The Pandemic Has Cost Airbnb $1 Billion In Bookings - And Maybe Its Future

As it focused on scale and its stock valuation, Airbnb emphasized big commercial owners over its original base of homeowners renting out a room or small guest accomodation. The negative reaction by those commercial operators to the company's order to refund traveler's deposits when the pandemic hit is causing a reappraisal of that strategy as the company's reputation has taken a further hit. JL

Vidhi Choudhary reports in Forbes:

Airbnb lost $1 billion in bookings driven by a global travel shutdown. "We need to think through our impact on cities and communities.” Airbnb does not normally do refunds, but with borders closed and guests unable to travel, (it) had to hand back guests’ deposits and so he had to raise funds — $2 billion from investors, at a 10% interest rate. (It) has axed 25% of staff.
Airbnb lost $1 billion in bookings driven by a global travel shutdown, its founder, Brian Chesky told The Times, saying he wants to go back to the basics and focus on hosting in local property markets and lesser-known travel destinations as he tries to save his company.

KEY FACTS

“We grew so fast, we made mistakes,” Chesky told The Times. “We drifted. We really need to think through our impact on cities and communities. A reset for everything and everyone.” Airbnb does not normally do refunds, allowing hosts to set their own cancellation policies, but with borders closed and guests unable to travel, Chesky had to hand back guests’ deposits and so he had to raise funds — $2 billion from investors, including private-equity firms Silver Lake and Sixth Street Partners, at a hefty 10% interest rate.

Chesky as part of a “really serious audit” of who should — and should not — be on the platform has suggested prioritising small-scale, everyday hosts over larger commercial operators. “We stand for accommodation and services that are unique. Whether they are offered by a business or sole proprietor, they have to feel authentic.”

Chesky also gave an additional $250 million to cover one-quarter of the immediate losses of its estimated 700,000 hosts.

Chesky has axed 25% of his staff, almost 2,000 people, many of whom were working on new projects as he rethinks his decision to own the “whole travel experience”.

Chesky sees growth in the post-lockdown recession: “Our business for last month has been at or above last year’s levels from a gross booking value (standpoint).”

Chesky, who late last year was said to be worth more than $3 billion, is planning to forgo a salary for the next six months according to the Wall Street Journal.

CRUCIAL QUOTE

Chesky describes the “trauma, complete madness and frantic panic” of shutdown. “There I was, a captain of a ship, a nice ship. It was really sunny and all of a sudden a torpedo hit. We lost the vast majority of our business. We got over $1 billion of cancellations.”

KEY BACKGROUND

When the pandemic hit Airbnb was forced to rethink its stock market debut and raise $2 billion from investors. Confusion over cancellation policies at its seven million properties world-wide has frayed relationships with its guests and hosts. After guests complained about not being able to get full refunds for bookings in quarantined cities, Chesky approved a plan to refund guest stays booked through mid-May.