Airbnb re­vives float plan af­ter a trip to the brink

The rental site took a $1bn hit from Covid but de­spite be­ing down, it’s not out, ac­cord­ing to its bullish boss, writes Hannah Boland

The Daily Telegraph - Business - - Technology Intelligen­ce -

There are few com­pa­nies as changed by the Covid-19 pan­demic as Airbnb. Since the start of the cri­sis, the rental site has seen its val­u­a­tion cut in half to $18bn (£13.7bn). As mil­lions across the world were forced to can­cel their trips to curb the spread of the deadly virus, Airbnb was in cri­sis mode. Sig­nif­i­cant job cuts were an­nounced, with a quar­ter of staff los­ing their jobs. The com­pany paused all mar­ket­ing spend, and reined in in­vest­ments into lux­ury stays and ho­tels.

For many, the com­pany’s planned 2020 mar­ket de­but ap­peared well and truly off the ta­ble. But, in­ter­nally at Airbnb, it seems the view was dif­fer­ent. Last month, boss Brian Ch­esky wrote to staff telling them that the com­pany was “down but we’re not out”. “When the mar­ket is ready, we will be ready,” he said.

It seems he be­lieves that now is that time. Airbnb this week an­nounced it had con­fi­den­tially filed for an ini­tial pub­lic of­fer­ing, paving the way for

‘It would be nice if you could say you’re a tech firm and triple your val­u­a­tion’

‘A dif­fer­ent world, but Airbnb’s tim­ing for a mar­ket de­but looks pretty good’

what could be one of the big­gest stock mar­ket de­buts of the year.

Airbnb is said to be tar­get­ing a list­ing be­fore the end of the year, coming on the heels of a re­bound in de­mand for short-term rentals.

“It’s a dif­fer­ent world that’s coming back,” Tom Ca­ton, chief rev­enue of­fi­cer at an­a­lyt­ics site AirDNA says. But, he says, it is “def­i­nitely coming back”. “Airbnb’s tim­ing for a mar­ket de­but looks pretty good.”

Things are cer­tainly bet­ter than they were at the start of the pan­demic. Back in March, Airbnb saw its book­ings fall off a cliff. This was hardly sur­pris­ing. Many coun­tries, in­clud­ing the UK, blocked any stays that were not deemed “es­sen­tial”, re­sult­ing in mil­lions of can­cel­la­tions.

To make mat­ters worse, Airbnb found it­self trapped in a dis­pute be­tween its hosts and guests over its re­fund pol­icy, which gave hosts con­trol over how flex­i­ble they were on re­funds. Ul­ti­mately, the site de­cided to al­low guests free can­cel­la­tions with full re­funds for some months, al­though ended up hav­ing to foot part of the bill it­self.

All in all, Ch­esky has es­ti­mated that Airbnb took a $1bn hit from the pan­demic. Its rev­enue is ex­pected to come in at half what it was in 2019.

For Airbnb, the pan­demic could not have come at a more cru­cial time. This was sup­posed to be a year in which Airbnb would at least break even, not ac­count­ing for tax, in­ter­est and de­pre­ci­a­tion. Now, such hopes ap­pear dead in the wa­ter. Things have, how­ever, started to look up in re­cent months. As lock­downs have eased in coun­tries, many have re­ported see­ing a rise in the “stay­ca­tion”, help­ing prop up some of the de­mand usu­ally filled by in­bound tourists.

In the UK, many Bri­tons are shop­ping around for last-minute lo­cal hol­i­days, with around half the na­tion said to still be un­com­fort­able trav­el­ling in a plane.

This has led to waves in book­ings. Ear­lier this sum­mer, when Boris John­son an­nounced some re­stric­tions were be­ing lifted, thou­sands flocked to ru­ral hide­aways and coastal towns on Airbnb. Ar­eas such as Pen­zance saw book­ings al­most dou­ble in one week in July. Things may have im­proved even more since. “We think Au­gust may be even higher than Au­gust last year, in terms of book­ings,” says Ca­ton.

On the ground, hosts are see­ing a sim­i­lar pic­ture. Mike Th­waites says his Airbnb in Rad­bourne, just west of Derby, has been booked solidly since July 4. “Peo­ple are coming to see fam­ily that they haven’t seen for a while.” That has largely led to a bet­ter kind of guests, he says.

David Buoy, an Airbnb host in Scot­land, says his guests ap­pear re­ally grate­ful. “They just want to get away and be in fresh air, and look out the win­dow and see a dif­fer­ent view.

“We’ve gone from some­thing like three or four book­ings a year, to 25 so far this year.”

Airbnb has also moved to tighten bans on house par­ties, say­ing yes­ter­day that oc­cu­pancy will be lim­ited to 16 peo­ple at most prop­er­ties around the world “in the best in­ter­est of pub­lic health” af­ter some guests sought to hold “lock­down par­ties”.

The com­pany’s re­la­tion­ship with its hosts has also im­proved, staving off what had been termed as an “Airbnb Apoca­lypse”, with swathes of hosts pledg­ing to leave the site dur­ing the pan­demic. “They’ve re­ally turned it around from be­ing quite self­ish to do re­ally well,” says Buoy.

Those us­ing its site are hope­ful that an forth­com­ing float will push Airbnb fur­ther in the right di­rec­tion. “They’ll have to start be­hav­ing like a grown up com­pany, and get­ting things like their cus­tomer ser­vice sorted out,” Th­waites says.

Not every­one is op­ti­mistic about its forth­com­ing float, though. More broadly, the tourism in­dus­try re­mains in tur­moil. Up to 1.1bn fewer peo­ple could be tak­ing trips this year, ac­cord­ing to World Tourism Or­gan­i­sa­tion es­ti­mates, and, in city cen­tres, book­ings re­main low.

His­tor­i­cally, many of Airbnb’s rentals have been con­cen­trated in city cen­tres.

“It’s a lit­tle bit strange and dif­fi­cult to com­pre­hend,” says Richard Hol­way, chair­man of the Bri­tish anal­y­sis firm TechMar­ketView. “I must ad­mit, I’m look­ing at it rather crit­i­cally.”

It is easy to see why Airbnb may want to float right now. List­ing be­fore Novem­ber would help avoid any tur­moil from the US elec­tion. Tech stocks are also ex­pe­ri­enc­ing a rally at the mo­ment. Ap­ple hit a $2 tril­lion val­u­a­tion this week, and names like Ama­zon and Face­book have seen their mar­ket cap­i­tal­i­sa­tions surge since the start of the year.

But, says Hol­way, these are very dif­fer­ent propo­si­tions to Airbnb. “It would be nice if you could just say you’re a tech com­pany and triple your val­u­a­tion, but at Airbnb, it’s very dif­fi­cult to ap­pre­hend why that should be a good buy.”

For Airbnb, though, he can see why they would want to float now, free­ing up cash at a time when there may be fur­ther trou­ble ahead.

What is clear is that Airbnb is not yet out of the woods. The next few months could bring re­newed lock­downs, or mar­ket fluc­tu­a­tions.

Airbnb may have man­aged to claw its way back to a bet­ter po­si­tion. It may have even brought hosts back on side. But it is far from home and dry.

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