Right now, the world is in a very difficult place. People are panicking and businesses are going down. The travel and hotel industries are suffering way too much. People can’t travel and of course, if they cannot travel then they can’t stay at a hotel. That is why, earning profits or just breaking-even is impossible. Airbnb, the most popular rental company, had many plans for 2020. However, their plans are now gone. Right now, for a company like Airbnb, surviving this pandemic is the only goal.
Besides this, when Bloomberg spoke with the CEO of the company about how will the company get back in the market, his answer was pretty sad. Brian Chesky, the CEO, said, “I’m not sure if there’s a more difficult thing that a CEO of a travel company could ever do than go through this.” He also stated that it felt like your ship just got hit by a torpedo.
How much did the pandemic hurt Airbnb?
The coronavirus pandemic forced Brian to make some very difficult decisions. Firstly, they had to raise a huge amount of capital during this time of very high rates of interest. Secondly, the company had to refund the people who booked their stay before all of this happened. That must have cost a fortune too. Brian had to start a huge fund of around $250 million in order to comfort the hosts who were affected.
However, this fund will only help the hosts to some extent. The amount they could have made from booking would be higher. Brian Chesky is doing his best to make everyone happy during these difficult times.
More problems for Airbnb
As you may have read above, the company raised some capital. The amount raised was somewhere around $1 billion. However, this hurt the company by decreasing their valuation by upto 40%.
This would affect the company by a huge margin. Businessweek stated that this would hurt the early employees and venture capitalist backers by billions in paper gains. This would include Sequoia and Andreessen Horowitz.
How is Airbnb going to face these problems?
Brian Chesky had to cut back on their ad purchases. Besides this, they had to cancel their marketing spending by $800 million. However, he is very hopeful because they will come back strong. Brian said that they are ready to be back after the pandemic ends.