With a $31 billion valuation, the startup has already surpassed every hotel chain except Marriott International Inc. (NASDAQ: MAR) and has done so while making a profit each year.

Alternative Lodging is Cannibalizing Hotels

The global hotel industry is expected to generate more than a half trillion dollars worth of revenue next year, according to Statista, representing a 6% compound annual growth rate over the past eight years. Technavio forecasts that the global Alternative Lodging Rentals market (ALR) will grow at more than 7% to $193.9 billion by 2021, but remains in it infancy with only about 15% market penetration in 2016, suggesting that they will cannibalize hotels.

The growth is largely attributable to consumer demand for unique experiences when traveling, as well as the conveniences of homes versus hotel rooms. Airbnb Experiences promotes the idea of ‘traveling like a local’ with more diverse itineraries than simply hopping a bus tour to the Colosseum. When staying in a local’s own home, you have access to their lifestyle and can experience the world through their eyes rather than a visitor’s eyes.

The key barrier with many ALR products, like Airbnb, is that they aren’t integrated into online travel agent (OTA) solutions, like Expedia Inc. (NASDAQ: EXPE) or Kayak. These OTAs are often used by consumers to book airline tickets, but upsell these customers on hotels, car rentals, and other travel services. In essence, it’s the 60% to 70% of the population that hasn’t stayed at a private accommodation when traveling.

Hotels have also responded to these trends in several ways. Marriott began placing its time shares into general inventory in some markets, like Orlando, Florida, while its Moxy Hotel business has evolved with open floor plans and communal spaces. Many other hotel changes have made similar moves designed to compete in the ALR market with more unique properties, as well as hotel concepts that are more closely tied to specific target audiences.

Monaker Group’s Innovative Approach

The Monaker Group Inc. (OTCQB: MKGI) has taken a unique approach to the ALR market by becoming a go-to intermediary for end-to-end travel services. Its business-to-business platform is the first real-time ALR product with mainstream travel products and services all on a single platform. Partners can access everything they need to provide ALR lodging, flight booking, car rentals, and even tours that travelers may want in real-time.

The real-time booking is what sets it apart from competitors like Airbnb and HomeAway. While budget travelers don’t need real-time booking, those planning business travel or luxury vacations are often seeking a more seamless experience. But more importantly, many OTAs and airlines require real-time booking to integrate with their platforms, which would open up an entirely new distribution channel for the ALR industry. 

Through its extensive network, the company has already contracted more than one million properties (with two million more in the pipeline) that it's about to start delivering to its B2B partners’ existing booking systems. Its innovative API (application programming interface) is designed to fit an industry standard format that makes it plug-and-play for many OTA platforms. This turns the company into an invaluable one-stop intermediary between property owners and distributors.


Monaker

Airbnb

HomeAway

Properties

1,000,000 + 2,000,000 Pending

2,500,000

1,200,000

Countries

150+

190

190

Real-Time Booking

Yes

Limited

Limited

Air, Car, Tour, Activities

Yes

Limited (“Airbnb Experiences”)

No

Valuation

~$50 Million

$31 Billion

$3.9 Billion (Expedia Acquisition in 2015)

Looking Ahead

The Monaker Group Inc. (OTCQB: MKGI) represents a compelling investment opportunity in the ALR industry given its real-time booking technology that connects property owners with OTAs, airlines, and other vital distribution channels. With a huge inventory of properties in place and existing distribution channels, the company is well positioned to generate significant long-term shareholder value in an industry that’s poised to cannibalize the $500+ billion hotel business.

For more information, visit the company’s website or download their investor presentation.