“You would not have an empire without us,” an Airbnb host shouts down the lens in a video addressing the company’s billionaire co-founder and chief executive Brian Chesky. “It’s our homes on your platform. It’s our face on millions of listings. It’s our soul that brings the magic … It’s our place that makes you money.”
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March 22, 2020
The man in the video is pulsating with anger at Airbnb’s decision to allow guests to cancel bookings for trips starting before 31 May with a full refund due to the coronavirus outbreak. The anger is so raw many commentators have dismissed it as a parody, and the Guardian was unable to confirm its authenticity.
But Airbnb’s army of 700,000 hosts are distraught at the income they are losing as a result of the company’s generosity to guests. Chesky this week apologised and said the company would spend $250m (£200m) covering 25% of what hosts would have been paid under their cancellation policies for reservations between 14 March and 31 May.
An additional $10m relief fund is being made available to “super hosts” offering grants of up to $5,000 for “hosts who hurt the most”. Airbnb founders will also take no salary for six months, and top executives will have their salaries halved.
“Although it may not have felt like it, we are partners,” Chesky said in email to hosts. “When your business suffers, our business suffers. We know that right now many of you are struggling, and what you need are actions from us to help, not just words.”
Airbnb has built up reported cash reserves of $3bn from booking fees charged to both guests and hosts. It collected revenues from the fees in excess of $4.8bn last year, according to Reuters. Hosts are charged 3% of every booking, while guests are charged up to 14.2%.
The hangover from the coronavirus pandemic is likely to last far longer than 31 May or whenever governments lift movement restrictions. Hosts report empty booking calendars stretching throughout the summer, and research by analysis website AirDNA shows bookings in some cities has fallen by as much as 96%.
For hosts who occasionally rent out their spare room in the style of a real bed & breakfast the lost Airbnb income due the coronavirus is a frustration.
But, for those who have built up mini (or in some cases not-so-mini) property portfolios that rely on a constant stream of guests churning through Airbnb apartments in Bath, Barcelona or Berlin, the prospect of weeks or months without guests spells financial disaster.
Rob Cross
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64% rise in rental properties across #Dublin in midst of #Covid_19 crisis according to property website @daftmedia as landlords start withdrawing their rentals from short-term listing sites like #Airbnb and are offering them into the market instead.#HousingCrisis #CoronaCrisis pic.twitter.com/Wfj56HaNLC
March 21, 2020
It is also a disaster for Chesky, 38, and the large number of Airbnb’s employees who hold stock options. The company was lining up for a stock market flotation this year, which some investors hoped would value the 11-year-old tech giant at up to $42bn – even though the Wall Street Journal reported the business lost nearly $320m in just the first nine months of last year.
In a video presentation on Thursday, Chesky told staff the company had lowered its valuation to $26bn, down from $31bn when it last raised money from investors in September 2017, according to the Financial Times.
Airbnb employees have long been pushing executives to press ahead with an initial public offering (IPO) because stock options granted to seasoned staff start to expire in November 2020. Those shares could be worthless if the platform is not trading on the public market.
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“They are stuffed, the IPO just can’t happen,” Richard Holway, chairman of analyst firm TechMarketView, said. “Airbnb is in the worst of the worst situations. Unlike other tech firms, like Uber which can do deliveries instead of driving people, it can’t diversify. There’s nothing Airbnb can do to make money.
“Everything indicates that Airbnb income around the world has just stopped,” he said. “It [coronavirus and lockdown] has exposed the Airbnb business model, and it’s going to pull thousands and thousands of people down with it. People [hosts] have gone into it as an absolute business and they’re in a very, very difficult situation.”
To try and make some income from their empty properties landlords have flooded the rental market with their Airbnb flats. On Edinburgh’s Princes Street, for example, there are 209 Airbnb listings on a road of just 494 homes. Property portal Rightmove said the number of new rentals coming on to the market in the week the UK lockdown started increased by 45% in London, up 55% in Brighton, 62% in Edinburgh and 78% in Bath. It’s a similar story the world over with a 61% increase in Dublin and 41% in Prague.
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Holway said many hosts are reliant on Airbnb income to pay mortgages on not one but several properties, while others “rent flats off commercial landlords and then seek to make a profit renting it out on short lets on Airbnb – that’s not going to happen now”.
Sheffield based entrepreneur Alex Milburn claims to have made “£1,000,000 in Airbnb sales in 12 months” and now markets his “rent to rent” strategy in one-day seminars costing £997 (plus VAT). He promises, in YouTube videos, he can teach others how to make six figure sums “with very little or none of your own money”.
One Airbnb host rented out 881 properties in London in a single year making revenue of £11.9m, according to AirDNA. The unnamed person was said to be highest-earning Airbnb landlord in the world in 2017.
• This article was amended on 4 April 2020 to make clearer that hosts will receive 25% of what would have been due to them under their cancellation policies. Hosts choose their policy option so the proportion of the guest payment returned will vary.
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