Is This the End of Airbnb?

https://www.wired.co.uk/article/airbnb-coronavirus-losses

by brunoluiz • 6 years ago

78 58 6 years ago

wired.co.uk

betaby• 6 years ago

But why it's burning hole in the finances? AirBnB is all marketing. Scale down your cloud instances and don't spend on ads? What exactly burning money at the rate of 1B per month? It's not clear from the article at all.

ksml• 6 years ago

I'm sure it doesn't account for 1B a month, but paying employees is really expensive and airbnb has a lot of them

flatiron• 6 years ago

1B a month just in employees is over 100k employees making 100k a year. i know the tech ones make more but i assume the customer support makes less. that's a lotttt of employees

Barrin922• 6 years ago

then the next question would be why in gods name have they so many employees. I just checked wikipedia and they have apparently twelve thousand workers? What do all these people do? I don't understand these sharing companies.

tmpz22• 6 years ago

My guess would be employees since we haven't heard of any large layoffs from them. The facade is that Air BnB is an engineering/technology company and the second they start cutting into that they "lose their magic".

paulcole• 6 years ago

They must pay lawyers an astronomical amount to help them skirt the law?

geronb4• 6 years ago

Current employee here. The burn rate is ~$100M/mo, not 1B/mo, after cutting marketing and reduced CS costs due to fewer bookings. You can see this in publicly available data from the WSJ and The Information. Not sure where people get these wildly inaccurate numbers.

cactus20933• 6 years ago

Clearly they're spending a lot of money, and maybe they'll need to do layoffs and/or other budget cuts to make it through this, but I imagine Airbnb will actually come out of this even stronger relative to the rest of the hotel industry.

They don't own or lease buildings the way other hotel chains do, or have their own maintenance or cleaning staff, so they've got to be losing less money per unit right now while everything is shut down. If some hosts over-extended themselves on mortgages for their rental properties and get foreclosed on, that's not really Airbnb's problem. They may even get bailed out by the government, which then directly benefits Airbnb.

And in the medium term, I think their booking rates might bounce back quicker than other hotels. In a world where the lockdowns have lifted but we're still recommending/enforcing social distancing in most places, which could last years, I imagine the demand to go and stay in a traditional, crowded hotel in Paris or NYC is still going to be pretty low. Business travel may not pick back up very quickly, as companies cut costs in the recession plus they've seen how meetings can mostly be done fine remotely. Massive conferences with thousands of people seem unlikely to happen for a very long time.

But people will still want some kind of leisure and vacation. Renting a house or cottage a couple hours away on a lake or in a small vacation town is a relatively safe thing to do where you can maintain social distancing pretty well, which is the scenario where I'm most likely to use Airbnb instead of a hotel.

On top of that, local governments have bigger problems to worry about than short-term rentals right now, so Airbnb may also get a couple years break from their constant legal battles with various cities.

dumbfounder2• 6 years ago

Agreed. Where do you want to be, in a hotel around a bunch of strangers? Or in a house where you can keep distance from other families? We tried to rent a house down south (SC, GA, FL) where we could have a pool and our kids could swim, but most states have no short term rental orders in effect. As soon as those lift I think you will see certain properties bounce back. No hotels for us until this thing clears up.

r00fus3• 6 years ago

This makes sense, but honestly I thought about post-COVID airbnb and my trust of hosts or other guests - and that trust is pretty dang low.

The fact that anyone hosting an airbnb may be more likely to be one of those reckless "open up America" folks is more likely than a properly organized hotel chain that can enforce cleanliness and social distance.

It's sad - I can't foresee staying anywhere other than my home anytime in the medium term.

Barrin922• 6 years ago

Agreed. Where do you want to be, in a hotel around a bunch of strangers?

Personally in a hotel because I at least know that the hotel is going to be cleaned.

fredophile• 6 years ago

I disagree. Do homeowners want to be renting out property on AirBnB if we still have social distancing in place? Professional AirBnB landlords are going to have serious financial trouble soon if they continue to have no or very low bookings. How long can they stay solvent? AirBnB could have a big supply problem before this is done.

dorchadas2• 6 years ago

I also think local governments will see a lot of the apartments re-enter the long-term rent market, helping fix some of the housing problem... And then make laws to make sure they don't leave it again.

I know they're already starting to re-enter the market in Dublin, where I'm currently in contact with people about housing as I'm looking at moving for school, and I don't think the populace would easily give those back up to let tourists come run them out of their town and Jack up prices again.

lasgsf6• 6 years ago

I actually think they will have a MORE inventory. The economic devastation of Covid will have people want to drive additional revenue stream and thus securitize their unused space.

So ironically it could bring AirBnb back to their roots which is grow with unused and extra rooms by individual homeowners/renters.

lasgsf6• 6 years ago

I agree 100% as well. A couple things:

1. They already own the short-term rental market. Why not expand to the long-term rental market and undercut the broker fee that currently occur right now.

2. Pent up demand for travel: Reality is that once/if vaccine hit you can bet consumers are going to travel like crazy due to pent-up demand after being stuck at home for months.

3. Movement to WFH: The movement to WFH will only become more pronounce after Covid. If this is the case you will see a bunch of consumers ask why bother staying in the city I was working at if I can WFH anywhere in the world? Thus AirBnb rentals would be the key to doing this.

4. Fear of the crowds: If you had a choice of staying in a crowded hotel where perhaps the cleaning is slightly better vs. staying at a home where minimal crowd what would you chose in a world with Covid? In fact what they should do is offer an extra add-on for guest to pay for a more deep clean of the unit prior to rental.

5. Hotels with fixed cost are going to drop like flies: Means less hotel inventory globally as they go out of business.

6. Due to loss of jobs/income: More folks will need to securize their fix assets meaning house for additional income which means more inventory for Airbnb

Anyway this all assumes that a vaccine comes out and in the near-term it is going to be pretty brutal for them.

1024core2• 6 years ago

I still can't wrap my head around the fact that they have 14,000 employees. Fourteen thousand. For a company that owns no hotels or motels, no real-estate (other than their offices, of course). The website is decent (but no amazeballs), which is all there is to AirBnB (other than customer service, of course). I don't understand why this all can't be done by, say, 1000 or so employees.

askafriend• 6 years ago

They operate in 191 countries.

Have you ever built a business that operates in that many countries?

grumple• 6 years ago

90% of the employees are not engineers. There's probably tons of customer service people, marketing, legal.

timcederman• 6 years ago

Every single time there's a thread about a company like Airbnb, there is a comment like yours. I am genuinely curious why you are so surprised that a company of their size would be that big? Particularly with a high touch business that works with so many businesses - between sales and support alone this number seems reasonable.

credit_guy• 6 years ago

Google had 5000 employees in 2005 [1]. And no, in 2005, Google was not just a start-up, it was the same search juggernaut that it is now. There was no youtube yet, google maps was less than 1 year old, and android was 3 years in the future. But in terms of search, it was the only game in town. Their revenue was $6 BN [2]. Airbnb's revenue in 2019 was around $4 BN. Now, Google is and was an exceptional company, and it's not totally fair to compare a business to Google, but still, people who wonder why AirBnB has so many employees have a point.

[1] https://medium.com/gabor/timeline-employee-count-growth-for-...

[2] https://www.statista.com/statistics/266206/googles-annual-gl...

seemslegit• 6 years ago

Besides it being an often-repeated cliche, how certain are we that airbnb has no real-estate ? It would have actually make alot of sense for them to long-term lease or even buy some in popular destinations through intermediaries or large residential real estate companies.

ed• 6 years ago

This question gets asked a lot because it’s a good question, and the popular explanations, for why big co’s get big, aren’t very satisfying.

I thought this thread was pretty insightful, for a change: https://news.ycombinator.com/item?id=22822995

TL;DR - big co’s get big because hiring is an optimization problem, and each new hire gets you closer to a local maximum. E.g. if we hire an engineer to improve load times by x%, they’ll pay for themselves. More successful companies have more opportunities for positive-ROI hires, so headcount tends to scale with revenue. (And because the company is making a series of local optimizations, it may actually be worse off due to the drawbacks of being a big org.)

mikestew• 6 years ago

(other than customer service, of course)

You actually wrote what is probably a large part of the answer, and then passed right over it as if for a multi-national corporation customer service would be a trivial expense and staffing problem.

There's got to be a "logical fallacy" Wikipedia page for something along the lines of "why did the Hindenburg burn so quickly (other than the large bag of hydrogen, of course)?" :-)

diogenescynic2• 6 years ago

The type of customer service you’re thinking of would be outsourced to call centers by AirBNB. When you call a 1-800 number those aren’t actually employees of the bank/service/website usually unless the company if huge. Most of them outsource. I bet AirBNb really does have all those employees but they’re probably doing things like Compliance, Financial/Payment operations (chargebacks, disputes, fraud, etc) and a lot more manual stuff than people realize.

IkmoIkmo• 6 years ago

It's a market cap of around 2 million per employee at the $30b valuation they've been at the past year. Of course, higher is 'better' as in more efficient.

Here's some context: https://craft.co/reports/s-p-500-market-value-per-employee-p...

To be fair, I do agree, it's higher than I think is right. It's absolutely not abnormal, IT companies are at 2.4m on average, and companies like Facebook (19m) or Netflix (11m), Apple (5.5m) or Microsoft (4m) are much higher.

But I also think we quickly get into apples/oranges comparisons, and it's hard to really make fair comparisons. For one, Airbnb has a very strong non-IT component, and 100% of its revenue comes from real-world transactions with very strong human behavioural elements of non-employees, i.e. complete strangers, that need to be managed. Selling a phone to a customer is pretty straightforward. Connecting a stranger to let another stranger into their home and treat it well, is a transaction with much more friction.

Second, it's not at all clear how employees are counted. Foxcon employs a million people and manufactures the majority of Apple's revenue. If Apple bought all its shares and let it operate independently, its valuation would not change radically (if it was purchased at market value), yet its market cap per employee would drop by huge amounts.

Employee figures alone don't say much. If anything they're a reflection of the company's (supply chain) structure. If Airbnb outsourced all its customer service, you'd see far fewer employees, but a far larger outsourcing bill. One or the other isn't necessarily better. Context matters, without it 14 thousand is a pretty meaningless number.

But again, on average, 2m is not a weird number, its very normal, quite average.

geronb4• 6 years ago

Current employee here. The employee count is actually 7000, half of what you stated. Not sure where you got 14,000.

lasgsf6• 6 years ago

and a big chunck is contractors or low-level customer support right?

1024core2• 6 years ago

Well, maybe you should fix your Wikipedia entry[0] then, which claims ~13,000 employees as of last year?

[0] https://en.wikipedia.org/wiki/Airbnb

PeterStuer• 6 years ago

The end? I could only wish.

That this social cancer was allowed to fester for so long means it will just raise it's ugly head once again when conditions are right.

rotterdamdev• 6 years ago

I hope so. It's cancer on our society.

dzonga• 6 years ago

airbnb is not a bad business, as a localized venture. imagine each city had it's own version of airbnb run by the local city council. not some vc funded, destroy regulations & rental market at all costs, company. a city owned short term rental market would be both beneficial to cities, tourists n hosts. aye, if there's any salesperson out there wanna partna on to build a platform we can sell to cities, I"m open.

charia• 6 years ago

The hotels in any city would lobby to kill any sort of government intrusion into the private sector like that.

On top of that cities prefer nice compartmentalized systems, short term rentals are hotels, long term rentals are apartments. City planners designate different areas for different use cases, airbnb style rentals go against this and raise all sorts of problems. This is one of the major reasons why cities generally dislike airbnb.

rmason• 6 years ago

The question they should be asking is will this kill Marriott and Hilton's recently launched AirBnB competitors?

While I'm sure Marriott and Hilton will get a ton of federal money they've got a ton of real estate mortgages to deal with right now. It would be pretty easy (especially if these efforts don't have a lot of traction and are costing a lot of money to keep afloat) to just shut them down.

jsilence• 6 years ago

Let the invisible hand of the market sort it out. Don't bail, let them fail.

watertom• 6 years ago

Airbnb

If infection does not confer immunity could we be looking at the end of:

Hotels, Shopping Malls, Eat in restaurants, Bars, Amusement Parks, Move Theaters, Clubs, Theaters, Public swimming pools, State and National parks, Beaches, Air travel, Train Travel, Bus Travel, Recirculating HVAC systems, Office buildings, Pro sports, college sports, high school sports, sports in general, gyms, parties, funerals,

Just to name a few.

badpassword• 6 years ago

in bali, hotels are now offering 3,000,000 rupiahs for 30 days stay

that's about 6-7 usd / day

no breakfast / food / mineral water cleaning every 2 weeks

minimum airbnb price floor is like what? 10 usd / day?

that's 50% more expensive than hotel chains in bali for months to come

aussiegreenie• 6 years ago

Just remember why they started, a bloke could not afford to pay his rent. There was a popular conference and he offered to let someone stay at his house sleeping on an airbed.

It was a hack. If the economy stays bad for a period of time both travellers and host will need an Airbnb or similar. Travellers want cheaper accommodation and host will need the money.

diogenescynic2• 6 years ago

One can only hope.

FreekNortier• 6 years ago

I have an Airbnb booking for December 2020. Would it be best to cancel now when there is still a chance of a refund?

Is This the End of Airbnb?

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