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Why should Airbnb be making losses at this point? Are they refunding booking fees to customers while paying hosts? Traditional hotels lose money because of hu

Why 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 ago
Why 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 ago
  I 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 ago
    They'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 ago
      Airbnb 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?
      - CydeWeys 7y ago
        I don't understand the point of your questions. Are you disputing the fact that Airbnb is not profitable? Because they very clearly and obviously aren't. Or are you saying that their business isn't well run, that their costs are too high, etc.? Because I can't answer this part of it; I don't work for them, I don't set their strategy, etc. I can't defend them on that mark. But it is true. They are spending more than they are earning. Just because you don't understand how or why doesn't mean that it isn't in fact happening.
- user5994461 7y ago
  They should not be tanking. Airbnb is in a highly profitable business with very high operating margin. For reference, they take 20 to 30% commission on each booking, whereas the fixed costs to run a website are ridiculously low. Even with half the bookings, it's still a cash cow.
  - shartshooter 7y ago
    A company growing as aggressively as AirBnB wasn't taking a 20-30% profit and paying out shareholders. They were taking that 20-30% and reinvesting back into growth. That means people, offices, tech, marketing, audits of homes, process, insurance, etc. When things look good you can run lean and focus on growth. If things start to turn you can ratchet back those costs. Unfortunately, things turned on them very fast and they aren't that nimble. When you've got 15k employees with salary, bonuses, benefits, offices that aren't being used and overnight you reduce your top line revenue by 50%+ you're likely in the red and from what I hear, they were in the red prior to this. AirBnB will likely be a casualty of this downturn. They're highly focused on the part of the economy hardest hit by COVID-19 and are unable to diversify in time. Lots of folks will lose their jobs, a lot of others may lose second or third homes that were used solely for part-time rentals. It's going to be hard on a lot of people and had AirBnB not gotten so far out over their skis they'd likely be OK, but would not be the market leader they were a few weeks back.
    - user5994461 7y ago
      What I am trying to say is that AirBnb is a solid business that is not at any risk of disappearing. I am moderately sure that they could have turned profitable any minute if they wanted to. There was a subject on HN yesterday were people were posting offers from AirBnb in excess of 400k per year and from what you are telling me they have 15k+ employees now. Fact is, they're burning money for the sake of growth and metrics. Can they sustain this and sustain it forever? No, but there are pretty much no business in the world who could, so that's not a reasonable metrics to say they're doing poorly and in danger. They might get a reality check and cut some fat, like most unicorns playing the VC game get sooner or later, but the company is not at risk of dying.
- tclancy 7y ago
  I think the OP's point is they don't have to pay for the real estate regardless of occupancy unlike traditional hotels. This is more lost opportunity cost than revenue being taken away.
  - CydeWeys 7y ago
    What? This doesn't make any sense. Of course they're losing massive amounts of revenue. Their business model is to make a cut off each booking, and bookings are down massively. At the same time, they have large fixed costs because they have a lot of employees and leased office space. So money coming in goes down massively while money going out doesn't. EDIT: It sounds like others are talking about pre-coronavirus times whereas I'm talking about now (like the linked article is).
- listenallyall 7y ago
  He's probably referring to the fact that they were losing tons of money before coronavirus. They recently reported that they lost $276 million in Q4-2019, which was almost double Q4-2018. Which does lead to the question, how is this company losing so much money when they are, essentially, a broker with very few fixed assets and no COGS? https://news.ycombinator.com/item?id=22561933 https://news.ycombinator.com/item?id=22561933

CydeWeys 7y ago

Why 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 ago
I 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 ago
  They'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 ago
    Airbnb 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?
    - CydeWeys 7y ago
      I don't understand the point of your questions. Are you disputing the fact that Airbnb is not profitable? Because they very clearly and obviously aren't. Or are you saying that their business isn't well run, that their costs are too high, etc.? Because I can't answer this part of it; I don't work for them, I don't set their strategy, etc. I can't defend them on that mark. But it is true. They are spending more than they are earning. Just because you don't understand how or why doesn't mean that it isn't in fact happening.
user5994461 7y ago
They should not be tanking. Airbnb is in a highly profitable business with very high operating margin. For reference, they take 20 to 30% commission on each booking, whereas the fixed costs to run a website are ridiculously low. Even with half the bookings, it's still a cash cow.
- shartshooter 7y ago
  A company growing as aggressively as AirBnB wasn't taking a 20-30% profit and paying out shareholders. They were taking that 20-30% and reinvesting back into growth. That means people, offices, tech, marketing, audits of homes, process, insurance, etc. When things look good you can run lean and focus on growth. If things start to turn you can ratchet back those costs. Unfortunately, things turned on them very fast and they aren't that nimble. When you've got 15k employees with salary, bonuses, benefits, offices that aren't being used and overnight you reduce your top line revenue by 50%+ you're likely in the red and from what I hear, they were in the red prior to this. AirBnB will likely be a casualty of this downturn. They're highly focused on the part of the economy hardest hit by COVID-19 and are unable to diversify in time. Lots of folks will lose their jobs, a lot of others may lose second or third homes that were used solely for part-time rentals. It's going to be hard on a lot of people and had AirBnB not gotten so far out over their skis they'd likely be OK, but would not be the market leader they were a few weeks back.
  - user5994461 7y ago
    What I am trying to say is that AirBnb is a solid business that is not at any risk of disappearing. I am moderately sure that they could have turned profitable any minute if they wanted to. There was a subject on HN yesterday were people were posting offers from AirBnb in excess of 400k per year and from what you are telling me they have 15k+ employees now. Fact is, they're burning money for the sake of growth and metrics. Can they sustain this and sustain it forever? No, but there are pretty much no business in the world who could, so that's not a reasonable metrics to say they're doing poorly and in danger. They might get a reality check and cut some fat, like most unicorns playing the VC game get sooner or later, but the company is not at risk of dying.
tclancy 7y ago
I think the OP's point is they don't have to pay for the real estate regardless of occupancy unlike traditional hotels. This is more lost opportunity cost than revenue being taken away.
- CydeWeys 7y ago
  What? This doesn't make any sense. Of course they're losing massive amounts of revenue. Their business model is to make a cut off each booking, and bookings are down massively. At the same time, they have large fixed costs because they have a lot of employees and leased office space. So money coming in goes down massively while money going out doesn't. EDIT: It sounds like others are talking about pre-coronavirus times whereas I'm talking about now (like the linked article is).
listenallyall 7y ago
He's probably referring to the fact that they were losing tons of money before coronavirus. They recently reported that they lost $276 million in Q4-2019, which was almost double Q4-2018. Which does lead to the question, how is this company losing so much money when they are, essentially, a broker with very few fixed assets and no COGS? https://news.ycombinator.com/item?id=22561933 https://news.ycombinator.com/item?id=22561933