Can Airbnb Outperform a Potential Recession? | WSJ
Airbnb was formed during the 2008 financial crisis and evolved during the Covid-19 pandemic. WSJ’s Preetika Rana and Airbnb CEO Brian Chesky share insight into the home-sharing giant’s success and what the future might hold for the company.
– [Presenter] This is a tiny home on Airbnb.
So far this year,
this listing has brought in over $20,000 for its host.
The typical U.S. host in 2021
earned over $13,800 according to the company.
– The tiny home doesn’t cost a lot to build,
and yet it could charge hundreds of dollars a night.
– [Presenter] Airbnb posted a profit in its second quarter,
as guests booked a record number of stays and experiences
and hosts increased prices for rentals amid high inflation,
but people didn’t book as much as analysts had projected,
and the company’s summer bookings forecast
fell short of expectations.
– Obviously it’s an incredibly dynamic period of time,
but I’m still expecting
an incredibly strong period of travel
even if people pull back spending some.
– [Presenter] So how did the largest
home sharing platform in the U.S.
navigate its biggest crises?
And could it borrow those lessons
to weather fears of a recession?
This is The Economics of Airbnb.
– Airbnb started
around the time of the 2008 financial crisis.
This was a time when people were really hard hit
by the recession,
and they were looking for a way to make an extra buck.
– [Presenter] In 2016,
the company launched Airbnb Experiences,
which let travelers book classes, tours, and outings.
Airbnb also spent more as it grew.
– The CEO branched out into all kinds of things
like he wanted to have a media studios,
he wanted to branch into transportation.
– [Presenter] And then the pandemic hit.
Business was down 80%
forcing Airbnb to take on $2,000,000,000 in debt,
and pause all non-essential projects.
– I hope I never do a side project again in my life.
I learned a lesson,
and I think the lesson is
when you try to do new things as side things,
they don’t work.
– [Presenter] Summer of 2020 was a turning point for Airbnb.
– [Rana] People started quarantining with their families.
Friends started taking staycations
while they could work remote.
So that’s something that definitely benefited Airbnb.
– [Presenter] Local travel became its stronghold,
and people started using the platform for longer stays.
The company was one of the hottest public listings of 2020,
though with stock price has fallen since then
amid a broad market cool off.
In August, Airbnb projected record third quarter revenue
on the back of higher rental prices,
and said it expects to post its first full year profit
– A lot of businesses have lucky moments,
but there’s something to be said about getting lucky
and also being able to ride that wave and capitalize on it.
– [Presenter] That’s what Airbnb says
it has done from the start.
– Back then in 2008, a lot of people turned to hosting,
because they were losing their homes,
high housing prices,
and a lot of people because they didn’t have as much money
were looking for more affordable ways to travel
than ever before.
– [Rana] That really helped them
bring a lot of people who were looking for
ways to make up for lost income onto the platform.
And you can really see them capitalize on timing
during the pandemic as well.
– [Presenter] Airbnb redesigned its app and website
to focus on local stays during the pandemic.
Last summer, it launched a flexible search feature,
which curates trips for people
who don’t know where they want to go.
– [Rana] The pandemic and remote work
gave us that flexibility.
You know, we could travel during the week
and still work remote.
So Airbnb starts noticing this trend and it says,
oh my God we can,
you know, we can sort of capitalize on this, and they do.
– [Presenter] In May,
Airbnb launched another redesign of its search tool
that split homes into more than 50 categories
as a way to steer people to places
they wouldn’t otherwise have picked.
– [Rana] So what they’re trying to do is
they’re trying to fill existing homes
instead of adding more and more homes.
– [Presenter] Some analysts say
this is key to the company’s future growth
since global occupancy rates are low.
When it comes to addressing safety issues on its platform,
some cities have complained that
Airbnb has been too hands off.
– They’re not actively monitoring these properties
because frankly they can’t, they don’t own them.
So that’s really where a lot of their problems stem from.
– Four people killed, another four hurt,
all of it happening in a house rented out on Airbnb.
– [Presenter] After a 2019 Halloween shooting,
the company announced safety measures
including a 24/7 neighborhood hotline to field complaints.
– [Brian] We’ve banned all parties globally on Airbnb.
We have a risky reservation queue
where we looking at any suspicious activity,
and we have a pretty hands-on team that’s using
some pretty advanced like machine learning technology
to essentially identify anything we think is suspicious.
If it is, we’ll continue to seek more information.
– [Presenter] The company says
the number of party complaints
have dropped 44% in the last two years.
Airbnb has also been trying to reduce that rate further
by doing things like blocking one or two nights stays
on new year’s Eve and Halloween
for guests without a history of positive reviews,
but incidents keep happening.
– [Rana] Earlier this year,
we had a shooting in Pittsburgh,
and again, you know, people were injured.
– [Presenter] City officials have also blamed Airbnb
for ruining the long term rental market
in some small communities
– What’s happened is a lot of people
are just snapping up properties and renting them.
And as a result,
locals don’t have enough properties to rent long term.
Airbnb doesn’t think that it’s actually
affected the long term rental market,
but you know if you ask city officials,
they have a different story.
– [Presenter] For example, in 2020,
the Mayor of Sedona, Arizona, a tourist hotspot,
said that the demand for Airbnb rentals
worsened the shortage of affordable housing
and demolished the long term rental market.
– If we are, you know, part of the problem,
we are gonna work with cities.
That’s why we’ve done numerous agreements with cities
to create restrictions.
We actually do want Airbnb
to get more and more into long term housing.
We want people to really feel invested in the community.
– [Rana] One of the things that Airbnb is doing now
is it’s trying to direct people
to areas where it has supply,
and that sort of also takes the load off of certain places
that everyone might go to
and that might get sort of overburdened
– [Presenter] In April,
that its employees can work from almost anywhere
without a pay cut.
– So if more businesses do follow Airbnb’s lead,
Airbnb stands to gain in its home rental business
because that would mean, more digital nomads,
more people traveling, and likely booking more Airbnbs.
– [Presenter] But some travelers are concerned
about rising nightly rates,
and some analysts believe that hotel chains and competitors
like Expedia Group,
stand to gain as business travel picks up this year.
So the question is, can Airbnb keep up the momentum?
– We’re an incredibly lean company.
We’ve already been preparing for a storm
that we thought was inevitable for years to come.
– [Presenter] Airbnb dramatically cut costs
during the pandemic,
and analysts have credited the company
for keeping those down even as travel rebounded.
While a potential economic downturn could decrease demand,
Airbnb says it could also bring more hosts to the platform.
– As the economy is gonna be slowing down,
I think more and more people
are gonna be interested in saving money,
and I think they’re also gonna be interested
in new ways to make money.
– [Presenter] And unlike hotels with fixed properties,
Airbnb can adapt quickly
by spotlighting properties
that serve travelers changing needs,
like it did during the switch to local travel.
– I think even as we’re entering a recession,
people have been kind of isolated for years
and they’re yearning to get out.
And the one thing
I think you’re gonna see them spend money on,
is they’re gonna continue to travel.
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