Everyone said that 2020 would be Airbnb’s year.
With 1.1 billion in revenue at the end of 2019, the popular short-term rental company acquired last-minute hotel booking engine HotelTonight, launched a sponsorship campaign for the Olympics, and announced its long-awaited IPO for some time in 2020. Airbnb was positioned to take over the accommodations industry.
That all changed with coronavirus.
The Impact of COVID-19 on Airbnb
Nearly 90% of Airbnb’s inventory suffered cancellations since March, with new bookings down 85% this spring, according to Wired.
In May, Airbnb cut 25% of its workforce, including its efforts to scale up Airbnb Luxe, Airbnb Studios, and additional efforts to expand into transportation. Valuation went from somewhere between $50–70 billion to less than $18 billion almost overnight. “This crisis has sharpened our focus to get back to our roots, back to the basics, back to what is truly special about Airbnb—everyday people who host their homes and offer experiences,” said cofounder and CEO Brian Chesky via email to employees.
Airbnb spent the last few years building up to become the next travel superbrand, but post-pandemic, it will emerge more committed to its core function: connecting hosts and travelers for short-term rentals. “Travel in this world will look different, and we need to evolve Airbnb accordingly,” said Chesky. “While we know Airbnb’s business will fully recover, the changes it will undergo are not temporary or short-lived.”
The Airbnb of 2019 is gone—probably forever.
COVID-19 Reveals Airbnb’s Fundamental Flaws
But Airbnb is more than a company. It’s a marketplace for travelers—and for hosts, who form the backbone of the platform. While you may be picturing a quiet retired couple looking to rent out a spare bedroom, many hosts instead built real estate empires that came crashing down with the pandemic.
“I made a bargain with the devil,” one Jersey City host told the Wall Street Journal. She went from $10,000 in bookings to 0 overnight.
Airbnb has more listings availability in most cities than any hotel chain combined, helping thousands of people hop in and out of a city for a weekend. “In London alone, there are 2,919 Airbnb hosts with between 3 and 5 listings, accounting for 10,318 listings across the city, or 12% of Airbnb’s total inventory. At the higher end of the scale, there are 645 hosts with 10 or more listings. Combined, these hosts are responsible for 16,758 Airbnb rentals in London,” writes James Temperton for Wired.
That’s a lot of potential tourists—and a lot of hosts with mortgages due.
Of the 1.1 million listings in the US, at least 600,000 are from hosts with at least 2 other listings. Why charge locals the market value when you could make twice that from a steady stream of tourists? It’s no wonder that Airbnb’s critics see the impact of COVID-19 as a good thing.
Local officials charge Airbnb with disrupting city centers, driving out locals, artificially increasing rents, and ruining the character of a city. Cities like Amsterdam, Venice, and Barcelona, groaning under the weight of thousands of tourists clogging the streets every day, have been trying to stop Airbnb’s growth for years—and now they may have their chance. Officials in Prague announced in April a new plan to collect taxes and other regulations on short-term leases, directly targeting Airbnb hosts.
How Airbnb Responded to the Crisis
When the implications of the pandemic became clear, Airbnb announced an extenuating circumstances policy for cancellations, allowing travelers to cancel without penalty for any stay booked before March 14, 2020, with a check-in date before May 31, 2020. Guests can take a travel credit or a full refund—but to get a full refund, you need to demonstrate the impact of COVID-19 in your area.
The company also pledged $250 million in coronavirus relief to eligible hosts impacted by cancellations in this window, agreeing to pay 25% of what hosts would have received under their cancellation policy. But most Airbnb hosts aren’t seeing any of this fund, having to jump through hoops to demonstrate their eligibility. “This stuff from Airbnb looks like a publicity stunt to stay relevant for an IPO,” Rusty Odom, a host from Galveston, Texas, who has yet to receive any money, told CNBC. Others have received comically low amounts, like St. Louis host Amanda O’Rourke, who told CNBC she received $31.89 to compensate for nearly $14,000 in lost revenue.
While there’s been discussion over boycotting Airbnb or leaving the platform altogether, Airbnb hasn’t seen any mass exodus, according to Skift. “We have seen no material drop in listings on the platform,” a spokesperson told the publication. “Macroeconomic forces much larger than Airbnb and its host community are causing changes in the rental and housing market amidst the COVID-19 pandemic.”
What the Future of Airbnb Looks Like
If hosts continue to list their homes, the question is, will anyone book them?
After being cooped up for months, the answer is yes, at least from Americans. Domestic bookings are up year over year between May 17 and June 3, now that many states have begun to re-open. “People, after having been stuck in their homes for a few months, do want to get out of their houses; that’s really, really clear,” Chesky told the LA Times. “But they don’t necessarily want to get on an airplane and are not yet comfortable leaving their countries.”
Travelers may be antsy, but they’re also trusting Airbnb hosts to follow new sanitization plans that include an enhanced cleaning directive created in partnership with US Surgeon General Dr. Vivek Murthy. Hosts that can’t commit to the cleaning can opt into a 72-hour window between stays. Airbnb plans to certify the cleaning process for hosts, but it’s unclear based on Airbnb’s sketchy past whether or not the verification will be truly rigorous.
Perhaps it doesn’t really matter.
Domestic travel may yet save Airbnb’s IPO for 2020. The percentage of “getaway” bookings on Airbnb—within 200 miles, or about a tank of gas—grew to more than 50% of all bookings since the pandemic began in February. “[Travel has shifted] from airplane to car, big city to small location, hotel to home,” said Chesky in a presentation to investors. “Near is the new far.”