Airbnb is poised for a comeback after a brutal spring

An Airbnb on the island of Santorini, in Greece.

Courtesy of Airbnb.

Airbnb bookings are starting to grow again, thanks to pent-up travel demand.

The company said that over the weekend of June 5–7, gross booking value grew in year-over-year terms for the first time since February, when the coronavirus began to devastate its business. 

“Like all businesses that involve human interaction, the sharing economy took a huge hit when Covid emerged and shelter-in-place was enforced,” says Roelof Botha, a partner at Sequoia Capital and an early Airbnb investor. But he notes that some areas have started to rebound. “One example is domestic vacation rentals — people are itching to get out of their homes but not yet ready to get on a plane.”

A dramatic turnaround

The uptick in bookings is a dramatic turnaround from where the start-up found itself just a few months earlier, when nearly every state in the U.S. was on lockdown and air travel had nearly ground to a halt, with the Transportation Security Administration passenger count below 110,000 for 17 consecutive days from April 6 through 22.

To get through the crisis, in May the company laid off about 25% of its workforce — about 1,900 of its 7,500 employees — and raised $2 billion in a combination of equity and debt to shore up its balance sheet. The equity portion of the deal valued Airbnb — which fell from No. 7 last year to No. 41 on  the 2020 CNBC Disruptor 50 list — at $18 billion, nearly half of what the company was worth in 2017. Airbnb also decided to “pause” activities that do not directly support the core of its host community, such as transportation and Airbnb Studios, and scaled back its investments in hotels and luxury properties. 

“When we started Airbnb, it was about belonging and connection. 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 co-founder and CEO Brian Chesky in a letter to his employees on May 5.

To this end, Airbnb implemented measures to keep its guests and hosts happy, but the result was a wave of criticism for seemingly every step it took.

First, Airbnb offered to refund the full cost of bookings for periods where locations were locked down to stop the pandemic from spreading. But some guests said they faced difficulty collecting the full cash refunds and took to social media to complain.

Airbnb also established a $250 million relief fund to help hosts through the crisis, but many said they struggled to collect a meaningful payout from the company. In frustration, some hosts built their own direct-booking sites, while others exited the vacation-rental market altogether and put their homes into the short-term residential rental market. Some small landlords and venture-backed start-ups that were trying to aggregate vacation rentals have been forced to sell to bigger consolidators.

IPO hopes revived

Despite the most dramatic period in Airbnb’s short history, hopes for a 2020 IPO are being revived.

Domestic travel is beginning to pick up again — albeit from a very low base — and the recent first-day pop of ZoomInfo‘s IPO in the middle of the pandemic has whetted investors’ appetites. Other long-private companies, including Palantir and Amwell, have recently filed confidential plans to IPO and could signal the beginning of a new wave.

In an interview with Bloomberg earlier this month, Chesky was noncommittal but said, “We’re not ruling out going public this year.”

Ron Conway, founder and co-managing partner of SV Angel and an early Airbnb investor, says guests have picked Airbnb as the safe option over hotels. “It is really clear that people want housing they have control over,” he says. “That is a huge learning. Guests trust Airbnb.”

Conway says they’ll go public when they’re ready. “The capacity of the platform to meld and adapt in real time to external events is a differentiator that makes this just a completely different company with no real comp in their sector.”

Another early Airbnb investor, who wished to remain anonymous, says that the painful cuts Airbnb enacted over the last few months have given the company a more efficient cost structure that it wouldn’t have pursued otherwise. As a result, the person says, Airbnb’s profitability outlook is better than it was pre-Covid. 

More from Disruptor 50:
Meet the 2020 CNBC Disruptor 50 companies
The technology that will dominate daily life on the other side of coronavirus
Opportunity Missed: Why there are no Black CEOs on this year’s list

But even as Airbnb sees green shoots, there are challenges ahead.

While Airbnb is seeing bookings pick up again, international and corporate travel is still far from pre-Covid levels, which will weigh on the start-up’s global business.

The regulatory environment is also likely to weigh on a future IPO. Airbnb recently reached a settlement with New York City over complying with short-term rental regulations. Hosts will have to provide information, including names and physical addresses to Airbnb, which the company can then share with the city. It’s possible that other cities will consider their short-term rental regulations and require similar information. 

Perhaps most worrisome is that if the coronavirus comes raging back in the fall, as some health experts expect it will, travel could grind to a halt once again.

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