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Airbnb Racks Up Hundreds of Millions in Losses Due to Coronavirus

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Re: Airbnb Racks Up Hundreds of Millions in Losses Due to Coronavirus

#51

Post by subpixel »

mschuster91 wrote: post #29
chadmeister wrote: post #4

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…

> 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. Oh I (living in Munich) hope for AirBnB going belly up. This will free a LOT of apartments back to normal rental markets. The rental markets won't be "hit" at all, the landlords will only lose the difference between "30 days of rent at AirBnB prices" and "30 days of rent at market…

NYC, same story.

But, as others in the thread have suggested, what will rush in when these leveraged AirBnB hosts lose properties will not be a bunch of normals with jobs and families, it will be a bunch of new investors who can buy cheap with cash.

Re: Airbnb Racks Up Hundreds of Millions in Losses Due to Coronavirus

#52

Post by 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-...

Re: Airbnb Racks Up Hundreds of Millions in Losses Due to Coronavirus

#53

Post by shartshooter »

foepys wrote: post #5

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 tha…

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.

Re: Airbnb Racks Up Hundreds of Millions in Losses Due to Coronavirus

#54

Post by CydeWeys »

colinmhayes wrote: post #46
ukabwlsbeux wrote: post #31

Earlier quoted context omitted.

I don’t think that’s frightening at all. A bunch of rent seekers lose everything, and everyone else wins. This practice should be, and in some places is, illegal.

Airbnb isn't rent seeking. They're providing a valuable service to tourists. I find it very hard to see how short term rentals should be illegal.

Hotels are a regulated industry for a reason and Airbnb is completely flouting the rules. No one wants to be a next-door neighbor to an Airbnb'ed apartment, and hotels are a more efficient use of real estate for housing a given number of tourists.

So yeah, they're helping out tourists, but they're harming all the people in the city who live there and need a place to live. If you're primarily a tourist then Airbnb is good for you; if you live in a high cost city then it's most definitely not. And more of us are in the latter situation, me included.

Re: Airbnb Racks Up Hundreds of Millions in Losses Due to Coronavirus

#55

Post by MegaButts »

drwl wrote: post #43
saltedonion wrote: post #21

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.

> Airbnb was never profitable (I think) Do you have any sources for this?

AirBnB first announced profitability in 2018, followed by 2019.

https://www.bloomberg.com/news/articles/2019-01-15/airbnb-sa...

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...

Re: Airbnb Racks Up Hundreds of Millions in Losses Due to Coronavirus

#56

Post by maximente »

vincentmarle wrote: post #18
gadnuk wrote: post #3

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.

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

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.

Re: Airbnb Racks Up Hundreds of Millions in Losses Due to Coronavirus

#57

Post by mschuster91 »

subpixel wrote: post #51
mschuster91 wrote: post #29

Earlier quoted context omitted.

> 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. Oh I (living in Munich) hope for AirBnB going belly up. This will free a LOT of apartments back to normal rental markets. The rental markets won't be "hit" at all, the landlords will only lose the difference between "30 days of rent at AirBnB prices" and "30 days of rent at market…

NYC, same story. But, as others in the thread have suggested, what will rush in when these leveraged AirBnB hosts lose properties will not be a bunch of normals with jobs and families, it will be a bunch of new investors who can buy cheap with cash.

But these investors have to rent out at market prices, thus reducing load on rental markets

Re: Airbnb Racks Up Hundreds of Millions in Losses Due to Coronavirus

#58

Post by CydeWeys »

tclancy wrote: post #45
CydeWeys wrote: post #25

Earlier quoted context omitted.

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).

I think the OP's point is they don't have to pay for the real estate regardless of occupancy unlike traditional hotels. This is more lost opportunity cost than revenue being taken away.

What? This doesn't make any sense. Of course they're losing massive amounts of revenue. Their business model is to make a cut off each booking, and bookings are down massively.

At the same time, they have large fixed costs because they have a lot of employees and leased office space. So money coming in goes down massively while money going out doesn't.

EDIT: It sounds like others are talking about pre-coronavirus times whereas I'm talking about now (like the linked article is).

Re: Airbnb Racks Up Hundreds of Millions in Losses Due to Coronavirus

#59

Post by CydeWeys »

user5994461 wrote: post #38
CydeWeys wrote: post #25

Earlier quoted context omitted.

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).

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.

Why shouldn't they be tanking? Everything in the travel sector, including hotels, is tanking right now. They're not highly profitable; indeed they've never turned a profit.

> whereas the fixed costs to run a website are ridiculously low

This is clearly not true. They are a tech company and have a large number of well-compensated engineers. So they do have a large amount of fixed costs.

It sounds like you're arguing from hypotheticals, none of which actually apply to Airbnb as it exists in the real world.

Re: Airbnb Racks Up Hundreds of Millions in Losses Due to Coronavirus

#60

Post by malandrew »

drwl wrote: post #43
saltedonion wrote: post #21

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.

> Airbnb was never profitable (I think) Do you have any sources for this?

What has happened to HN that asking for sources/evidence is now something that gets you downvoted? Asking for supporting evidence should never get downvoted.
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