The travel industry is one of the worst-hit because of the COVID-19 pandemic. The lockdowns and shelter-in-place across the world have resulted in record low hotel and travel bookings across the world. Airbnb has not been spared. They had planned to go public in 2020 and are now trying to save their business. They took a $1B expensive loan at a 40% lower valuation, wiping out billions of dollars in gains for Airbnb’s early employees and investors. They also canceled the $800M marketing budget. The hosts and travelers wanted to get refunds for all the bookings committed on the platform.
Airbnb disrupted the hotel industry and increased the availability of bookable rooms worldwide. It is also a young company and has used AI and data analytics to improve the experience for hosts and travelers. Will it be able to innovate its business model and bounce back? Here are some of its responses and lessons from them.
Airbnb launched “Online Experiences” that are led by inspiring hosts from over 30 countries—including Italy, Japan, Morocco, and Mexico—unlocking access to cultures and traditions from around the world. Hosts are already offering Online Experiences—like magic lessons, cooking classes, guided meditations, and more—through Zoom. Airbnb already has nearly 100 hosts offering experiences online and thousands more who have offered to host experiences. Some of the most popular offerings are already sold out.
This is a great example of innovating new solutions while maintaining the core “building connections across the world” philosophy. These online experiences could be an alternate source of revenue for Airbnb and hosts and a nice hedge against major disruptions such as pandemics. However, the market for online experiences has many competitors by industry such as Masterclass. Airbnb has the advantage of many users and hosts already on its platform.
The success of Airbnb as a platform relies on both sides (hosts and travelers) being satisfied. In the light of the pandemic, Airbnb made two tough decisions: first, refunding guests whose trips were canceled at the personal expense of Airbnb’s hosts. This did not go well with the hosts who lost a lot of expected revenues. Second, Airbnb started a $250M fund to reimburse the hosts partially, with the Superhosts (highest rated hosts on the platform) getting a priority.
While this was a big sacrifice for Airbnb, this might win travelers’ and hosts’ hearts. Airbnb’s long-term success depends on the community, and this will go a long way to showcase how much they care.
Extended Stays and COVID Frontline Worker Stays
Airbnb’s home page is suddenly very focused on three things — online experiences, monthly stays, and something called “frontline,” which is an area for hosts to offer housing to healthcare staff and first responders. This is a great move by Airbnb and will help win a lot of loyalty points from the community across the world.
One promising travel trend on Airbnb in these times is that searches for longer stays nearby have more than doubled worldwide. People are turning to Airbnb for these types of reservations, which can provide the flexibility they need with the comforts of home. In the U.S., for example, bookings for four to six weeks increased by at least 30%. Airbnb was quick to act on this and has been encouraging hosts to enable the long-term stay option along with flexible cancellation policy to encourage peace-of-mind for bookers. This can be a win-win for both the hosts and Airbnb.
In addition to this, Airbnb launched a program to house 100k COVID-19 frontline responders. Leveraging the power of its community, it encouraged hosts to open homes to collectively help control the virus spread. These homes were either available free or at a reduced cost for the frontline responders. This is better than keeping the places empty as it earns some revenue and helps the pandemic. It also keeps the community engaged – a critical factor for Airbnb’s rebound after the pandemic.
What enabled this transformation?
This transformation has not been easy for Airbnb. When hundreds of employees are working remotely and simultaneously, and complex changes must roll out in 60 different languages, it is hard to do that seamlessly. Airbnb’s incredibly tech-savvy team mapped the process and scope in under three weeks. They made quick and big changes on the website and reached out to the stakeholders. Airbnb removed abstract layers of communication. Instead of using a Google Doc, they used collaborative interface design tools such as Figma to look at all the designs and quickly prototype and screen-share. Their real-time analysis systems monitored the behavior of guests on the platform to new changes. Airbnb used this feedback to quickly iterate and improve the offerings.
Airbnb could also invest time in building a sophisticated cancellation, forecasting, booking system now to cater to the surge in demand when things reopen. For instance, the regular business travelers, who have been “tethered” to their domiciles and working from home, will want to travel even more but they will look to small cities and communities as their preferred leisure options. Airbnb can be prepared for these changes to capitalize on future opportunities.
Lessons for Others
Airbnb has shown that rapid transformation to the business model can help raise hopes for a stronger comeback and survival. Despite being in one of the worst-hit industries, Airbnb leveraged its incredibly agile and tech-savvy team to redesign the products and keep the community engaged. It also taught us that speed of implementing changes using remote tools matters greatly in adverse circumstances. Hopefully, the traditional hospitality industry will take note of this and reinvent itself.
Airbnb has gained goodwill from travelers, hosts, and the world for their efforts. However, this has costed them dearly, and they may face a liquidity crisis if the pandemic lasts longer. The rapid response from an agile team might just enable them to bounce back even stronger and eat up competitors’ market share when the world reopens!