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I thought AirBNB was recently claiming to have more than $1Bn in Cash on Hand. This seems like an extreme measure that wouldn't make sense if they actually did

I thought AirBNB was recently claiming to have more than $1Bn in Cash on Hand. This seems like an extreme measure that wouldn't make sense if they actually did have that much cash -- right??

nemo44x 7y ago
Well, I certainly expect their CFO did the arithmetic and found that their best path forward is to do this deal. It could be they can survive here for quite awhile and just burn cash. But if this pandemic goes on and on for 18 months they’d be in serious trouble. So maybe this is asking for cash before it’s too late? Maybe this is the insurance they’re now buying.
- tmh79 7y ago
  yea, its def a risk play. Lets say they can make it 12 months with cash on hand, what does the funding env look like in 12 months? There is def someone with a big spreadsheet who has modeled this out and decided this was the best path forward.
- puranjay 7y ago
  Airbnb is in a LOT of trouble if this pandemic fear persists for a while. Forget the obvious drop in casual travel, it's going to be hard to compete with hotels that can claim 100% control over their properties. I can already picture the Mariott ads promising "100% sanitized rooms and common areas". Can Airbnb guarantee the same? Not by a long shot.
  - nemo44x 7y ago
    Agreed. And hotels have political capital. Hell, the president is a hotel guy himself. They are getting bailed out. AirBnB is not. Hotel companies that are solvent and can use this money as leverage will have an opening to eat AirBnB’s lunch.
  - yibg 7y ago
    Probably true on the control and more flexibility in dealing with this by the hotel chains. But if this pandemic lasts for 18 months, they'd all be in serious trouble too.
babesh 7y ago
It is probably because travel will take a lot longer to come back than most of us expect. This is because travel is probably one of the prime ways covid-19 can start spreading again and governments will be very leery of any activity that will restart the spread. I bet travel will be restricted till there is a vaccine yet no vaccine is in sight. Perhaps in the meantime you will be forced to take a covid-19 test before boarding and when you come back? So you should expect AirBnB to lose virtually all its business till major tourist centers and sources of tourism have stabilized. And you should expect that it won't come close to recovering till there is a vaccine. Then you have to add on that travel is discretionary and given the economic shock, travel will be the first to fall and last to recover. So months to recovering some and then no full recovery till a vaccine is found (> 6 months to year(s)). One good proxy is the Olympics. It's been postponed to July of next year. I bet their burn rate with ~12000 employees is >>1B per year.
- TheOtherHobbes 7y ago
  I would expect a lot of attrition among their host base even after (if?) tourism recovers, so it's going to take a year at a minimum. In my area former hosts are already switching to the long-term rental market. Which is good IMO, because AirBnB has had a terrible effect on the availability of affordable rentals. In fact AirBnB are reliant on cheap air travel, and that's going to be badly hit. Lufthansa shuttered their budget Germanwings brand today, and a lot of budget carriers will be gone a few months from now. Given a general economic contraction and shake out, I doubt the cheap flights industry is going to recover to anything like its former volumes within 5-10 years.
  - onlyrealcuzzo 7y ago
    One of my favorite studies: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3006832 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3006832 > "A 1% increase in Airbnb listings leads to a 0.018% increase in rents and a 0.026% increase in house prices." In a lot of markets, AirBNB listings doubled (or more) for years. That could easily account for most of the REAL increases in rents and house prices in those markets.
- 7y ago
nostrademons 7y ago
If they expect to have $500M cash on hand next quarter [1] and still need the money, then it's much easier to raise it at 10% now than take their chances then when they're in a much worse position. [1] Seems fairly likely given their employee count and cash burn.

I thought AirBNB was recently claiming to have more than $1Bn in Cash on Hand. This seems like an extreme measure that wouldn't make sense if they actually did have that much cash -- right??

nemo44x 7y ago

Well, I certainly expect their CFO did the arithmetic and found that their best path forward is to do this deal. It could be they can survive here for quite awhile and just burn cash. But if this pandemic goes on and on for 18 months they’d be in serious trouble. So maybe this is asking for cash before it’s too late? Maybe this is the insurance they’re now buying.

tmh79 7y ago
yea, its def a risk play. Lets say they can make it 12 months with cash on hand, what does the funding env look like in 12 months? There is def someone with a big spreadsheet who has modeled this out and decided this was the best path forward.
puranjay 7y ago
Airbnb is in a LOT of trouble if this pandemic fear persists for a while. Forget the obvious drop in casual travel, it's going to be hard to compete with hotels that can claim 100% control over their properties. I can already picture the Mariott ads promising "100% sanitized rooms and common areas". Can Airbnb guarantee the same? Not by a long shot.
- nemo44x 7y ago
  Agreed. And hotels have political capital. Hell, the president is a hotel guy himself. They are getting bailed out. AirBnB is not. Hotel companies that are solvent and can use this money as leverage will have an opening to eat AirBnB’s lunch.
- yibg 7y ago
  Probably true on the control and more flexibility in dealing with this by the hotel chains. But if this pandemic lasts for 18 months, they'd all be in serious trouble too.

babesh 7y ago

It is probably because travel will take a lot longer to come back than most of us expect. This is because travel is probably one of the prime ways covid-19 can start spreading again and governments will be very leery of any activity that will restart the spread. I bet travel will be restricted till there is a vaccine yet no vaccine is in sight. Perhaps in the meantime you will be forced to take a covid-19 test before boarding and when you come back? So you should expect AirBnB to lose virtually all its business till major tourist centers and sources of tourism have stabilized. And you should expect that it won't come close to recovering till there is a vaccine. Then you have to add on that travel is discretionary and given the economic shock, travel will be the first to fall and last to recover. So months to recovering some and then no full recovery till a vaccine is found (> 6 months to year(s)). One good proxy is the Olympics. It's been postponed to July of next year. I bet their burn rate with ~12000 employees is >>1B per year.

TheOtherHobbes 7y ago
I would expect a lot of attrition among their host base even after (if?) tourism recovers, so it's going to take a year at a minimum. In my area former hosts are already switching to the long-term rental market. Which is good IMO, because AirBnB has had a terrible effect on the availability of affordable rentals. In fact AirBnB are reliant on cheap air travel, and that's going to be badly hit. Lufthansa shuttered their budget Germanwings brand today, and a lot of budget carriers will be gone a few months from now. Given a general economic contraction and shake out, I doubt the cheap flights industry is going to recover to anything like its former volumes within 5-10 years.
- onlyrealcuzzo 7y ago
  One of my favorite studies: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3006832 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3006832 > "A 1% increase in Airbnb listings leads to a 0.018% increase in rents and a 0.026% increase in house prices." In a lot of markets, AirBNB listings doubled (or more) for years. That could easily account for most of the REAL increases in rents and house prices in those markets.
7y ago

nostrademons 7y ago

If they expect to have $500M cash on hand next quarter [1] and still need the money, then it's much easier to raise it at 10% now than take their chances then when they're in a much worse position. [1] Seems fairly likely given their employee count and cash burn.