The pandemic brought an unexpected and severe crisis to Airbnb’s business. After exponential growth numbers seen in 2019, by April of 2020, the gross bookings for nights and experiences plunged by 72% on a year-over-year basis. According to Forbes, there were more cancellations than bookings in the period of March to April. Management decided to execute some changes in the strategy -which included layoffs- and by June, an 1% increase in gross bookings was observed.
After a careful analysis of the situation, Airbnb management decided to cut 25% of the workforce. There was a steep reduction in discretionary and capital expenditures, as well as in executive salaries.
In a letter sent to employees and published on the company blog, Airbnb CEO and founder, Brian Chesky expressed what he had in mind for an action plan:
- Map all reductions to our future business strategy and the capabilities we will need.
- Do as much as we can for those who are impacted.
- Be unwavering in our commitment to diversity.
- Optimize for 1:1 communication for those impacted.
- Wait to communicate any decisions until all details are landed — transparency of only partial information can make matters worse.
The decisions seem to have paid off. In the first quarter of 2021, revenue was up 5% from two years earlier. The company attributes the sequential improvement to continued strength in North America, improvement in Europe and higher average daily rates.The company posted revenue of $1.3 billion for the second quarter, significantly exceeding Q2 2020 revenue of $335 million and higher than the $1.21 compiled in Q2 2019.
On an adjusted EBITDA basis, Airbnb was profitable: Adjusted EBITDA in Q2 2021 was $217 million compared to a loss of $397 million in Q2 2020 and a loss of $43 million in Q2 2019. Net loss for the quarter was $68 million.
Our business dramatically improved with the rollout of vaccines and the easing of some travel restrictions. While conditions aren’t yet normal, they are improving. People’s desire to travel, combined with our tightly managed expenses, drove a return to a positive top-line growth with materially improved adjusted EBITDA
Brian Chesky, Airbnb CEO and founder
Nights and Experiences booked for the quarter were 83.1 million, nearly reaching the total in Q2 2019. Gross booking value — defined as nights booked prior to cancellations and alterations — was more than $13 billion, up 37% from Q2 2019.
Airbnb reported that its number of active listings on the platform grew in Q2, with the strongest supply increases in areas with the greatest guest demand. Active listings in non-urban destinations in Europe and North America increased by 8% from Q1 2021 to Q2 2021.
An example of this quandary for Airbnb was about the spike in cancellations.
One of the serious challenges that the company faced was the high number of cancellations, many of which were non-refundable. Airbnb used more than $1 billion to provide refunds. There was also a commitment of up to $250 million for those hosts that were impacted by the cancellations.
A crisis brings you clarity about what is truly important. You become thankful for not only what you have in your life, but for who you have in your life. We are thankful for everyone who stuck by us during our darkest hours
Brian Chesky, Airbnb CEO and founder
The company attributes the growth to its platform refresh in May that simplified the sign-up process for hosts, as well as a marketing campaign touting the benefits of hosting.
