In an increasingly competitive luxury listings segment of the travel industry, Airbnb will reportedly purchase Montreal high-end vacation rental platform Luxury Retreats for “no more than $300 million in cash and stock.”
The report comes from Bloomberg’s Olivia Zaleski, Gerrit De Vynck and Scott Deveau, in which people familiar with the matter spoke to the reporters.
“It’s really about the technology that Luxury Retreats brings in managing luxury listings,” Zaleski said.
Moreover, Airbnb is targeting its new potential purchase for its ability to easily add on sparkling services.
“They have mastered that and Airbnb wants to tap into that technology that can essentially bring luxury to scale around the world,” added Zaleski. “Luxury Retreats has done an excellent job in managing whether or not you want to use a masseuse or a bartender while you’re on vacation, all these extra little amenities that are very difficult to manage at scale because you’re often in exotic locations.”
The Airbnb board of directors is expected to vote on approving the deal this week.
The expected sale is all part of a luxury-hungry arms race in which travel industry incumbents like Expedia and Priceline have already been investing serious capital into extra, finer amenities for travellers.
“Luxury is a huge market that Airbnb can enter, and it wants to because Expedia is already pursuing it and Priceline is as well,” said Zaleski.
Expedia’s HomeAway unit focuses on vacation destinations like Florida or mountain resorts of Colorado – “precisely the market Luxury Rentals operates in.”
“We are always looking to provide our community with access to new and different options, but we have no announcements to make,” Airbnb spokesman Nick Papas told Bloomberg on Thursday. A spokesman for Luxury Retreats declined to comment. Luxury Retreats is expected to operate with its own employees in Montreal, reported Bloomberg.
Luxury Retreats is a profitable business, started in 1999, with more than 4,000 properties around the world. It was founded by Joe Poulin, who started building websites for Caribbean villa owners back at the age of 17. Over the next decade, he added new destinations and acquired another Caribbean-focused rental broker in 2011. Luxury Retreats has raised about $16 million in two rounds led by Canadian venture capital firm iNovia Capital.
The company focuses on service and amenities. One of its clients, former NHL star Kirk Muller, has used the service often, including on a cliff-top villa in Praiano, a small fishing village. Breakfast was prepared by a private chef and each morning the concierge catered to their every whim. A local man assisting Muller’s family arranged a private day trip to Corsica aboard a 30-foot yacht.
It’s commission on rental fees is between 20 and 30 percent.
Poulin has been said to have “obsessive pride” for the business, several times declining sale offers. In 2005, the nonprofit motor club AAA expressed interested in buying his company. “We’re not for sale,” he told them. When AAA offered instead to take a 20 per cent stake, valuing the company at about USD$20 million, Poulin accepted. In 2012, however, Poulin and a partner bought back AAA’s interest in Luxury Retreats, wanting greater ownership.
“I’m not looking to exit,” he told Entrepreneur’s Brian Patrick Eha four years ago. “I look at what I’ve done on my own, and I say, if I bring a lot of smart people around me, if I bring really good investors, a really good management team, I can only imagine what they’re going to help me do.”
A lot can change in four years.
Today, its villas, chalets and other fancy homes span 90 markets around the world, generating about $150 million in gross bookings a year, according to the company.
According to Bloomberg, “adding more high-end rentals would enable Airbnb to target the sort of clientele willing to pay for its new luxury tourism services. In November, it began offering truffle tastings, mushroom hunting and guided tours provided by local experts. The company is looking to expand into other parts of the travel business and is working on a flight-booking tool.”
Moreover, the Silicon Valley tech darling Airbnb still has practically all of the $3.1 billion in funding. Investors last valued the business at $30 billion. Founded in San Francisco in 2008, Airbnb turned a profit for the first time in the second half of 2016, Bloomberg reported last month, and expects to maintain profitability this year.
Airbnb has more than 3 million listings, about 1,400 of which are “castles.”
But it also wants to focus more on Canada, where the company said it sees a lot of room to grow in Montreal and other Canadian cities, including Toronto, where listings jumped almost 60 percent last year.