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Airbnb Racks Up Hundreds of Millions in Losses Due to Coronavirus
- qiqitori 7y agoHow? What are they spending their money on? They need to put people on leave and "pause" their business as quickly as possible!
- fbonetti 7y agoThey’re losing revenue due to the massive amount of recently cancellations.
- whymauri 7y agoThey're honoring a massive amount of refunds. There's also a lot of logistical work to be done for hosts which will probably be expensive.
- atwebb 7y agoI think the OP was asking, why is income negative on any revenue (they lost in Q3/Q4 of FY19), what are the expenses that can't be covered?
- CydeWeys 7y agoThey employ a lot of people and have office space. Any big company has a large amount of fixed costs that will drag you under when income dries up.
- yesplorer 7y agoAirbnb has over 5 million listings and 150 million customers around 190 countries and they don't make enough in commissions to pay rent, salaries and server costs?
- CydeWeys 7y agoThey don't. Period. That's a simple fact. No questions need asking here; they do NOT make enough money from their listings to cover all of their costs, full stop.
- yesplorer 7y agoThen they're indeed not fit to run their business, period.
- CydeWeys 7y agoOK, so what are you going to do about it?
- yesplorer 7y agoAm I supposed to do something about it? Do you know the meaning or point of a discussion forum? You're such a bad loser, lol. Wsj published the article, what are they going to do about it? Don't be rude, it's stupid. You can have the last word.
- rchaud 7y agoyou forgot marketing costs. Airbnb is a household name for a reason.
- yesplorer 7y agoAt what point does Management not realise that they need to balance their books and so at least, expenditure = revenue for them to break even? Airbnb is 12 years old. If they haven't figured out that they shouldn't spend more than they earn by now, I don't think the current management will be able to figure it out in another 12 years.
- subpixel 7y agoThey've massively overbuilt their product, and I'm sure wasted millions in the process. I recently booked and I had to actively avoid CTAs for things I wanted nothing to do with: tours, food offers, I don't even know. Finding a place to rent practically meant looking below the fold. Also, pretty sure they developed their own fonts and I shudder to think what they paid for the new utero-logo.
- gadnuk 7y agoWeren't they already losing money prior to this? Seems like a lot of companies are attributing losses to the Coronavirus masking the actual problem behind it all.
- sebazzz 7y agoI also wonder this, isn't Airbnb your typical venture capital company.
- vincentmarle 7y agoThey lost close to $300M last quarter. And those were the good times.
- Pandabob 7y agoI'm a little baffled, how is this possible? Surely their core business is profitable and the losses are because of investments in new growth areas?
- maximente 7y agowell that's a little disingenous. they have been profitable before. from where i stand they attempted to turn their platform into an entire travel experience (w/ business travel "certifications", spending lots on verifying pictures/host setups/etc., experiences) as opposed to just sharing homes. i believe they have large M&A associated with this, buying up some longer-term rental sites who may have been competitors in the future as well.
- chadmeister 7y agoIt's kind of frightening to think of the broader economic impact it would have on the whole real estate market if Airbnb went belly up. Aren't there a ton of cases where people are mortgaging multiple homes and paying them off with the revenue they generate? That cash just dried up over night and there doesn't appear to be any incoming federal support. Edit: Look, I'm all for affordable housing, but when viewing this within the context of a looming recession and potential financial crisis I can assure you that the last thing you want to do is add in a potential amplifier to a housing market crash. Houses may get cheaper, but everyone is going to suffer in very difficult to imagine ways. Corporate debt markets are looking scary as hell right now. If you threw a housing market meltdown at it right now, we could easily be looking at something much much worse than what we saw in '08.
- shaneprrlt 7y agoOur new reality is getting scarier.
- ss2003 7y agoThis would not be a bad thing. Airbnb has been driving up the cost of housing in many cities.
- tylerchilds 7y agoAs someone that would like to buy a house one day, I welcome this. People owning multiple houses to rent out to vacationers that people would like to actually live in doesn't upset me at all. If people buying houses to rent on Airbnb artificially inflated the housing market, it's just a necessary correction and federal support would be a mistake.
- foepys 7y agoIt will be interesting to see what happens to all these VC-backed companies that have been losing money for years and are still not profitable. When the VC money runs out not even government bailouts will help. Helping money-losing companies to lose more money isn't in the interest of a government unless they are essential to the rest of the economy or national security. Maybe the bay area will be hit much harder than other companies.
- shartshooter 7y agoA lot of the herd will be thinned out for sure. Customers of ours are starting to lay folks off. Ultimately, it's a question of how long and deep the downturn is. A couple of months and VC-backed companies already losing money may be ok. A couple of quarters and you'll see a lot go belly-up depending on who they sell to.
- unlinked_dll 7y agoThis isn't winter kill thinning the herd though, it's more like the mass extinction of American Buffalo during the push to the west. Companies with good fundamentals are laying people off en masse and burning their cash reserves rapidly. It's not just the VC backed companies, or the low marging/highly leveraged mom-and-pop, big box retail, airline, whatever. I'm terrified what's going to happen on May 1 when rent checks and mortgage payments bounce.
- richajak 7y agoWe were brainwashed that sharing economy (uber, wework, airbnb) was going to be our savior. We were renting because assets were too high to own, better to do short rent; cheaper and less commitment. Looks like those sharing economy model cannot solve the root cause. The coronavirus acts as a RESET to the whole society. We may see a collapse in housing price, business bankruptcy, and stock market. If we have to think positively, the current situation will only stop when all of these apply -stock price reflects 8-10x true profit, not EBITDA -average housing price in Manhattan will be be 3x working class income. -young people get decent job, not survival gig, not blocked by increasing retiree or union. If this virus was artificially made or by natural evolution, I can say it was meant to reset the society. It will actually prevent WW3.
- joshmn 7y agoMakes me wonder if they will start to offer "trip protection" or the like. The economics of it checks out.
- animalnewbie 7y agoAbsolutely nobody find I surprising that China claims no new cases? I'm beginning to wonder if they're lying... (For Chinese two cent army, look up tiananmen square)
- thrownaway954 7y agoi am still speculating that they manufactured the virus as a way to curb their elderly population. lots of people i come in contact with are saying the same thing. its a little too coincidental that this virus is dangerous to mostly the elderly.
- tibbydudeza 7y agoSome virology experts already said mother nature is way better at this type of thing than we could ever be.
- yesplorer 7y agoWhy should Airbnb be making losses at this point? Are they refunding booking fees to customers while paying hosts? Traditional hotels lose money because of huge amount of, costs (both fixed and variable) associated with running a hotel. shouldn't Airbnb be making so much money at this point? Edit: "...at this point?" not in reference to the current pandemic, rather at this point of how far Airbnb has come and how they've become a household name all over the world.
- CydeWeys 7y agoWhy would they be making lots of money when their business is tanking? Their reservations have more than halved, so that's a huge drop in revenue without much if a drop in costs (unless they fire half their workforce and walk away from half of their office leases).
- yesplorer 7y agoI don't mean making money during this very pandemic. Rather, making money overall. What are they doing besides providing intermediary service all around (most of) the world throughh their website. I presumed they would be profitable by now, just as Facebook was profitable before IPO. Not saying they should be as profitable as Facebook but they should be profitable from taking a cut off every booking.
- CydeWeys 7y agoThey're just doing what almost all VC-funded private tech companies do: Spend massive amounts of money to grow faster than if you limited yourself to what could be accomplished while maintaining profitability. And the comparison to Facebook isn't really fair; not everyone can be a Facebook. They're an exceptional success story. Airbnb isn't.
- yesplorer 7y agoAirbnb takes approximately 15% off every booking. What are they doing as an intermediary that 15% on each booking isn't enough to pay salaries, rent and server costs?
- saltedonion 7y agoThis is fair. A lot of hotel groups have seen their revenue drop 75 to 90 percent. Airbnb was never profitable (I think) and this round of trip cancellations put them deeply in the red.
- drwl 7y ago> Airbnb was never profitable (I think) Do you have any sources for this?
- MegaButts 7y agoAirBnB first announced profitability in 2018, followed by 2019. https://www.bloomberg.com/news/articles/2019-01-15/airbnb-says-it-made-a-profit-again-in-2018-as-ipo-looms-large https://www.bloomberg.com/news/articles/2019-01-15/airbnb-sa... That said, I'm not sure how many asterisks are attached to the definition of profitable. Likewise, the fact that a company that holds no substantial assets while operating in the face of most regulations only became profitable in 2018, while clearly being the market leader, makes me wonder what is going on with their financials. It should not take 10 years for a company like AirBnB to become profitable, it should take closer to 5. I know they had a disagreement with their CFO in 2018, and it took them the better part of a year to find a replacement. Admittedly, the replacement seems incredibly qualified. https://www.cnbc.com/2018/11/26/airbnb-hires-cfo-dave-stephenson-amazon-exec.html https://www.cnbc.com/2018/11/26/airbnb-hires-cfo-dave-stephe...
- listenallyall 7y agoNo they didn't. Literally the first sentence of your Bloomberg link includes "based on a common measure that excludes some expenses." They made an EBITDA (operating) profit. They were not a profitable company.
- malandrew 7y agoWhat has happened to HN that asking for sources/evidence is now something that gets you downvoted? Asking for supporting evidence should never get downvoted.
- tibbydudeza 7y agoIs WeWork still worth something ... guess co-working is a bum idea right now.
- Traster 7y agoIsn't it hilarious looking back, people were making the argument "In the next recesion co-working spaces are going to explode as a great way of managing costs". Turns out... maybe not this recession.
- paxys 7y agoWho the hell was saying that? It was pretty universally acknowledged that if there was a recession WeWork would be the first one to go bust. Of course, they did it before the recession actually happened.
- pjc50 7y agoGuess you've not been reading Money Stuff - they were already imploding, with lots of borderline fraud by the CEO, but this has really killed them.
- fny 7y agoWhy don't they borrow given we're at 0 percent rates?
- rwmj 7y agoI suppose the serious answer is it depends on (a) can businesses borrow at 0% (actually no, not even banks can, the fed rate is not 0). And (b) if they could borrow at 0% what would the term be? The fed rate is only an overnight rate so it requires constant refinancing. If AirBNB could borrow for 20 years at 0% it might make sense, but in terms of how it able to borrow in reality, probably not so much.
- unlinked_dll 7y agoThat's the rate the fed loans to the banks, which can't fail. The banks aren't going to loan AirBNB at a low interest rate when it looks like they're on the edge of insolvency.
- mrnaught 7y agothis reminds me of the quote "You never know who's swimming naked until the tide goes out." by Warren Buffet
- zwieback 7y agoWe recently bought a small condo in Portland for our weekend use and as we were shopping around it seemed like the whole Airbnb-triggered rental market was already hopelessly overheated. With the capacity that's there I can't imagine occupancy rates averaged over the year being worth it for the condo owners. I'm guessing there will be a glut of condos available after the virus, many of them in foreclosure.
- deleted 7y ago[deleted]
- moneymattress 7y agoIf you didn't know this already. "Poor" AirBnb here is simply letting customers cancel their stays without even letting hosts know and is then not paying hosts [1]. Note that a lot of these "hosts" are often small guesthouses that barely make rent and now have basically nothing for the next months. Of course you have your fair share of "rent hackers" on AirBnb but beyond that a lot of people run genuine small businesses around the platform and care a lot about their guests. [1] https://www.forbes.com/sites/johnkoetsier/2020/03/15/airbnb-coronavirus-cancellations-guests-cancel-for-free-hosts-pay-the-costs/#742ec36f131b https://www.forbes.com/sites/johnkoetsier/2020/03/15/airbnb-...
- imperialdrive 7y agoAirbnb was for people to make extra cash with extra space. I highly doubt people are going to be in ruin over a couple months of cancellations.
- rocketpastsix 7y agoI watched Airbnb places ruin Nashville. I feel for the employees of Airbnb, but Im not exactly sad to see this .
- listenallyall 7y agoHow does this submission drop from top 10 to 3rd page in about 20-30 minutes? Not allowed to mention anything negative about YC co's?
- hkmurakami 7y agoCame here to say the same thing. This is ridiculous.
- dang 7y agoThe opposite: we moderate HN less when YC or YC startups are involved. Obviously the trust of the community is critical and we would be dumb to risk that. https://hn.algolia.com/?dateRange=all&page=0&prefix=false&query=by%3Adang%20moderate%20less%20not%20more%20yc&sort=byDate&type=comment https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu... It doesn't mean that we don't moderate such threads at all, though. We penalized this one the same way we've been penalizing almost every coronavirus story, because if we didn't, HN would have consisted of nothing but coronavirus for the past week. I don't see this story as significant or interesting enough to rise above the threshold. "$Company is losing money" is a dog-bites-man story right now, especially in that industry. No?
- listenallyall 7y agoThanks for explaining. > we've been penalizing almost every coronavirus story Only you know the actual volume of coronavirus-related stories, and whether leaving them as-is would cover the entire top 10, entire first page, or entire first 3 pages. However IMO the adjustment, or "penalization," being applied seems too severe. CV is obviously the most important news topic in the world right now, the situation changes extremely rapidly, making the comments section, with contributors from around the globe, highly relevant and informative. My opinion is that up-to-date CV-related content on HN has been difficult to find, and the lack of such, in favor of random, often whimsical topics, trivializes HN. As I write this, the only CV-connected stories on page 1 are at #19: "Chloroquine, past and present" and at #28: "State projections for Covid-19." While its understandable not wanting HN to be totally dominated by CV, I think there is a better balance to be had.
- neonate 7y agohttps://archive.md/AMpB5 https://archive.md/AMpB5
- dk8996 7y agoI'm not very surprised, most of the travel industry is getting hit hard. On a side note, I had a very bad experience with Airbnb. I found out, because it happened to me, that they remove negative reviews of hosts. I lot of the rating on their site are goosed.
- deleted 7y ago[deleted]