Airbnb Pulled Back from the Brink
wsj.com
wsj.com
However the last times I used Airbnb in major cities it did not go well. In SF I had to do this weird “pretend I’m not an Airbnb traveler” to get past the front desk, which I had to do even though I didn’t want to because I had made no other plans. They didn’t tell me that scheme until I got close. In NYC some guy rented his condo but clearly that wasn’t allowed, he said I had to get luggage into the room ASAP.
It’s obvious that a huge amount of Airbnb is just regulatory arbitrage. People don’t want their buildings turning into hotels, which is what Airbnb enables, and the political wind is blowing against them now. I don’t see them having much success in major cities anymore, unless they sell to small time hotel operators as a booking and management platform.
Even if Airbnb goes under, there seems to be more than enough demand from both owners and travellers for VRBO or someone else to pick up. It may be different in apartments and townhomes, but I don't see this trend disappearing anywhere else.
EDIT: Yes, I understand the math of (ensemble-averaged) expected values. My point is that such a calculation (for a high variance distribution) is useless/pointless/stupid/<adjective of choice> (basically a bad model) for anyone for whom their AirBnB investment is more than a small/marginal part of their portfolio. In particular, it’s a dangerously misleading number to anyone who has a large fraction of their personal wealth invested in AirBnB (including employees & founders, or potential retail investors who might invest directly in the company at IPO, rather than through index funds)
Refer the St. Petersburg paradox.
A $30b valuation is a very rational valuation if you assessed there was a 50% chance of a $0 valuation and a 50% chance of a $60b valuation.
Nobody rational with a significant amount of their wealth in a $30bn company hasn't already taken some chips off the table. Whether through cash bonuses, loans, tendered shares or secondary sales.
Is it even meaningful for a company to be valued at ~$30B if it cannot guarantee survival & stability? In what sense of reality is this a “unicorn”?
*
Fed is printing infinite money
So $30 billion is not $30 billion
AirBnB offers the potential of high upside
Do you park your 'free, Feb printed money' in the bank, and then at some point its value is less than it started
Or do you park it in AirBnB or another IPO, where it might go to zero, or it might go ten times
Everywhere IPOs are booming. Because money is being printed and there is nowhere for it to go for a good return
I tried to stay at an AirBnB in Houston in the summer with broken AC. I left before the first night, and AirBnB wouldn't refund a single dollar. Not the cleaning fee, not their fee, and not the two nights fees.
i should clarify that my observation is for populated cities that aren't specifically tourist destinations
I would imagine when business travel starts picking back up, they will also prefer whole homes (albeit smaller 1-2 bedrooms) to stay away from the uncontrollable hotel environment which I'd guestimate turns into folks who already had covid or folks who just DGAF.
As a startup founder who already booked airbnb's for team travel instead of hotels, I absolutely won't even consider a hotel until vaccines are readily accessible, if not longer.
the risk to staff are hard to mitigate and I don't even want to think about what happens when traveling employees catch covid on a business trip. gyah.
tldr - still long on airbnb but short term, they are doing better than many would expect because they have like 95% of covid travel stays.
I booked an AirBnB in a major city for 16 days because I thought there was a nonzero chance I'd have to quarantine for 14 of them. Had I tested positive (or not tested) it would have sucked to be in a hotel for the whole stretch, and staying with friends would have defeated the purpose of quarantine.
The price was about 20% below pre-Covid peak prices, so not really much of a discount. A quite nice hotel room would have cost about the same all-in.
I have to think there must be at least some of that factoring in: if you need to go somewhere and you might get quarantined there, you are going to plan ahead, and for lots of reasons quarantine in a 1BR apartment is way nicer than in a hotel.
When Airbnb put out guidelines - sanitize, don't allow gatherings, 24-hour cooldown between bookings, etc., we bumped up our rate and started communicating that up front before accepting bookings - and everything got much better. For the last few months, our weekends have been booked solid - mostly for weddings and anniversaries. A couple of remote workers who wanted a change of scenery. Was it the 100% occupancy we've had during summer months in year past? No. But it feels like a better balance.
I think the lockdown flushed out the people misusing the system. Were those people and those setups part of Airbnb's valuation? Probably. But it feels like it's brought things closer to the original purpose of Airbnb. I hope they pull through, but even in the event they don't, someone will swoop in to take over that market.
- Do you think some of those problematic/abusive bookings will start coming back? - Do you think Airbnb might actually start marketing hard again to increase demand on their platform?
I suspect that diehard Airbnb fans (most of my close circle prefer it over hotels) will come back quickly when they are able
Claiming anything before that is ... unwise. I think this article is part of getting more money for Airbnb (promo and marketing wise) so they can try to live through 2021.
These temporary boosts in one small sector are just blips that mask the fact that the leisure travel industry is in major, major trouble.
There was a temporary boom in younger people looking to get out of cities and find some space this summer, but as more and more people lose jobs, or have jobs that are threatened there is going to be a smaller and smaller group of people willing to pay much less for travel.
On top of this I'm still very bearish on leisure air travel. There have been numerous articles on HN about the two major drivers of airline revenue: credit card miles and corporate travel. Corporate travel will never return to pre-covid levels, and credit card miles are a big part of this as well.
Airlines are already starting to have major layoffs (when I mentioned this months ago the comments were that this wouldn't happen, but here we are). Airlines seriously expected government bailout, but it didn't happen and so furloughs, which will become layoffs did.
This will mean that air travel will return to a luxury good, which will make leisure travel a luxury experience. Likewise, gen-z workers are realizing that the economy is not always good times and full speed ahead. The idea of booking a last minute beach trip with a bunch of friends will quickly seem like a luxury of another age.
We still haven't seen the consequences of this pandemic and our fragile startup ecosystem start to unfold.
However, business travel and leisure travel shouldn't be conflated. I'm much more worried about the hotel industry - which caters to business travelers that will be significantly impaired for much longer post-COVID.
I.e. domestic Airbnb spending was actually up 22% in July YoY, whereas hotels are still getting destroyed.[1]
[1]: https://trends.edison.tech/research/airbnb-hotel-sales-sept-...
I don't have much more compelling arguments than you have, so time will tell!
Months? Years?
Domestic air travel (inside national borders) will have various starts and stops due to corona. The worst-case is if the FAA rules something like jets must be 100% disinfected between flights, which could be $250,000 or more per leg. (That is the case for some drug-resistant TB patient flights.)
But I'd estimate that international airline travel will take a year to start again after a vaccine is globally available, so in the area of 2 more years. I say globally because travellers were found to be skirting travel bans from China to the USA via legs to Africa and Canada.
The international airline industry really doesn't have any corona answers at this time.
A gradual increase in air travel is unavoidable since unpickling airliners will take a considerable amount of time - each jet will take about a calendar week to prepare for inspection, consisting of one man-month of work. If problems are found, then longer.
(Airliners aren't designed to sit for an extended period of time, so there's all kinds of moisture, landing gear/tires and corrosion issues that are possible. Big planes create big problems.)
Besides planes, another issue that will need to be addressed is that pilots need a variety of recurring training and medical certificates, so that would cause a spike in demand that can't be met after a sudden re-opening.
Currently, the FAA has various modified rules and extensions, but those are temporary and the FAA is loathe to allow gaps in airmen standards.
https://www.ainonline.com/aviation-news/business-aviation/20...
Source: commercially-rated airplane pilot.
On the topic of luxury, I'm not sure people appreciate what air travel becoming a luxury really entails. My wife mentioned a few months ago that air travel from North America to China was going for something like $80k per ticket at some point (and this is for economy class!). If we see Covid case numbers increasing again due to the flu season coming up, and if we see subsequent governmental pressures to limit air travel for even more extending periods of time, then the laws of supply and demand might make air travel prohibitively expensive even for relatively well-off people, like FAANG folks.
Perhaps a silver lining is that in such a scenario, maybe places like Bali might get a chance to take a break from tourist ecological destruction.
We believe there will be pent-up demand for vacations in 2021 after travel restrictions relax (Maui has had mandatory 14 quarantines in place which end this week). People will have more unused vacation time than normal and quarantine fatigue/cabin fever will also increase demand.
I do agree that air travel will be the biggest barrier for us. The non-stops from where we live are gone for now, so the shortest travel time has gone from 5h 30m to an 11h 30m red-eye.
It's definitely not the case among my peers. If anything, the people who traveled a lot have just been saving a lot of money during covid while they WFH and are unable to spend it as frivolously.
Sure my tech friends have done great, but not everybody works in an industry that's conducive to remote work.
And the locals were really vigilant, they were reporting any quarantine breakers on Facebook and to local authorities. In some cases, people who refused to cooperate got flown back off the islands.
And from what I read, even though the local economies are decimated by the lack of tourist dollars, a lot of locals are really happy to not be overrun with tourists at their favorite beaches. There is also talk of less tourist numbers, to be made up for with higher value tourists--less budget options. I wonder if things will ever go back to what they were before, because a lot of people didn't like it before.
Yes, the quarantine orders were very strict. You could not even go pick up a rental car. You needed a private driver hired. You could not go get groceries. We know of people staying at a hotel that opened the door when a service person knocked to change something. The guest told them they were in quarantine and shut the door. The front desk called within a couple minutes to ask why the door had opened.
The locals we've been in contact with have been making the most of it. They have very much enjoyed having the island to themselves. It is (hopefully) a once in a life time opportunity for them.
One example - The last several years, I probably charged in excess of $120k / year on one particular airline card. This year, probably $1000 so far, mainly recurring bills I haven't bothered to switch to another card.
Since cards had become a significant revenue driver for airlines, this is going to have some medium term negative financial consequences as well.
(I'm probably not even in the top 20% of business travelers, either)
AirBnb is looking for bagholders
anyone with half a brain knows now is the absolute worst time to invest in something like AirBnb
On the other hand, if the IPO flops, and prices go down a lot, then it might become a worthwhile risk
Focus on the core business, keep expenses low and listen to customers
is true for ALL businesses, not just hot new Silicon Valley "startups".