- 2020 was supposed to be
the golden year for Airbnb,
it was supposed to be the
year that Airbnb went public.
They were supposed to
be the hottest offering
of this year.
- [Narrator] In just under a decade,
Airbnb went from a single
air mattress for rent
to a global company valued at
more than 30 billion dollars.
The home sharing giant has
thousands of employees,
over three million hosts,
and seven million listings
in over 220 countries.
It even branched out with a new
division called Experiences.
Which allows guests to book outings.
But travel is now at a stand still.
Airbnb's planned listing is in doubt.
Expected revenue is down by at least half,
and CEO Brian Chesky said
25% of staff will be cut.
So how did one of the most
successful startups of the decade
become such a vulnerable company?
- Airbnb was founded in the aftermath
of the 2008 financial crisis.
A lot of ordinary people
had lost their jobs
and were looking for secondary income.
Once the idea of sharing your
home with someone took off,
a lot of people bought into that promise.
- You know we had revenue from day one.
And we didn't actually need to raise money
at any given point.
We decided that we invest ahead of growth
and we've always tried to
think about it like a throttle.
So that we could at any given point
throttle into profitability.
- Airbnb was profitable
by a certain measure
in 2017 and 2018.
So that gave investors a lot of confidence
and excited everyone, really,
about the prospect of a startup like this
that has become a household name
around the world to go public.
- These are beautiful homes.
- [Narrator] The company spent big
during this period of growth.
Administrative costs increased
113% between 2017 and 2019
as they hired thousands of employees
and built out a corporate headquarters
in a trendy San Francisco neighborhood.
Then 2019 ended with a tragedy.
- Airbnb now says it is
banning house parties.
That after a shooting
left five people dead
in San Francisco in a suburb
there on Halloween night.
- This mass shooting was
really a moment of reckoning
for Airbnb and that's
what led them to invest
over 100 million dollars
into safety initiatives.
- [Narrator] These expenses
helped bring Airbnb's
total costs to 5.3
billion dollars last year.
More than double what they were in 2017.
- You had board members
grilling some of the executives
and saying, "Hey, your costs
"are outpacing your revenue growth.
"Lets reign that in, let's control that."
And then of course the pandemic hit
and changed everything for Airbnb.
- China says the number of people infected
by a mysterious respiratory virus
has more than tripled over the weekend.
- [Narrator] In January,
officials in China
issued local travel
warnings and restrictions
following the spread of Covid-19.
- It wiped out bookings
over night in China.
So remember at the time,
no one thought this would
become a global problem.
- [Narrator] And then on March
11th, President Donald Trump
announced new international
travel restrictions.
As Airbnb bookings fell,
Chesky held in-person meetings
with employees to discuss what
these new developments meant
for Airbnb and their plans to go public.
- What was happening was a lot of anxiety
was building among employees
because a lot of them have stock options.
And those are set to
expire later this year,
which meant that if they
didn't go public this year,
a lot of valuable options
that employees hold
would just be worthless.
So Mr. Chesky really took it upon himself
to reassure employees, to say,
"It's gonna be okay.
"We are still very much
going to list this year."
That changed in a matter of days.
By the end of March, he
struck a more cautious tone.
He held a video conference with employees
where he said everything is on the table.
- [Narrator] Around this time many guests
began to demand refunds for reservations.
But Airbnb had a long time practice
of allowing hosts to set their
own cancellation policies.
- But in a world where you
have guests fighting back
and saying, "Hosts are
not giving us any refunds,
"what's Airbnb gonna do about it?"
I think that really shook
the company as well.
- [Narrator] This led to a
sudden decision by Chesky
to give guests refunds
for certain bookings.
After backlash from some hosts,
Chesky issued an apology to them.
- I am sorry.
I'm sorry we didn't
consult you as partners.
And I've heard from you
ever since that decision.
- [Narrator] Airbnb said
it would pay hosts 25%
of what they would have
received for canceled bookings.
They also created a 17
million dollar mortgage fund
to help top rated hosts cover mortgages.
By April the company
had barely any revenue
coming in from short term stays.
- So they ended up raising
a billion dollars in debt
at a very high interest rate
that is associated with distressed assets.
So overnight Airbnb went from being
the Silicon Valley unicorn
that is a household name around the world,
to being reduced to business
that is in distress.
- [Narrator] On May fifth,
Brian Chesky announced
massive staff cuts in a memo
that has drawn praise for
addressing the impending layoffs
with compassion and clarity.
Chesky said nearly 2000 employees,
a quarter of Airbnb's
workforce would be cut.
He also said 2020 revenue would be less
than half of what it was in 2019.
- I think everyone would be very surprised
if they choose to go
public later on this year.
What I'm hearing from investors
is that Airbnb would need
at least two good quarters
before they go public.
- [Narrator] The pandemic
has shifted Airbnb
in fundamental ways.
The company is pivoting to longterm stays,
and recently rolled
out cleaning guidelines
to help guests feel safe whenever
they do return to rentals.
The sudden collapse of the Airbnb economy
that was a lifeline for many
has also exposed deep cracks
in the sharing economy.
- [Preetika] If you think about it,
Airbnb is really a property manager
without the property risk.
Unlike hotels that run and
manage their properties,
Airbnb doesn't own any of the properties.
The pandemic has really held a mirror
and has really made us all question
the very fundamentals
of the sharing economy.
Who takes on the risk.
