5 ms·

This pandemic is really shining light on many flimsy and questionable business models. In good times, it looks great on paper to own a business with no inventor

This pandemic is really shining light on many flimsy and questionable business models. In good times, it looks great on paper to own a business with no inventory and whose sole purpose is to be a marketing middleman between people offering a service and those in need of a service. But in bad times, income dries up—in this case, extremely quickly—and the flaws of that business model are exposed. Airbnb, coworking spaces, Getaround, and home services companies are just a few examples of this model. Bird/Lime also have this issue and will likely collapse as well—both have laid off most or all of their staff (Bird in particular handled it poorly.)

usaphp 7y ago
According to your logic all of the restaurants, hotels and bars have a questionable business model since they are suffering now because of the pandemic
- ericabiz 7y ago
  I specifically stated “a business with no inventory and whose sole purpose is to be a marketing middleman between people offering a service and those in need of a service.” Restaurants, hotels, and bars provide services directly and are not examples of this.
  - tathougies 7y ago
    Those businesses work perfectly well -- see banks, retail stores (who often don't even own the inventory they're selling), Amazon. The ones that don't work are the ones whose markets are affected by natural disaster, which is true of any business.
- smileysteve 7y ago
  I think that industry statistics show that many restaurants always have questionable business models. It would certainly be ideal if Restaurants, Cruise Lines, Hotels, Airlines had the balance sheets to handle an event like this, so far a 2 month slowdown, especially as there are things like cancelled events, hurricane season, recessions reducing travel, etc.
- wzdd 7y ago
  "questionable business model => may collapse during a pandemic" is not equivalent to "may collapse during a pandemic => questionable business model". (No comment on whether these things have a questionable business model, this is just how implication works.)
llampx 7y ago
Isn't it actually better for them not to have the liabilities of cars, hotel rooms etc on their books? They can lean up and cut costs and spring right back up once the pandemic is under control. At least theoretically.
- deleted 7y ago
  [deleted]
- cheriot 7y ago
  Exactly. Actual car rental companies are down more than 60% because they have debt payments to make whether people want to rent the cars or not.
  - TheOtherHobbes 7y ago
    AirBnB etc have (relatively) fixed infrastructure and staffing costs. Companies can negotiate loan payment holiday if they can persuade their creditors that it makes more sense to get an extra few months of debt relief than to be closed down - which would probably take a few months anyway. Not so with fixed staffing costs. Even if furlough is an option you need to decide who's essential, and who can be layed off temporarily - not always simple, especially if you're not sure if the downturn will be short. If furlough isn't an option you suddenly start burning your cash reserves after a huge drop in income, and investors start getting very nervous.
    - cheriot 7y ago
      > Companies can negotiate loan payment holiday By the time bond holders are taking a haircut, shareholders are wiped out. > Not so with fixed staffing costs. Layoffs aren't easy, but owners have more flexibility and control than they do negotiating with bond holders.
temp20160423 7y ago
I don't follow this logic. Bird/lime own their inventory. Airbnb is better off than the hotel chains IMO. The hotel chains have to keep paying their staff and rent while revenue drops, but airbnb just sees the revenue drop. It exposes the people who bought properties to list on airbnb on aggressive margins or like the example in the article of someone buying a car just to put on the platform. I wonder how much rental prices will be affected when the properties that were bought to use for airbnb are brought back to the long-term rental market.
- wvenable 7y ago
  Yes, Airbnb will be better off because they've offloaded all the risk on the hosts -- which is really what we're talking about here. Sure there were some hosts just renting out their basement suite but many others were effectively running makeshift hotels by buying up properties. Those people are going to be in big trouble.
  - hn_throwaway_99 7y ago
    Actually, I know some people who bought whole homes in vacation destinations that are doing fine as they are advertising their properties as good places to quarantine. It's the market for shared spaces that is completely dead.
    - wvenable 7y ago
      That's got to be the exception rather than rule.
      - PopeDotNinja 7y ago
        I'm under quarantine at an Airbnb!
- AnimalMuppet 7y ago
  I agree with you about Airbnb. Airbnb itself will be fine, but those who bought a property to rent out are hurting. But Bird/Lime are in deep trouble, and not just because of cost of the scooters they own. Who is going to rent one, not knowing the health status of the previous renter?
netsharc 7y ago
All the "sharing economy" businesses like Airbnb and "Airbnb but for x" (like this one with x = cars) have the same model anyway, be the middle-man, promise protection for both sides, take 30%, great if everything works out, but be slow to respond and offer a pittance if one of the parties gets shafted.
deleted 7y ago
[deleted]
0x8BADF00D 7y ago
Coronavirus was the impetus for pricking the bubble. As Warren Buffet so eloquently put it: “Only when the tide goes out do you discover who's been swimming naked.” Turns out there were a lot of unsustainable businesses like this. The Fed and government stimulus will not be able to reflate that bubble. No matter how many companies we nationalize.
- hn_throwaway_99 7y ago
  I think it's important to separate "the bubble" pricking from the very arbitrary nature of which industries are affected by coronavirus. I mean, for travel, restaurants, gyms, non-emergency healthcare etc. it's a great depression, while for distance learning, Amazon, videoconferencing, gaming, etc. it's boom times. But it's not like travel, restaurants etc. are inherently bad businesses.
  - colmvp 7y ago
    Is Amazon booming? In Canada, some Amazon shipments for non essential equipment is going to take over a month which is why I'm not bothering to order anything from them during this time and finding other stuff locally.
    - kube-system 7y ago
      That's because their customers are going bananas and buying everything. Amazon is trying to hire like crazy. https://abcnews.go.com/US/wireStory/amazon-seeks-hire-100000-surge-orders-69628178 https://abcnews.go.com/US/wireStory/amazon-seeks-hire-100000...
tzs 7y ago
I don't think that follows. What's hurting e.g. Airbnb is not that they are a marketing middleman between people offering a service and people in need of a service. It's that the need for that underlying service has greatly diminished--if people don't need the underlying service anymore then they don't need a marketing middleman for that service either. What you need to make your point are examples where the underlying service still does fine in bad times, but the marketing middleman for that service do not.

usaphp 7y ago

According to your logic all of the restaurants, hotels and bars have a questionable business model since they are suffering now because of the pandemic

ericabiz 7y ago
I specifically stated “a business with no inventory and whose sole purpose is to be a marketing middleman between people offering a service and those in need of a service.” Restaurants, hotels, and bars provide services directly and are not examples of this.
- tathougies 7y ago
  Those businesses work perfectly well -- see banks, retail stores (who often don't even own the inventory they're selling), Amazon. The ones that don't work are the ones whose markets are affected by natural disaster, which is true of any business.
smileysteve 7y ago
I think that industry statistics show that many restaurants always have questionable business models. It would certainly be ideal if Restaurants, Cruise Lines, Hotels, Airlines had the balance sheets to handle an event like this, so far a 2 month slowdown, especially as there are things like cancelled events, hurricane season, recessions reducing travel, etc.
wzdd 7y ago
"questionable business model => may collapse during a pandemic" is not equivalent to "may collapse during a pandemic => questionable business model". (No comment on whether these things have a questionable business model, this is just how implication works.)

llampx 7y ago

Isn't it actually better for them not to have the liabilities of cars, hotel rooms etc on their books? They can lean up and cut costs and spring right back up once the pandemic is under control. At least theoretically.

deleted 7y ago
[deleted]
cheriot 7y ago
Exactly. Actual car rental companies are down more than 60% because they have debt payments to make whether people want to rent the cars or not.
- TheOtherHobbes 7y ago
  AirBnB etc have (relatively) fixed infrastructure and staffing costs. Companies can negotiate loan payment holiday if they can persuade their creditors that it makes more sense to get an extra few months of debt relief than to be closed down - which would probably take a few months anyway. Not so with fixed staffing costs. Even if furlough is an option you need to decide who's essential, and who can be layed off temporarily - not always simple, especially if you're not sure if the downturn will be short. If furlough isn't an option you suddenly start burning your cash reserves after a huge drop in income, and investors start getting very nervous.
  - cheriot 7y ago
    > Companies can negotiate loan payment holiday By the time bond holders are taking a haircut, shareholders are wiped out. > Not so with fixed staffing costs. Layoffs aren't easy, but owners have more flexibility and control than they do negotiating with bond holders.

temp20160423 7y ago

I don't follow this logic. Bird/lime own their inventory. Airbnb is better off than the hotel chains IMO. The hotel chains have to keep paying their staff and rent while revenue drops, but airbnb just sees the revenue drop. It exposes the people who bought properties to list on airbnb on aggressive margins or like the example in the article of someone buying a car just to put on the platform. I wonder how much rental prices will be affected when the properties that were bought to use for airbnb are brought back to the long-term rental market.

wvenable 7y ago
Yes, Airbnb will be better off because they've offloaded all the risk on the hosts -- which is really what we're talking about here. Sure there were some hosts just renting out their basement suite but many others were effectively running makeshift hotels by buying up properties. Those people are going to be in big trouble.
- hn_throwaway_99 7y ago
  Actually, I know some people who bought whole homes in vacation destinations that are doing fine as they are advertising their properties as good places to quarantine. It's the market for shared spaces that is completely dead.
  - wvenable 7y ago
    That's got to be the exception rather than rule.
    - PopeDotNinja 7y ago
      I'm under quarantine at an Airbnb!
AnimalMuppet 7y ago
I agree with you about Airbnb. Airbnb itself will be fine, but those who bought a property to rent out are hurting. But Bird/Lime are in deep trouble, and not just because of cost of the scooters they own. Who is going to rent one, not knowing the health status of the previous renter?

netsharc 7y ago

All the "sharing economy" businesses like Airbnb and "Airbnb but for x" (like this one with x = cars) have the same model anyway, be the middle-man, promise protection for both sides, take 30%, great if everything works out, but be slow to respond and offer a pittance if one of the parties gets shafted.

deleted 7y ago

[deleted]

0x8BADF00D 7y ago

Coronavirus was the impetus for pricking the bubble. As Warren Buffet so eloquently put it: “Only when the tide goes out do you discover who's been swimming naked.” Turns out there were a lot of unsustainable businesses like this. The Fed and government stimulus will not be able to reflate that bubble. No matter how many companies we nationalize.

hn_throwaway_99 7y ago
I think it's important to separate "the bubble" pricking from the very arbitrary nature of which industries are affected by coronavirus. I mean, for travel, restaurants, gyms, non-emergency healthcare etc. it's a great depression, while for distance learning, Amazon, videoconferencing, gaming, etc. it's boom times. But it's not like travel, restaurants etc. are inherently bad businesses.
- colmvp 7y ago
  Is Amazon booming? In Canada, some Amazon shipments for non essential equipment is going to take over a month which is why I'm not bothering to order anything from them during this time and finding other stuff locally.
  - kube-system 7y ago
    That's because their customers are going bananas and buying everything. Amazon is trying to hire like crazy. https://abcnews.go.com/US/wireStory/amazon-seeks-hire-100000-surge-orders-69628178 https://abcnews.go.com/US/wireStory/amazon-seeks-hire-100000...

tzs 7y ago

I don't think that follows. What's hurting e.g. Airbnb is not that they are a marketing middleman between people offering a service and people in need of a service. It's that the need for that underlying service has greatly diminished--if people don't need the underlying service anymore then they don't need a marketing middleman for that service either. What you need to make your point are examples where the underlying service still does fine in bad times, but the marketing middleman for that service do not.