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
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.