While 2020 has taken its toll on the majority of businesses, few players have been hit harder than those in the travel vertical. Shelter-in-place orders have left consumers at home, with every intention of staying there — possibly for quite some time.
And among firms hit hard, unicorn and tech-industry darling Airbnb stands out in a class by itself. The past several weeks have seen its estimated valuation halved, its planned 2020 IPO likely shelved and its headcount in the process of being radically reduced.
It’s a reversal of fortune that has sent ripples of concern throughout Silicon Valley because when 2020 began, Airbnb was by all accounts one of the most financially secure startups. But by March, the firm had instituted a hiring freeze, suspended marketing and cut executives’ salaries and 2020 bonuses. And by April, Airbnb had raised an emergency $2 billion from investors in order to survive the ravages of the pandemic.
Airbnb CEO Brian Chesky referred to the virus as “the most harrowing crisis of our lifetime” in an email to employees announcing 1,900 layoffs from among the firm’s 7,500 staffers. He wrote that the firm will likely only collect roughly half of the $4.8 billion in revenue it saw in 2019, and as a result would be reprioritizing its efforts and markedly pulling back from some.
For example, Airbnb is putting spending growth in areas like luxury homes and traditional hotels on hold, and will also cut back investment in Airbnb Studios and Transportation. Not surprisingly, Chesky wrote that cuts will hit those divisions hardest as the firm gets back to what it considers both its roots and its core value proposition: “everyday people who host their homes and offer experiences.”
“To those leaving Airbnb, I am truly sorry. Please know this is not your fault,” the CEO wrote to employees. He went on to note that all laid-off employees would receive their equity in the firm — even those there for less than a year — when an IPO occurs.
But of course, that also remains a mostly unanswered question. Thus far, the firm has yet to comment on what its IPO plans will be in COVID-19’s wake. But pressure is mounting for that public offering, as some current and former employees have now been waiting over a decade to cash in their stock options.
And that’s not the only source of pressure. Years of growing dissatisfaction among hosts have reached a near boiling point over cancellation policies put into place by Airbnb when pandemic-related cancellations started rolling.
The firm forced hosts to refund most if not all of rental costs to guests. As a result, reports are starting to emerge of short-term rental hosts banding together and launching their own direct-booking websites in an effort to diversify their business — and wrest some control of the market away from platforms like Airbnb and VRBO.
“The hold that Airbnb had a few years ago is no longer quite as strong,” said Henry Harteveldt, travel industry analyst at Atmosphere Research Group. “Hosts that are really unhappy with Airbnb have options — not just listing on competitors like HomeAway, but having their own independent, free-standing websites. This is a wake-up call.”
Perhaps, though, that’s a wake-up call that begs a question about what the travel vertical can and can’t control. Moving to independent booking sites can give hosts a lot of control over how they brand their rentals, offer refunds and how much money they can keep after paying a middleman. But it can’t really alter consumer interest in travel.
And according to PYMNTS data on the subject, consumer interest in returning to their former travel habits is less than rarin’ to go. Among those we surveyed, only 44 percent of those who want to resume their daily activities as before want to travel domestically and a paltry 18 percent found the concept of hopping a plane and traveling internationally appealing.
In fact, Karen Webster noted in her commentary this week that the only things consumers really do seem to miss is getting together with family and friends. But an array of digital substitutes have made that possible to do in new ways that carry almost zero risk of contamination (and a lot of unexpected delight in their use).
The question, Webster noted, isn’t just about recovery, but what consumers will do in a recovering environment. “How many consumers will stick with the online substitutes they’ve found for physical activities, which seem to get stickier and stickier every time we ask them?”
A question, it seems, that even Airbnb has asked itself. The company recently launched its own variation of digital travel — an online variation of its Experiences platform.
The new system allows hosts to offer the sort of interest-based experiences they used to offer in person to virtual visitors tuning in from their living rooms. Airbnb called the switch “a new way for people to connect, travel virtually and earn income during the COVID-19 crisis.”
As Chesky noted, new ways of doing things are about to become very necessary, because travel is just not going to be the same industry after COVID-19 as it was before. Consumer demands will change, and the only way to survive is to be ready to pitch to that new expectation set, he wrote.
“Travel in this new world will look different, and we need to evolve Airbnb accordingly,” Chesky indicated in his missive. “People will want options that are closer to home, safer and more affordable.”
And in that regard, Airbnb, notably, might have a bit more luck recapturing consumers than its counterparts in hotels. Single stand-alone residences, with no hotel, no elevators, no buttons to press or public surfaces touched hourly by thousands of people, will likely have a deeper appeal than they did before. When consumers do leave their houses again, an Airbnb rental might look a whole lot safer and more secure than a standard hotel room.
But first, the public will have to get to get that point of recovery. “While we know Airbnb’s business will fully recover,” Chesky wrote in his email to Airbnb employees, “the changes it will undergo are not temporary or short-lived.”