On March 11, Airbnb co-founder and CEO Brian Chesky was finalizing the paperwork for a highly anticipated June IPO of the company, when the World Health Organization officially declared the COVID-19 outbreak a global pandemic.
Over the next 24 hours, more than $1 billion in Airbnb reservations were canceled and Chesky suddenly found himself at the helm of a company in freefall. Airbnb is a travel business, and suddenly travel all over the world had come to a virtual standstill. “It was like slamming the brakes on a car that’s going 100 mph,” Chesky recalled in a recent Thomson Reuters Newsmakers interview where he discussed his handling of the crisis and the future of the travel industry.
Compassion in a scary world
Since then, Airbnb has put its IPO on hold, laid off 25% of its global workforce, suspended many of its side projects (such as Airbnb Experiences, Airbnb hotels, Airbnb Studios, Airbnb transportation services, and Airbnb Luxe), secured $2 billion in emergency financing, and charted a new path that Chesky said is based on returning the company to its “roots” as a company that fosters “belonging and connection.”
In business circles, Chesky is also being lauded for his transparent and compassionate handling of the Airbnb crisis, even though a number of hosts, investors, and board members have called for his resignation. In an open letter to employees posted on the company’s website, Chesky laid out the company’s entire pivot strategy, including severance and healthcare, and closed the letter by telling employees that he had “a deep feeling of love” for all of them.
“In a time of need, when millions of people are losing their jobs and people are afraid for their lives, they want to know that people entrusted with power and responsibility have compassion [for them],” Chesky said of his decision to publicly share the letter, adding that if leaders don’t demonstrate compassion, “it’s a scary world, because they’re the ones who are supposed to be looking out for us.”
The New Normal of travel redistribution
All of Chesky’s business decisions were difficult and controversial, but Airbnb has seen a surprising rebound in bookings, he says, as people emerge from COVID-19 lockdowns and engage in whatever travel possibilities are available to them. “The world has permanently changed,” he declared, noting that business travel will likely never return to its pre-COVID popularity. “As of January 2020, travel as we used to know it is over — and it’s not coming back.” People will continue to travel, he clarified, but the industry will be “fundamentally reshaped” as people around the world adapt to the strange new reality ahead.
The term Chesky used to describe this evolution in the industry is “travel redistribution,” a catch-all phrase that refers to all the many different ways people are re-thinking the use of their time and resources, not to mention their appetite for risk. “The pandemic has been a reset moment,” Chesky said. “Most people don’t want to get on a plane right now, but they will get in a car and drive 200 miles. People are not doing mass tourism to big cities, but they are going to small cities where there’s less population density.” People are also going to national parks and “rediscovering” small towns and regional attractions, he added. Also, international travel may still be problematic, but people around the world are “traveling inside their country” rather than vacationing abroad.
Not coincidentally, Airbnb is there to help these itinerant pioneers. “There aren’t many hotels near national parks,” Chesky explained, “but there are a lot of homes.” Homes that, thanks to a recent partnership with the National Park Service, now have more rooms to rent.
Another boom market: Unique homes. “Tree houses, Airstreams — anything that’s special, unique, or one-of-a-kind. People want something more private, intimate, smaller.”
Reasons for optimism
Airbnb’s go-local strategy appears to be paying off. In fact, Airbnb’s resurgence during the summer vacation season has been so strong that it “defies logic,” Chesky claimed. “We don’t want to be premature, because nobody knows what’s going to happen. But we’re incredibly optimistic, because things have far exceeded our expectations.” On July 8, Chesky said the company had 1 million room-nights booked, an amount he described as “beyond all reason.”
One likely reason, however, is that people are still leery of mingling with strangers in a hotel, and Airbnb offers a safer, more socially distanced travel experience. To reassure Airbnb guests that coronavirus hygiene is a top priority, the company even hired former U.S. Surgeon General Vivek Murthy to develop its new “Enhanced Cleaning Initiative,” a series of cleaning protocols that all Airbnb hosts are required to adhere to during the pandemic.
Despite all the setbacks and second-guessing, Chesky said he believes his company will rebound because “society wants us to exist” and because Airbnb provides the “essential service” of “connecting people” in a world where connections everywhere are frayed and crumbling. Also, in a recession, more people may be eager to sign up as Airbnb hosts, a market Chesky described as “massive.”
Indeed, despite the crushing hit to his bottom line, Chesky said he still believes his company has a bright future ahead. “We made a lot of hard decisions, but we’re more focused as a company than we’ve ever been,” he insisted, adding that managing the company through the COVID-19 crisis is the “hardest thing I’ve ever done.” On the positive side, however, he said it did give the company and its leadership an opportunity to re-think their priorities.
As for reviving that IPO, Chesky would not speculate about Airbnb’s plans, but he did offer an upbeat assessment of the company’s performance. “Airbnb is still a great business, and many investors are impressed by how we handled the pandemic,” Chesky said. “We’ve shown that we can move quickly and make difficult decisions, all while sticking to our core principles.”
The additional pressures and responsibilities that would come with running a public company do not seem to faze him, either. “Whatever pressure there is as a public company CEO, it cannot be worse than losing 80% of your business in eight weeks,” he said.