Airbnb co-founder and CEO Brian Chesky in 2018. ERIC RISBERG/ASSOCIATED PRESS
Airbnb’s Coronavirus Crisis: Burning Cash, Angry Hosts and an Uncertain Future
With travel nearly at a standstill, the home-sharing giant is facing increasing losses and doubts about its planned public listing
By
Kirsten Grind,
Jean Eaglesham and
Preetika Rana
April 8, 2020 1:11 pm ET
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Everything was supposed to come together for Airbnb in 2020.
The hottest stock-market debut of the year. A valuation of more than $50 billion. Riches for hundreds of employees holding options expiring at year-end. And vindication for co-founder and Chief Executive Brian Chesky’s decision not to go public earlier.
The coronavirus pandemic has made all those scenarios next to impossible.
With global travel nearly at a standstill, the home-sharing giant is expected to lose $1 billion through the first half of the year, and its private-market valuation is dropping, according to people familiar with the company’s finances. On a videoconference with employees in late March, someone asked whether layoffs were coming. “Everything is on the table,” Mr. Chesky responded.
On Monday, the company said it was raising $1 billion from private-equity firms Silver Lake and Sixth Street Partners to bolster its financing. The funding comes at a steep price: $1 billion of debt with an interest rate of more than 10%, The Wall Street Journal reported Tuesday. Some investors declined to put in new money after Airbnb said it wouldn’t replace Mr. Chesky as chief executive, while others didn’t participate because they didn’t think the terms were favorable, according to people familiar with the terms of the deal. Silver Lake and Sixth Street Partners said they had faith in the business and existing leadership team.
Airbnb hasn’t addressed its plans for a public offering, but some of its investors don’t believe it will happen this year. “There’s no way,” said Matt Novak, a partner at London-based All Blue Capital.
Airbnb is now weighing plans to raise as much as $1 billion more in new financing, said the people familiar with the matter.
Meanwhile, confusion over cancellation policies at its seven million properties world-wide is fraying relationships with its guests and hosts. After guests complained about not being able to get full refunds for bookings in quarantined cities, Mr. Chesky approved a plan to refund guest stays booked through mid-May. That infuriated property owners who saw revenue evaporate.
The Journal sought comment from Airbnb on the details of this article and requested an interview with Mr. Chesky. Nick Papas, an Airbnb spokesman, characterized the Journal’s reporting as “wildly inaccurate and wrong,” without providing any specifics.
As travel ground to a halt, Airbnb bookings plummeted.
PHOTO: CHARLY TRIBALLEAU/AGENCE FRANCE-PRESSE/GETTY IMAGES
Whether Airbnb can rebound fully from the coronavirus catastrophe—and how quickly—will depend in part on how consumers feel about traveling and staying in other people’s homes once the pandemic eases. Some analysts say Airbnb might benefit if more people decide to avoid more crowded hotels. Others say hotels might gain an advantage if people think they are cleaner.
Virus FalloutWeekly counts of Airbnb bookings have fallen sharply as thecoronavirus has spread.
Airbnb executives and investors express confidence the company will recover. Mr. Chesky has cited Puerto Rico, where booking volumes bounced back swiftly after a hurricane devastated the island, to try to persuade bankers and employees of the resilience of his business model, said one person familiar with the recent capital-raising effort. The company said on Monday it will now focus more on long-term stays such as students needing housing or executives on work trips.
Airbnb told the Journal last month it has a capital cushion of about $4 billion. Nevertheless, its board and investors are increasingly concerned about what happens if the pandemic lasts months longer and the company’s revenues don’t bounce back in the second half of this year.
Airbnb could have gone public in 2018 at a value estimated by its bankers at between $50 billion and $70 billion, according to a presentation from bankers. Mr. Chesky and his two co-founders—Joe Gebbia and Nate Blecharczyk—ultimately opted against it, according to people who were there at the time, believing that Airbnb would perform better as a private company out of the spotlight.
In March, as the pandemic began gaining momentum in the U.S. and across Europe, Mr. Chesky told employees the company still plans to go public this year.
Airbnb’s valuation, in the private secondary market for shares held by early investors, has dropped from $150 per share a few weeks ago to under $90 a share, valuing the company at less than $30 billion. “The plane’s losing altitude,” said Paul Maguire, managing partner of Iron Edge VC, which executes secondary trades. “Early investors are trying to see what kind of luggage they can throw out there to lighten their load.”
When the company was considering a 2018 IPO, its bankers projected it would be profitable by now. Instead, as costs climbed, Airbnb lost $674 million last year, according to company documents.
Airbnb built out a corporate headquarters in the trendy San Francisco neighborhood known as SOMA, or ‘South of Market.’
PHOTO: GABRIELLE LURIE/REUTERS
Mr. Chesky, a former art student and amateur bodybuilder, co-founded the company in 2008, eventually enlisting millions of property owners around the world to rent out their homes and apartments. Airbnb has become the largest home-sharing site in the U.S. and a major player internationally.
As it grew, the company spent big. Its total costs rose to $5.3 billion last year, from $2.6 billion in 2017, outstripping an 85% increase in revenue over the same period, from $2.6 billion to $4.8 billion, according to a copy of its financial statements.
Administrative costs increased 113% between 2017 and 2019 as the company hired thousands of employees and built out a corporate headquarters in the trendy San Francisco neighborhood known as SOMA, or “South of Market.” As Airbnbstruggled to police crime on its platform, spending on safety also has increased, the Journal has reported.
By the beginning of this year, some Airbnb board members were pressuring Mr. Chesky to cut costs, according to people familiar with the discussions.
When the coronavirus hit China and then Europe, Airbnb’s bookings plummeted. In Beijing, little more than 1,600 bookings were made between March 1 and March 7, down 96% from the Jan. 5 to Jan. 11 period, according to AirDNA, an analytics firm that tracks the short-term rental market.
i feel bad because this is bad luck for people that offer a good service. But they are also wrecking the long term rentals game so 
They really should’ve went public in 2018
i guess theres always real tenants
