Airbnb is one of many businesses in
the travel industry that has been hit hard by
the Coronavirus pandemic. If you happen to be working in
the travel industry, your entire basis of substance is gone. You can assume its occupancy rates
have completely fallen off a cliff. In March of 2017, Airbnb was
valued at 31 billion dollars. By the end of April 2020,
the value dropped to 18 billion. At the beginning of May, the company
was forced to lay off 25 percent of its staff, nearly
19 hundred individuals. CEO Brian Chesky told employees that
revenue this year was forecasted to be less than half of
what the company earned in 2019. They need people to be booking or,
you know, they could be in trouble. The company was founded in
2008 by three friends from college, starting with their own
apartment as the first listing. The concept was simple. Airbnb has hosts and guests. The hosts list their properties on
Airbnb, the guests book those properties on Airbnb and Airbnb takes
a cut from both sides. They take a percentage of every booking,
which is very similar to how Uber, how Lyft make money. The company grew quickly and today
has over seven million listings worldwide. In January 2020, Airbnb saw
50.2 million Web site visits. Airbnb competition, VRBO saw 14.7 million
visits in the same month. Today, Airbnb, by the number of rooms
that it has or the number of nights that it books is by
far the largest operator in the hospitality industry. No hotel company can
compete with the scale. But the global pandemic is proving
to be Airbnb's greatest challenge yet. The company is struggling
with cancellations and reimbursements after Airbnb announced it would
be refunding customers whose reservations fell within
a certain timeframe. This angered many hosts who were stuck
having to pay back most, if not all, of the cost of the rental. No one knows what to
do in this situation. Many guests were also angered by
the way Airbnb handled refund requests. I might just be screwed. Which is completely unfair, and that's
a lot of money, man. That's a that's a lot of money. And while social distancing measures
were in place, some local governments deemed short term
rentals as non-essential businesses, adding more stress to hosts who
rely on Airbnb for income. Airbnb hosts, if they're going to
try and have their business, they're actually gonna be skirting the law. It was speculated that Airbnb would go
public in 2020, but that goal is growing more and more distant. Certainly it would be very
difficult in this environment. With the threat of more cancellations
as the pandemic cripples the travel industry, guests, hosts and
investors like are left asking what Airbnb will look like after
the Coronavirus pandemic or whether the company will survive at all. Airbnb be defined an entire subgenre
of the travel industry as it gained popularity, the
short term rental It's like Kleenex, you know. Kleenex and Kleenex, it's tissue
and Airbnbs aren't Airbnbs, they're short term rentals. Airbnb doesn't have a viable competitor,
at least in the United States and in many other markets. Though it quickly became a market
leader, it does not have an untarnished record. The platform has been criticized for
driving up rent prices and contributing to housing shortages
in major cities. It has also been criticized
for racial discrimination, illegal listings, hosts using spy cams,
troublesome, sometimes deadly house parties and unnecessary fees. Despite these conflicts, Airbnb
was doing well. According to source says Airbnb actually
was profitable in 2017 and 2018. And that's actually seen as a
little bit rare for a unicorn of its size that has this
marketplace in the gig economy. In 2019, however, Airbnb burned through
more money and is thought to have notched losses. The company was aiming to
go public in 2020. We think next year will be
the right time for us. Ok. They have very
strong market position. Their business was going well. Reservations were going up. Everything was pointing in
the right direction. And then of course the sky fell. As Covid-19, spread across the globe,
travel ceased and Airbnb lost nearly 42 percent of its value from
March of 2017 to April of 2020. You have to ask, did Airbnb
wait too long to go public? Many people would say that it did. On March 14th, 2020, Airbnb
announced an extenuating circumstances policy that suspended the cancellation
policy set by Airbnb hosts. If a guest book to trip on
or before March 14th with check-in dates between March 14th and April 14th,
that guest was allowed to cancel eligible trips without penalty. The policy was extended to allow
guests with reservations up until May 31st and then again to June
15th to be eligible for either an Airbnb credit or the more selective
option, a full cash refund. In any two sided market, you always
figured out who you're going to subsidize more and what you're
going to actually screw more. This was a blow for hosts, some
of whom would lose thousands from the new policy. Cancellations are a detriment
to the host's bottom line. That's why on Airbnb platform,
the hosts choose the cancellation policy they are comfortable with. They made a policy change
that overrode every single partners cancellation policies. They made the decision to give guests
who fit a specific window, a 100 percent refund, regardless of whether,
you know, you as a host had chosen strict,
moderate or flexible. This change puts hosts
in difficult situations. Liam and Travers are two hosts that
make a living from their Airbnb listings. I mean, I lost thousands
upon thousands within like a week. My phone just kept going off. Cancel, cancel, cancel, cancel. cancel. I was looking at a
business that did almost two million dollars in revenue last year and
within two days, I'm like, everything is good. Then all of a
sudden I'm thinking I might have to go bankrupt. Many hosts rely on
the money they make on Airbnb, whether it's just renting out a spare
room or if they've built a business with hundreds
of properties. It's what pays for my mortgage
and property taxes, and in San Francisco, those two
things are lot. Some hosts have shifted their
business model to compensate. There's multiple ways that
I can handle this. I can either sit back and blame
Airbnb for the whole situation or I could kind of take action into my
own hands and try to pivot my business model so that I can
make it through these challenging times, which luckily I did. Travers created a guide for other
Airbnb hosts discussing ways to save their businesses during this global
pandemic, and Travers, along with many hosts, have turned to longer
rentals, especially for those in the health care industry to make up
for the loss of short term vacation rentals, and Airbnb
has supported the strategy. Right now, during Covid, I opened it
up to a health care worker. A frontline worker
was staying there. But Airbnb decision to favor guests
over hosts has tainted some relationships. They had options. They could have put their listings
on Airbnb, be on VRBO, on Booking.com, built their own websites,
put them on Craigslist. You know, they had options, but they
were going nice and steady and exclusive with Airbnb. And that decision on March 14th just
completely broke the trust for a lot of these hosts. The relationship
with Airbnb, it was it was great. I mean, the customers just
kept on coming, especially in Pittsburgh, where the market's
not too saturated. And then with the coronavirus now,
it's just a new challenge. The CEO, Brian Chesky, faced
backlash over the extenuating circumstances policy. Brian Chesky is seen as an
innovator, but also somewhat of an operator. He will be truly challenged
over the next year to navigate Airbnb way through this crisis. He later apologized for making
that decision without the host community. I wanted to say
this to you right now. I'm sorry. I'm sorry we
didn't consult you as partners. And I've heard for you
ever since that decision. And what I've heard is that, you know,
you want us to treat you truly like partners. People
make mistakes. He made a mistake. But that doesn't
mean he isn't on the leadership team, isn't the right team to
guide Airbnb past this crisis. In response, the company created a
250 million dollar fund for struggling hosts, but there was some
fine print on how much hosts would be helped, and many hosts
were still left struggling with the cost of cancellations. Airbnb said that, you know, with our
new policy, you're going to get 25 percent of what
you should have had. So that sounds that you're going to
get 25 percent of your booking. But really, it's 25 percent of the
50 percent that you would have had. So a lot of the hosts
are doing the math, and really, that's just twelve point five percent
of the original booking. What has happened with the guest,
however, doesn't quite add up either. Though some guests had an
easy time getting their refunds. Other guests were asked
to jump through hoops. Eduardo Albani was flying to Rome
where his parents live, and the three of them are going to
fly to Barcelona after that. When he asked to cancel,
Airbnb customer service suggested Albani have his elderly parents in
Italy get a doctor's note. What they would recommend to you is
that you send your parents to the doctor, get a certificate
they can't travel. I said excuse me. I mean, my parents
are pretty old, there is a global pandemic. I mean, it's not safe. It's not something you can
ask in this phase. There are I mean, there over 70
year old, they're really high risk people. Airbnb Customer Service also
asked for sensitive information from this guest who
asked to remain anonymous. My wife, who is a nurse in
a major hospital in Charlotte, used the reason of a medical worker. And then they came back and said,
well, if you're a medical worker, we need documentation from your supervisor
in the hospital saying that you're unable to travel these days
due to Covid-19 in your work obligations. That's not what
the CEO said. The CEO said it was
unequivocal, we're giving refund. Done. The hospital had better things
to do than spend their time writing letters justifying why an
employee can't do convenience travel. And we refused to ask
her employer for that information. Our plan was to do a trip
to Sayulita, Mexico for spring break with our kids and then another family. You're gonna give a refund to people
who had scheduled to go between March 14th and May 31st. I was scheduled between March
15th and March 22nd. Clearly within there. And yet
I'm not getting a refund. All of these folks were
traveling within the extenuating circumstances, policy timeframe. Luckily, Albani and the anonymous
guest eventually received refunds. But Scanlon is out eight thousand
eight hundred ninety six dollars because he asked his host to cancel
on March 12th and the policy didn't go into effect
until March 14th. According to Airbnb's extenuating
circumstances policy, cancellations will be handled according to
the extenuating circumstances coverage in effect at the time of
submission and reservations that were already canceled will
not be reconsidered. I have no recourse here. I don't know what to do. My experience of what the requirement was
to get a full refund was very different than what the CEO
said, his written message, the corporate website. Given the service I've received, I don't
know if I will choose it again. Airbnb responded to these
three guests complaints, saying our global customer service team has been
working around the clock to help both hosts and guests throughout
a situation that has been challenging for the
entire industry. We firmly believe that travelers should
not have to choose between safety and money and are
extenuating circumstances policy aims to strike a balance and protect the
well-being of both hosts and guests. Beyond these three guests, the outcry
has been loud against Airbnb's customer service. People are congregating on Twitter. They're congregating on Facebook. They're congregating on Reddit
to complain about this. I have now like an Airbnb
customers or agent because they're having no luck with the company, and
now they're turning to reporters because that's the only
thing they can do. All this adds up to a pretty
unstable future for Airbnb, at least for the immediate future. What a day for Airbnb to get
through this is, first of all regain trust of the hosts as
well as the guests. I think, you know, one of the worst
things that you can deal with is uncertainty. And that's certainly what's
going on right now. I can't imagine that the company
will go public in 2020. In early April 2020, Airbnb be
raised one billion dollars in funding from investors Silverlake and
Sixth Street Partners. But that wasn't enough. The company raised another one billion
dollars in debt from Fidelity, T. Rowe Price, BlackRock, Apollo and
Oaktree just a week later. It is getting hit hard by the global
pandemic and it needs to put more cash on its balance sheet in case
this goes on for longer and longer. So it did go to the market twice,
but when you look at the types of investors that have gotten into Airbnb,
that is a vote of confidence that some of the biggest hedge
funds, private equity funds and institutional investors in
the world. It's not a bad opportunity for an investor
to come in and buy up A irbnb's shares in the private market
for the cheap, because in the long run, I think it's a solid
company with a solid business model, but they need more capital. I don't think, you know, two billion
dollars is gonna go too far, by the way. But that still wasn't enough
money and Airbnb had to make massive cuts to its workforce. Airbnb has also enacted a hiring
freeze, cut executive salaries by 50 percent and may
scrap employee bonuses. The CEO won't even get a
salary for the next six months. In better news for the company, some
say Airbnb is in a better position than other businesses in
the travel industry, especially hotels. Because a hotel company
still has to pay rent. They still have to pay
the real estate taxes. They still have to pay the labor. They have to keep the
facilities maintained and cleaned. While it's unlikely the company will
close its doors for good once this is all over, it may end
up being a very different company when folks do start traveling again. I do believe they will come
through this actually much more strongly than the hospitality
industry in general. Probably Airbnb doesn't know if they're
gonna get through this because we don't know how long this pandemic
is going to last and we don't know how long it's going to
take before people feel comfortable to travel again and stay in other people's
homes or even book a hotel room. The type of fall that we might
see can be more in line with that of Uber and we work. There is still around, but there are
shell of what they once were.
