Airbnb going Bankrupt because of Covid-19
Business have greatly suffered because of the coronavirus pandemic and the Covid-19 has also dealt a fatal blow to the hoteliers and to the Airbnb businesses
In May this year Airbnb cut off 1,900 employees which makes about 25% of Airbnb’s workforce, the largest layoff to hit Silicon Valley as a result of the Covid-19.
Brian Chesky, the CEO of Airbnb said to his employees in an email “The global pandemic is the most harrowing crisis of our lifetime” he said that “The virus’s devastating blow to the travel industry means the company’s 2020 revenue is forecast to be less than half of what the startup pulled in last year”.
Brian chesky in an interview with the NPR described the challenge the virus presented to his company “Airbnb” which is one of the most valuable private technology companies in the United States.
“You go from living year to year to month to month to week to week today,” Chesky said. “You go from having multi-year plans to figuring out how you’re going to get to next Thursday because you can’t even predict what the world is going to look like in two months.”
Airbnb which was last valued at $31 billion and employed 7,500 before the cuts, is the latest high-profile company that the Covid-19 has brought to its knees.
Hosts who had their calendars booked up to the next three months straight suddenly had their calendars empty and all of the reservations canceled.
Many hosts’ livelihoods were dependent on the income from the Airbnbs, guests canceled reservations overnight as the pandemic started, leaving hosts unable to pay their bills.
Airbnb host Kate Shaw talked about the business before Covid-19 and said “it was booming and this was supposed to be the time of the year, you would see hundred percent occupancy”.
She said that she has exclusively made her income from the rentals since 2018, Shaw owns multiple properties in Joshua Tree and Long Beach. Shaw talked about the pandemic affecting her business she said “it was literally overnight, I can’t begin to describe. The morning of March 10th, all of a sudden- it actually hit in Long Beach first, because conventions started to be canceled and events started to be canceled, and so people were canceling.”
For that purpose Airbnb has put a policy in place, to return the customers full cash under the Extenuating circumstances policy. The company also created a $250 million fund to reimburse the hosts for some of their losses.
But the hosts are not very happy with the company about the $250 million coronavirus relief fund, they have taken to online groups to complain that they have yet to receive the reimbursement fund or if they have received anything from the fund it’s so small almost comical.
Heading into the year, Airbnb was looking for an entry into the public markets, The company had also lined up bankers to lead the offering, which was supposed to test whether Airbnb could live up to its $31 billion market valuation from 2017 or not.
Instead, the company found itself on the verge of bankruptcy and also found its hosts going against the company for not delivering on its coronavirus relief fund.
The company’s CEO Brian Chesky is holed up in San Francisco these days baking a lot of chocolate chip cookies while the company is on the brink of bankruptcy and no way to salvage it in the near future.