Airbnb IPO under threat as bookings plummet

Airbnb has seen its bookings collapse by 40 per cent in big European cities and China because of the Covid-19 pandemic, according to independent data, putting its plans for an initial public offering this year in doubt.

Data from analytics group Airdna showed a severe drop in bookings across Europe in the past two weeks of February, as tourists began to delay or cancel their travel plans in the face of the outbreak.

The cancellation of big conferences and festivals, such as Mobile World Congress in Barcelona, and South by Southwest in Austin, Texas, has also hit Airbnb and the hosts who rent out their homes on its platform.

Revenues

In China, Airdna projected year-on-year revenues for Airbnb hosts in Beijing would fall 43 per cent in March, after a 22 per cent decline in February. Before the crisis, China was Airbnb’s fastest-growing market.

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“We haven’t rented out a single apartment since Chinese new year,” said Wang Peng, who manages 12 apartments and standalone homes in the southern city of Guangzhou. Across China, passes were now needed to enter apartment blocks and these were unavailable to short-term renters, he added.

The wave of cancellations is also likely to hit Airbnb’s US market. Kameron Bain, director of strategy at Beyond Pricing, an Airbnb affiliate that provides pricing suggestions to hosts according to demand, said that there had been mass cancellations in urban centres such as San Francisco and Chicago, as well as in London and Paris.

Airbnb had been hit by “a major decrease in total bookings worldwide specifically in the last week”, he said.

The home rental company declined to comment on whether the disruption would cause it to postpone its planned IPO, but a spokesperson pointed to prior statements on the 2020 target.

One of its investors said the conditions have made it “impossible” to move forward with plans until the coronavirus was contained.

“I don’t see why Airbnb would go public in a market like this today,” he said. “I think rationally it makes sense for them to wait - and I don’t think they were in any kind of rush in the first place.”

But another big investor suggested Airbnb was relaxed about a low valuation. Once the travel sector recovers, the investor suggested, the only way for Airbnb stock would be up.

Unlike a typical IPO, Airbnb is considering a direct listing in which no new shares are created, potentially allowing the company to float with a smaller base of public investors.

Options

The company’s employees are also concerned that if it delays its IPO, some of their stock options may expire, leaving them worthless. But investors speculated that Airbnb could find ways to compensate them if that were to occur.

Two sources familiar with Airbnb’s finances said the company was cash flow positive in every quarter last year, and has some $3 billion (€2.65 billion) in cash on hand.

In February, the Wall Street Journal reported that Airbnb had posted a $322 million net loss for the first nine months of 2019, compared to a $200 million profit for the full year in 2018.

Airbnb executives suggested that the numbers were influenced by one-off costs in upgrading systems and investing in safety, such as the creation of a 24-hour hotline in North America to deal with emergencies.

As the travel industry grapples with the current crisis, Airbnb has also come under fire from consumers who have not been refunded after certain events, such as the Californian music festival Coachella, were postponed or cancelled.

On Wednesday, Airbnb sought to explain in a blog post why it did not wish to leave the people renting homes on its platform out of pocket. “We know our hosts depend on the economics generated through the Airbnb platform,” wrote Greg Greeley, who runs Airbnb’s homes business.

“In a recent global survey we conducted, half of host respondents said their Airbnb income helped them stay in their homes, and nearly one quarter (24 per cent) said hosting on Airbnb helped them avoid eviction or foreclosure.”

Hosts are mostly free to choose the degree to which guests get refunds as they cancel. In order to encourage more hosts to offer more flexibility, Airbnb said it would promote listings that gave the most generous refund option, and would waive some fees.

Circumstances

Airbnb had already put in place an “extenuating circumstances” policy that meant customers received a full refund, regardless of the host’s policy choice, if they had booked a trip in a severely affected area – China, South Korea and Italy – or were travelling from those locations. Likewise, hosts could cancel those guests without penalty.

Analysts did offer some hope that business might improve in the summer, suggesting that consumers were adapting, rather than abandoning, their plans. “We believe this is likely due to residents still wanting to travel but preferring to stay within their own country and within driving distance,” said Mr Bain from Beyond Pricing.

“It’s important to note that the effects are highly localised,” concluded Dillon DuBois, product content market at Airdna. “The markets affected are largely limited to where the virus actually is.

“This may seem obvious, but it’s important to recognise that the vast majority of vacation rental markets are not in all-out panic mode.” – Copyright The Financial Times Limited 2020