The travel industry is in shambles. Now that going places has become very ill-advised at best and contagiously fatal at worst, travelers are staying at home. That’s meant the businesses that make up the travel-industrial complex — from hotels to airlines — are cratering. Airbnb, the short-term rental behemoth, had even planned to go public this year. Now that those plans have been foiled and its business is in trouble, the question of what the company needs to do to simply survive the pandemic is paramount.
Yesterday, Bloomberg Businessweek spoke to Airbnb CEO Brian Chesky and published an inside look at what the company is doing to weather the storm. The mood seems grim. “I’m not sure if there’s a more difficult thing that a CEO of a travel company could ever do than go through this,” Chesky told the magazine. “You feel like you were T-boned, or like a torpedo has just hit the ship.”
“You feel like you were T-boned, or like a torpedo has just hit the ship.”
That torpedo has forced Chesky to make two tough decisions: first, refunding guests whose trips are now canceled at the personal expense of Airbnb’s hosts, and second, raising billions in capital at perilously high interest rates. To calm the hosts, Chesky started a quarter of a billion-dollar fund to reimburse them — though it will only cover a fraction of what those hosts had expected to make from their bookings.
The raise has its own problems, too. Taking $1 billion from Silver Lake Partners has revised the company’s valuation downward by 40 percent, which, according to Businessweek, “wipe[s] out billions of dollars in paper gains for Airbnb’s early employees and venture capitalist backers, including Sequoia and Andreessen Horowitz.”
In response, Chesky cut ad purchases and canceled a full $800 million in marketing spend. The CEO, however, is optimistic. The common wisdom among travel industry vets is that travel will bounce back, plague or no plague. “We are prepared to go public, and we will be ready when the storm clears,” Chesky told Businessweek. That may be true! But until this virus clears, business is at the mercy of nature.