Airbnb to Cut 25% of Workforce as Coronavirus Stalls Global Travel

Airbnb said it is slashing 1,900 jobs, or a quarter of its workforce, and cutting investments in noncore operations, as the home-sharing giant predicted the coronavirus pandemic would change its business even after more people start traveling again.

Co-founder and Chief Executive Brian Chesky told employees about the cuts in a memo Tuesday, adding that the company’s revenue forecast for this year is “less than half” of last year’s level.

“We are collectively living through the most harrowing crisis of our lifetime, and as it began to unfold, global travel came to a standstill,” Mr. Chesky told employees in a memo Tuesday. “Airbnb’s business has been hit hard.”

This was the year Airbnb, one of the most successful private tech companies of the past decade, planned to go public, minting billions for Mr. Chesky and the company’s early backers. Instead, the pandemic has ground global travel to a halt and kept would-be lodgers at home, forcing Airbnb to retrench.

Amid expectations that it would lose $1 billion through the first half of the year and its valuation would crater, it has raised rescue capital to backstop its balance sheet as it continues to hope that the sector will recover later this year.

Mr. Chesky also said the company is reducing investment in newer areas, pausing its Transportation and Airbnb Studios initiatives while scaling back investments to bring traditional hotels and more luxury properties onto its website.

“Travel in this new world will look different, and we need to evolve Airbnb accordingly,” Mr. Chesky said. “People will want options that are closer to home, safer, and more affordable.”

One high-profile initiative that Mr. Chesky didn’t mention in his list of cuts was Airbnb Experiences, which allows guests to book outings. While the unit was supposed to be profitable by 2019, it has racked up losses totaling nearly $1 billion, according to people familiar with the project, which is favored by Mr. Chesky.

A company spokesman said the losses are a “small fraction” of nearly $1 billion.

Some board members have pushed Mr. Chesky to cut back investments in that project, The Wall Street Journal previously reported. The spokesman said Airbnb’s board has encouraged the company to invest in Experiences.

Airbnb, founded in 2008 during the financial crisis, spent as it grew. Its total costs rose to $5.3 billion last year, from $2.6 billion in 2017, outstripping an 85% increase in revenue over the same period, to $4.8 billion from $2.6 billion.

Last month Airbnb raised $2 billion to shore up its finances. Half of that amount came via a five-year loan from institutional investors that pays an interest rate of 7.5% plus the benchmark London interbank offered rate, or Libor.

The other half came from private-equity firms Silver Lake and Sixth Street Partners. That investment came with a steep price tag: an interest rate of 10% plus Libor, according to people familiar with the deal. Those investors also get warrants that can be converted into shares at a valuation for the company of $18 billion, the people said, well below the $31 billion valuation when the company raised equity capital in 2017.

In an interview in mid-April, Mr. Chesky told the Journal that he didn’t have plans to lay off salaried employees but said he needed to closely monitor cash reserves, business performance and the economic outlook daily. Nothing was off the table, he said.

“You have to make a lot of difficult decisions, and the problem with making difficult decisions in crisis is things happen so fast and they’re so unprecedented,” he said. “You often don’t have any data- you have to make really big, sometimes company-altering, decisions.”

The last day of work for laid off employees will be May 11, Mr. Chesky said in his memo. He said affected employees will be informed about their departure through a one-on-one meeting with a senior person in their department. Departing employees will receive at least 14 weeks of base pay, a year of health insurance through Cobra, and as part of a broader effort to help them find new jobs, Airbnb will let them keep their company-issued laptops.

The hit to Airbnb extends beyond the company to a vast network of hosts, and the cleaning services, interior designers and property maintenance workers that help make the Airbnb economy function.

Some hosts borrowed large sums to build small property empires that are largely dependent on the business Airbnb brings them.

Many hosts were hit hard when Airbnb decided to grant guests full refunds for stays between March 14 and 31. In some cases, that overrode the policies the hosts had in effect that would have allowed them to keep some money for canceled reservations. Later, Airbnb said it would pay hosts 25% of what they would have received for canceled bookings.

Airbnb reduced executives’ pay by 50% for six months, the company previously said, while Mr. Chesky and his co-founders are foregoing salaries. The co-founders’ shares are still worth billions of dollars on paper. And each has cashed out millions of dollars worth of stock.

Source: WSJ