Can Airbnb Survive?

Video Statistics and Information

Video
Captions Word Cloud
Reddit Comments
Captions
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.
Info
Channel: CNBC
Views: 1,156,136
Rating: undefined out of 5
Keywords: CNBC, business, news, finance stock, stock market, news channel, news station, breaking news, us news, world news, cable, cable news, finance news, money, money tips, financial news, Stock market news, stocks
Id: yverNV9Tzi4
Channel Id: undefined
Length: 14min 49sec (889 seconds)
Published: Wed May 06 2020
Related Videos
Note
Please note that this website is currently a work in progress! Lots of interesting data and statistics to come.