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How Airbnb Fell From Successful Startup to Crisis Mode | WSJ - YouTube
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[1]
- 2020 was supposed to be
the golden year for Airbnb,
[5]
it was supposed to be the
year that Airbnb went public.
[9]
They were supposed to
be the hottest offering
[12]
of this year.
[13]
- [Narrator] In just under a decade,
[15]
Airbnb went from a single
air mattress for rent
[18]
to a global company valued at
more than 30 billion dollars.
[23]
The home sharing giant has
thousands of employees,
[26]
over three million hosts,
and seven million listings
[29]
in over 220 countries.
[31]
It even branched out with a new
division called Experiences.
[35]
Which allows guests to book outings.
[38]
But travel is now at a stand still.
[40]
Airbnb's planned listing is in doubt.
[43]
Expected revenue is down by at least half,
[46]
and CEO Brian Chesky said
25% of staff will be cut.
[51]
So how did one of the most
successful startups of the decade
[54]
become such a vulnerable company?
[57]
- Airbnb was founded in the aftermath
[60]
of the 2008 financial crisis.
[62]
A lot of ordinary people
had lost their jobs
[65]
and were looking for secondary income.
[68]
Once the idea of sharing your
home with someone took off,
[71]
a lot of people bought into that promise.
[74]
- You know we had revenue from day one.
[76]
And we didn't actually need to raise money
[79]
at any given point.
[81]
We decided that we invest ahead of growth
[83]
and we've always tried to
think about it like a throttle.
[85]
So that we could at any given point
[87]
throttle into profitability.
[89]
- Airbnb was profitable
by a certain measure
[93]
in 2017 and 2018.
[97]
So that gave investors a lot of confidence
[99]
and excited everyone, really,
[101]
about the prospect of a startup like this
[103]
that has become a household name
[104]
around the world to go public.
[106]
- These are beautiful homes.
[109]
- [Narrator] The company spent big
[110]
during this period of growth.
[111]
Administrative costs increased
113% between 2017 and 2019
[117]
as they hired thousands of employees
[119]
and built out a corporate headquarters
[121]
in a trendy San Francisco neighborhood.
[123]
Then 2019 ended with a tragedy.
[127]
- Airbnb now says it is
banning house parties.
[131]
That after a shooting
left five people dead
[132]
in San Francisco in a suburb
there on Halloween night.
[135]
- This mass shooting was
really a moment of reckoning
[139]
for Airbnb and that's
what led them to invest
[142]
over 100 million dollars
into safety initiatives.
[147]
- [Narrator] These expenses
helped bring Airbnb's
[149]
total costs to 5.3
billion dollars last year.
[153]
More than double what they were in 2017.
[155]
- You had board members
grilling some of the executives
[158]
and saying, "Hey, your costs
[160]
"are outpacing your revenue growth.
[162]
"Lets reign that in, let's control that."
[165]
And then of course the pandemic hit
[167]
and changed everything for Airbnb.
[170]
- China says the number of people infected
[172]
by a mysterious respiratory virus
[174]
has more than tripled over the weekend.
[176]
- [Narrator] In January,
officials in China
[178]
issued local travel
warnings and restrictions
[181]
following the spread of Covid-19.
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- It wiped out bookings
over night in China.
[186]
So remember at the time,
[188]
no one thought this would
become a global problem.
[192]
- [Narrator] And then on March
11th, President Donald Trump
[196]
announced new international
travel restrictions.
[199]
As Airbnb bookings fell,
Chesky held in-person meetings
[202]
with employees to discuss what
these new developments meant
[205]
for Airbnb and their plans to go public.
[208]
- What was happening was a lot of anxiety
[210]
was building among employees
[212]
because a lot of them have stock options.
[215]
And those are set to
expire later this year,
[217]
which meant that if they
didn't go public this year,
[221]
a lot of valuable options
that employees hold
[224]
would just be worthless.
[226]
So Mr. Chesky really took it upon himself
[229]
to reassure employees, to say,
[231]
"It's gonna be okay.
[232]
"We are still very much
going to list this year."
[236]
That changed in a matter of days.
[239]
By the end of March, he
struck a more cautious tone.
[244]
He held a video conference with employees
[247]
where he said everything is on the table.
[251]
- [Narrator] Around this time many guests
[253]
began to demand refunds for reservations.
[255]
But Airbnb had a long time practice
[258]
of allowing hosts to set their
own cancellation policies.
[262]
- But in a world where you
have guests fighting back
[265]
and saying, "Hosts are
not giving us any refunds,
[268]
"what's Airbnb gonna do about it?"
[270]
I think that really shook
the company as well.
[274]
- [Narrator] This led to a
sudden decision by Chesky
[276]
to give guests refunds
for certain bookings.
[279]
After backlash from some hosts,
[281]
Chesky issued an apology to them.
[284]
- I am sorry.
[285]
I'm sorry we didn't
consult you as partners.
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And I've heard from you
ever since that decision.
[291]
- [Narrator] Airbnb said
it would pay hosts 25%
[294]
of what they would have
received for canceled bookings.
[296]
They also created a 17
million dollar mortgage fund
[300]
to help top rated hosts cover mortgages.
[303]
By April the company
had barely any revenue
[305]
coming in from short term stays.
[308]
- So they ended up raising
a billion dollars in debt
[312]
at a very high interest rate
[314]
that is associated with distressed assets.
[318]
So overnight Airbnb went from being
[322]
the Silicon Valley unicorn
[325]
that is a household name around the world,
[328]
to being reduced to business
that is in distress.
[332]
- [Narrator] On May fifth,
Brian Chesky announced
[334]
massive staff cuts in a memo
[336]
that has drawn praise for
addressing the impending layoffs
[338]
with compassion and clarity.
[341]
Chesky said nearly 2000 employees,
[343]
a quarter of Airbnb's
workforce would be cut.
[347]
He also said 2020 revenue would be less
[349]
than half of what it was in 2019.
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- I think everyone would be very surprised
[355]
if they choose to go
public later on this year.
[359]
What I'm hearing from investors
[360]
is that Airbnb would need
at least two good quarters
[365]
before they go public.
[367]
- [Narrator] The pandemic
has shifted Airbnb
[369]
in fundamental ways.
[371]
The company is pivoting to longterm stays,
[373]
and recently rolled
out cleaning guidelines
[375]
to help guests feel safe whenever
they do return to rentals.
[380]
The sudden collapse of the Airbnb economy
[382]
that was a lifeline for many
[384]
has also exposed deep cracks
in the sharing economy.
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- [Preetika] If you think about it,
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Airbnb is really a property manager
[393]
without the property risk.
[395]
Unlike hotels that run and
manage their properties,
[398]
Airbnb doesn't own any of the properties.
[401]
The pandemic has really held a mirror
[404]
and has really made us all question
[406]
the very fundamentals
of the sharing economy.
[410]
Who takes on the risk.
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