
Airbnb Racks Up Hundreds of Millions in Losses Due to Coronavirus - dcgudeman
https://www.wsj.com/articles/airbnb-racks-up-hundreds-of-millions-in-losses-due-to-coronavirus-11584723498
======
chadmeister
It'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.

~~~
tylerchilds
As 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.

~~~
mandeepj
>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

net-net : is n't both the same?

~~~
jankassens
Airbnb turns housing into hotels. Typically those are zoned differently,
potentially subsidizing housing for locals at the cost of driving up prices
for travelers.

------
saltedonion
This 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
> Airbnb was never profitable (I think)

Do you have any sources for this?

~~~
MegaButts
AirBnB first announced profitability in 2018, followed by 2019.

[https://www.bloomberg.com/news/articles/2019-01-15/airbnb-
sa...](https://www.bloomberg.com/news/articles/2019-01-15/airbnb-says-it-made-
a-profit-again-in-2018-as-ipo-looms-large)

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-
stephe...](https://www.cnbc.com/2018/11/26/airbnb-hires-cfo-dave-stephenson-
amazon-exec.html)

~~~
listenallyall
No 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.

------
yesplorer
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
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).

~~~
user5994461
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
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.

~~~
imperialdrive
There is NO WAY they have 15K employees! edit: Wow, ok, so the number appears
to be 12,736 - incredible. Well, I'm speechless.

Good for them for passing money down to staff, but my goodness, how does it
make financial sense, no clue.

~~~
CydeWeys
You're right, the correct number is around 13k.

------
listenallyall
How 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?

~~~
dang
The opposite: we moderate HN less, not more, 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&qu...](https://hn.algolia.com/?dateRange=all&page=0&prefix=false&query=by%3Adang%20moderate%20less%20not%20more%20yc&sort=byDate&type=comment)

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
Thanks 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.

~~~
tptacek
On any given day, most of the world's most important news topics aren't on the
HN front page, and don't belong there. There are plenty of other sites that do
a better job of reporting on the entire world.

~~~
listenallyall
> most of the world's most important news topics aren't on the HN front page

because they don't gain traction among the HN audience. CV has, and to a very
large degree, according to dang's comment above.

~~~
dang
> because they don't gain traction among the HN audience

That's a bit of a misperception. They do gain traction. If we didn't moderate
them, HN's front page would consist of the hottest topics of the moment and
would be a different site altogether.

The strongest force on the internet is indignation—orders of magnitude
stronger than curiosity—so there need to be countervailing mechanisms (like
software and moderation) to contain its effects and allow HN to be HN. Upvotes
alone don't do it, unfortunately.

[https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...](https://hn.algolia.com/?dateRange=all&page=0&prefix=false&query=by%3Adang%20%22upvotes%20alone%22&sort=byDate&type=comment)

~~~
listenallyall
I appreciate your thoughts in this thread, and more importantly, your
willingness to explain your decisions. Your diligent moderation throughout the
site ensures it remains a terrific, unique and much-needed resource. Thank
you!

~~~
dang
Thank you too! It's important feedback to hear that the explanations are
helpful, because otherwise I need to recalibrate how I do it, or just (if it's
not working) do less.

People are most welcome to ask further questions if there's something we
haven't explained yet. I'm slowly building up a corpus of links to previous
explanations, which is why my answers are so full of HN Search links.
Eventually we might compile all that into some web pages.

------
moneymattress
If 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-...](https://www.forbes.com/sites/johnkoetsier/2020/03/15/airbnb-
coronavirus-cancellations-guests-cancel-for-free-hosts-pay-the-
costs/#742ec36f131b)

~~~
imperialdrive
Airbnb 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.

------
gadnuk
Weren'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.

~~~
vincentmarle
They lost close to $300M last quarter. And those were the good times.

~~~
maximente
well 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.

------
zwieback
We 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.

------
dk8996
I'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.

------
mrnaught
this reminds me of the quote "You never know who's swimming naked until the
tide goes out." by Warren Buffet

------
neonate
[https://archive.md/AMpB5](https://archive.md/AMpB5)

------
foepys
It 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
A 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
This 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
We 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.

------
qiqitori
How? What are they spending their money on? They need to put people on leave
and "pause" their business as quickly as possible!

~~~
fbonetti
They’re losing revenue due to the massive amount of recently cancellations.

~~~
atwebb
I 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
They 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
Airbnb 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
They 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
Then they're indeed not fit to run their business, period.

~~~
CydeWeys
OK, so what are you going to do about it?

~~~
yesplorer
Am 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.

------
tibbydudeza
Is WeWork still worth something ... guess co-working is a bum idea right now.

~~~
Traster
Isn'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
Who 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.

------
joshmn
Makes me wonder if they will start to offer "trip protection" or the like. The
economics of it checks out.

~~~
sureshv
Who would underwrite that at this moment?

~~~
joshmn
Great question. But, at a company in the past that I worked at, they just took
a gamble and hoped they wouldn't have to pay it out. Morals aside, simpler
times.

------
rocketpastsix
I watched Airbnb places ruin Nashville. I feel for the employees of Airbnb,
but Im not exactly sad to see this .

------
fny
Why don't they borrow given we're at 0 percent rates?

~~~
rwmj
I 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.

