How the Covid-19 crisis excluded Airbnb from its own homes | Airbnb
“You wouldn’t have an empire without us,” shouts an Airbnb host in a video addressing billionaire co-founder and CEO of the company, Brian Chesky. “These are our homes on your platform. It’s our face on millions of ads. It is our soul that brings magic… It is our place that brings you money.
The man in the video is vibrating with anger over Airbnb’s decision to allow customers to cancel bookings for travel beginning before May 31 with a full refund due to the coronavirus outbreak. The anger is so intense that many commentators have dismissed it as a travesty, and the Guardian has not been able to confirm its authenticity.
But Airbnb’s army of 700,000 hosts is overwhelmed by the revenue it is losing due to the company’s generosity to customers. Chesky apologized this week and said the company would spend $ 250million (£ 200million) covering 25% of what hosts would have been paid under their cancellation policies for bookings between March 14 and May 31.
An additional $ 10 million relief fund is made available to “super hosts” offering grants of up to $ 5,000 to “hosts who suffer most”. Airbnb founders will also get no pay for six months, and senior executives will see their pay cut in half.
“Although it may not have been, we are partners”, Chesky said in the email to the hosts. “When your business suffers, our business suffers. We know that right now many of you are struggling, and what you need are actions from us to help you, not just words. “
Airbnb built up $ 3 billion in reported cash reserves from reservation fees charged to guests and hosts. It raised more than $ 4.8 billion in revenue last year, according to Reuters. Hosts are charged 3% of each reservation, while guests are charged up to 14.2%.
The hangover from the coronavirus pandemic will likely last much longer than May 31 or whenever governments lift restrictions on movement. Hosts report empty reservation calendars stretching throughout the summer, and research by analytics site AirDNA shows bookings in some cities have fallen 96%.
For guests who occasionally rent their spare room like a real bed & breakfast, the loss of Airbnb revenue due to the coronavirus is a frustration.
But, for those who have built mini (or in some cases not so mini) real estate portfolios that rely on a constant stream of guests flocking to Airbnb apartments in Bath, Barcelona or Berlin, the prospect of weeks or months without guests comes financial disaster.
It’s also a disaster for Chesky, 38, and the large number of Airbnb employees who hold stock options. The company was lining up for an IPO this year, which some investors hoped to value the 11-year-old tech giant up to $ 42 billion – even though the Wall Street Journal reported the company lost nearly $ 320 million in the first nine months of last year.
In a video presentation Thursday, Chesky told staff the company lowered its valuation to $ 26 billion from $ 31 billion when it last raised funds from investors in September 2017, according to the Financial Times.
Airbnb employees have long pushed executives to move forward with an Initial Public Offering (IPO) as stock options granted to experienced staff begin to expire in November 2020. These shares could be worthless if the platform is not traded on the public market.
“They’re drunk, the IPO just can’t go through,” said Richard Holway, chairman of analyst firm TechMarketView. “Airbnb is in the worst of the worst situations. Unlike other tech companies, like Uber which can make deliveries instead of driving people, it cannot branch out. There is nothing Airbnb can do to make money.
“Everything indicates that Airbnb revenues around the world have just stopped,” he said. “This [coronavirus and lockdown] exposed Airbnb’s business model, and it’s going to draw thousands and thousands of people with it. People [hosts] have gone into this business as an absolute business and they are in a very, very difficult situation.
In an attempt to earn income from their empty properties, landlords have flooded the rental market with their Airbnb apartments. On Edinburgh‘s Princes Street, for example, there are 209 Airbnb listings on a route of just 494 homes. Property portal Rightmove said the number of new rentals put on the market in the week the UK foreclosure began rose 45% in London, 55% in Brighton, 62% in Edinburgh and 78% in Bath. It’s a similar story around the world with an increase of 61% in Dublin and 41% in Prague.
Holway said many hosts depend on Airbnb income to pay off mortgages on not one but more properties, while others “rent apartments to commercial owners and then seek to make a profit by renting them out on properties. short term rentals on Airbnb – that’s not going to happen now “.
Sheffield-based entrepreneur Alex Milburn claims to have achieved “£ 1,000,000 in Airbnb sales in 12 months” and is now marketing his “rent-to-let” strategy in one day seminars at £ 997 (excluding VAT). He promises, in YouTube videos, that he can teach others how to make six-figure sums “with very little or no money of your own.”
An Airbnb host rented 881 properties in London in a single year, generating a turnover of £ 11.9million, according to AirDNA. The anonymous person was reportedly the highest paid Airbnb owner in the world in 2017.