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Luxury Retreats’ roster of homes includes a villa owned by filmmaker Francis Ford Coppola in Italy’s Puglia region topping out at $10,840 a night and a French-style chateau in Vienna with a cigar and cognac bar, wedding chapel and outdoor apricot trees for $27,102 a night.
Luxury Retreats’ roster of homes includes a villa owned by filmmaker Francis Ford Coppola in Italy’s Puglia region topping out at $10,840 a night and a French-style chateau in Vienna with a cigar and cognac bar, wedding chapel and outdoor apricot trees for $27,102 a night.

Airbnb buys Montreal-based Luxury Retreats to bolster high-end vacation offerings Add to ...

Airbnb Inc. has struck a deal to buy Montreal-based Luxury Retreats International Inc. in a move that will help it bolster its high-end vacation rentals while delivering a shot in the arm to Canada’s technology sector.

The San Francisco, Calif.-based hospitality company will acquire Luxury Retreats for a price sources said was between $200-million (U.S.) and $300-million, paying with a combination of cash and stock. Luxury Retreats will operate as a standalone business under Airbnb ownership in the short term with its 4,000 home listings integrated into the Airbnb network over time, the companies said in a statement.

No official purchase price was disclosed. Luxury Retreats does about $200-million in gross bookings per year, said a person familiar with the private company’s financials. Its roster of homes, personally vetted by employees, includes a villa owned by filmmaker Francis Ford Coppola in Italy’s Puglia region topping out at $10,840 a night and a French-style chateau in Vienna with a cigar and cognac bar, wedding chapel and outdoor apricot trees for $27,102 a night. Private hunting tours at the chateau are extra.

The deal highlights the growing competition in travel and accommodation booking as rivals manoeuvre to widen their offerings beyond their core businesses. Airbnb, which has a private market valuation of $30-billion and has traditionally dominated in urban rentals, is pushing into new product categories, such as flight-booking and trip planning, ahead of a possible initial public offering this year or next. Rival Expedia Inc. is building a network after a string of acquisitions, including the $3.9-billion purchase of vacation rental site HomeAway, whose brands include VRBO.com and VacationRentals.com.

“I like this acquisition. I think it makes sense and it’s logical” for Airbnb, said Santosh Rao, a technology specialist and head of research at New York-based merchant bank Manhattan Venture Partners. “Airbnb is just getting into the luxury side. It’s just very nascent. So I think they’re just buying growth in that category.”

Compared with an Airbnb big-city booking of a few days, average transaction values are significantly higher in vacation rentals of the type done on VRBO.com because they’re typically longer stays at larger properties, said Douglas Quinby, an analyst at research firm Phocuswright.

“It’s much more attractive I think for Airbnb to grow in that market and there’s a lot of top-side opportunity for them,” Mr. Quinby said. He said property managers in the United States are far less likely to list their homes on Airbnb than with HomeAway or VRBO, meaning there’s a lot of room for the company to grow.

The agreement works out to a minimum of about $50,000 for each property Luxury Retreats has listed, a hefty price to pay on the face of it. Beyond the roster of homes, however, Airbnb is also buying the Montreal company’s expertise in the high-end travel market – a competency it has perfected over years. Luxury Retreats is profitable and will be immediately accretive to Airbnb’s margins and revenue, sources said.

Website developer Joe Poulin founded Luxury Retreats in 1999 to market unused vacation homes to the well-heeled. Years earlier, when he was only 17, he flew to Barbados to try to persuade owners of several luxury villas to pay him $1,000 to list their properties for rent. His goal at the time was to make $1-million by listing 1,000 homes and charging each owner $1,000 a year. But owners balked at handing a teenager who’d showed up at their doorstep that kind of money.

Eventually, he persuaded homeowners to give information about the property and allow photos to be taken, which he displayed on a website. For each transaction, he received a commission based on the value of the booking the owner received. The model is the same today. Mr. Poulin was not available on Wednesday.

Unlike many other takeovers of Canadian tech firms where the best talent is moved to U.S. headquarters, Luxury’s 250 employees will remain in Montreal under the guidance of Mr. Poulin and other members of the senior management. Airbnb officials said they expect to add additional workers and resources to the Canadian team in the years ahead.

The agreement will boost prospects for a new generation of Canadian tech firms, said Chris Arsenault, managing partner of iNovia Capital, which has led two rounds of financing for Luxury Retreats . “We’re building bigger and bigger companies, which is important for tech over all,” he said. “But we’re also inspiring other entrepreneurs to go out and build. And having a company that not only gets acquired but you see that company further grow, I think it’s going to send extremely positive signals to the tech community as well as the investment community.”

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