AirBnb's pandemic survival strategy | dstill.ai shared chat

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What did AirBnb do to survive the pandemic?

To survive the pandemic, Airbnb took several actions:

Balancing stakeholder interests: Airbnb faced a tension between favoring either guests or hosts. To mitigate this, they made the decision to override host cancellation policies and refund a billion dollars of reservations, even though it upset the hosts .
Raising capital: To guarantee both the guests and hosts, Airbnb raised $2 billion of straight debt, despite the high interest rates at the time .
Cutting costs and restructuring: Airbnb reduced executive pay, cut key projects, and laid off 25% of its employees. They also reduced their product line and went back to a functional organization .
Adapting to the changing demand: Airbnb modified its business strategy to focus on non-urban areas, longer stays, and larger homes. They quickly pivoted to provide housing in vacation rental communities and rural areas, which led to a rebound in bookings .
Reacting effectively to the crisis: The Airbnb team made quick decisions, acted decisively, and demonstrated empathy towards the customers. They recognized the importance of rebuilding trust and took actions to make things right with users .

These actions allowed Airbnb to navigate the pandemic, restore confidence, and ultimately become a stronger and more resilient company .

1

Airbnb ft. Brian Chesky - Battling a copycat clone and rebuilding user trust to revolutionize travel

Crucible Moments

(someone): Like, what happens if somebody's home gets trashed?

(someone): There was a wake-up call. Of course something like this could happen at any given point in time. It just had never happened. And there was an element of shock. How could this have happened? Well, it's just going to happen. It's a situation where you can't avoid something bad happening. What you can decide to do is how you're going to respond.

(someone): We initially put our response, it was a very inadequate response. People felt like we just weren't owning up to the fact that there was a fundamental weakness in the model. And so there was this huge pile on, it was a crisis in confidence. Oh, and by the way, why did, why was this like such a big viral moment? Well, not weeks before we were announced to be a billion dollar company. And so suddenly people expected us to be like a large multinational corporation, but we were still basically operating out of a three bedroom apartment or we had been not long before that. So we basically worked around the clock and we knew this was a do or die moment.

Roelof Botha: Airbnb began with a crucible moment. How do you unlock user trust? Now the company had arrived at another crossroads. When you lose user trust, how do you rebuild it?

(someone): I did two things that has guided me ever since in every crisis, in every crucible moment.

2

Airbnb ft. Brian Chesky - Battling a copycat clone and rebuilding user trust to revolutionize travel

Crucible Moments

(someone): There's about three or $4 billion of customer deposits where both sides are claiming that they were owed that money.

(someone): And so a real tension of who do you favor, guest versus host? And based on the principle that Brian was very clear with from the onset of the pandemic, we really wanted to balance these different stakeholders to try to do the best we could by all of them.

(someone): We made a decision to override our host cancellation policies and refund a billion dollars of reservations. But this really upset our host. You know, they were really hurting financially.

(someone): The biggest crucible moment that, in my opinion, that we had to solve was that. Because in a marketplace, if you choose one side or the other, even if you come out of it, the other side is going to be annoyed at you for not taking their side. The company didn't need more capital for its own internal operations. They needed to raise capital so they can guarantee both sides. And that was the reason why Airbnb decided to raise money.

(someone): We moved very quickly. So over the course of, I would say, two weeks, we explored a variety of different options in the form of, you know, straight equity, a convertible or debt.

(someone): We ended up raising $2 billion of straight debt. And the interest rate was really high because nobody really understood how to price risk back then. So the interest rate was like 10%.

(someone): In retrospect, the cost of that capital seems extremely high, but if we walk back to that moment when we're facing insolvency and we don't know what the world will look like going forward, the cost of that capital was effectually, you know, the cost of, of solvency.

3

Airbnb ft. Brian Chesky - Battling a copycat clone and rebuilding user trust to revolutionize travel

Crucible Moments

(someone): I think confidence was restored. The product was better for it. We tried to do our best to make things right with EJ. I always thought a crisis is a terrible opportunity to waste. And ever since then, whenever I had a crisis, I've asked myself, number one, what's the principal decision? What's the right thing to do? Number two, in a crisis, more people are paying attention than ever. So it's an opportunity for you to demonstrate what you stand for, your values. A crisis is a great forcing function to be bold, to do things you wouldn't have otherwise done in normal times.

(someone): It was a defining moment because the company woke up and grew up in a very fast way to knowing that how they respond in a crisis, in a crucible moment, is what defines them. And one of the things that Airbnb does really well is always to find the solution to these problems by being empathetic to the customer, whether it's the guest or their host, and to really think from their point of view. How would we best protect the guest? How do we best protect the host in situations that you don't anticipate?

Roelof Botha: As Airbnb rose in popularity, there came the question, what's next? How should Airbnb expand? Where do you go from here?

(someone): A lot of people like to reason by analogy. And it's very easy to look at Airbnb and the analogy would be an online travel booking site, an OTA. And then you should just accept whatever inventory that can make you money.

4

Airbnb ft. Brian Chesky - Battling a copycat clone and rebuilding user trust to revolutionize travel

Crucible Moments

(someone): We'd create all the different guidelines for them. Then I'd go to the market. We'd do a big launch. We did a bunch of press interviews. We'd do a giant community meetup. We'd work with the team, get them all rallied and mobilized. And we'd go, and we'd never look back. And it was essentially an all-out war for a couple of years, probably. And predictably, they were able to stick with us for a little bit, but exactly what I thought was going to happen, happened.

Roelof Botha: WMDU hung on for seven years, but in the fall of 2018, they finally capitulated. As Brian predicted, the missionaries prevailed.

(someone): They never had an intention, in hindsight, to build a long-term company. They built this company to sell it. It ultimately became a marathon and they didn't want to keep racing.

(someone): One sign of success to me from Airbnb through this crucible moment with Windu is, in some sense, this was known to be the harder path. And in retrospect, they made it look easy. I don't think it was actually easy at any given point in time when they were going through the motions of trying to sign up as many listings as possible in Europe. But slowly but surely, a company that was based in San Francisco, most of its business in the United States, ended up in a situation where the majority of the business was actually coming from Europe and bookings in Europe.

5

Airbnb ft. Brian Chesky - Battling a copycat clone and rebuilding user trust to revolutionize travel

Crucible Moments

(someone): Next, I basically started immediately cutting costs. We reduced the pay of all the executives. We punted a lot of key projects. I studied Apple when Steve came back to Apple. He reduced the product line. He went back to a functional organization. That's what we did. Reduced the product line. We went back to a functional organization. We had to do a layoff. We were one of the first big layoffs in Silicon Valley. We cut 25% employees. It was the hardest thing I ever did. We had over a billion dollars worth of reservation requests that came in for guests that wanted to cancel their trips, but they couldn't get a refund because of their cancellation policy. And the hosts were really hoping to get paid.

Roelof Botha: In a two-sided marketplace with guests on one side and hosts on the other, Airbnb faced existential financial risk.

(someone): The hosts are thinking, I'm not going to get any more revenue for a period of time because all of travel is shut down. And the guest is like, well, I don't know what's going to happen. Maybe I'm going to lose my job because of the pandemic and I have to take care of family members. I need that money back. There's about three or $4 billion of customer deposits where both sides are claiming that they were owed that money.

(someone): And so a real tension of who do you favor, guest versus host?

6

Airbnb ft. Brian Chesky - Battling a copycat clone and rebuilding user trust to revolutionize travel

Crucible Moments

(someone): Like, what happens if somebody's home gets trashed?

(someone): There was a wake-up call. Of course something like this could happen at any given point in time. It just had never happened. And there was an element of shock. How could this have happened? Well, it's just going to happen. It's a situation where you can't avoid something bad happening. What you can decide to do is how you're going to respond.

(someone): We initially put our response, it was a very inadequate response. People felt like we just weren't owning up to the fact that there was a fundamental weakness in the model. And so there was this huge pile on, it was a crisis in confidence. Oh, and by the way, why did, why was this like such a big viral moment? Well, not weeks before we were announced to be a billion dollar company. And so suddenly people expected us to be like a large multinational corporation, but we were still basically operating out of a three bedroom apartment or we had been not long before that. So we basically worked around the clock and we knew this was a do or die moment.

Roelof Botha: Airbnb began with a crucible moment. How do you unlock user trust? Now the company had arrived at another crossroads. When you lose user trust, how do you rebuild it?

(someone): I did two things that has guided me ever since in every crisis, in every crucible moment.

7

Airbnb ft. Brian Chesky - Battling a copycat clone and rebuilding user trust to revolutionize travel

Crucible Moments

(someone): And so over the last couple of years, we've done our very best to grow into that valuation. And I think that hopefully the results now speak for itself.

(someone): When I think about the role of the pandemic crisis on Airbnb's business, we are a fundamentally different and better business today because of that crisis. And the lessons there were act quickly, be decisive, consider your stakeholders, and play the long game. You know, where we are today, we are leaner, we are more focused, and we haven't forgotten the pain that was the forcing function for all the changes that ultimately made us stronger.

(someone): Since we went public, we've made more than 340 upgrades and innovations to the product. It went from a breakeven business to generating. We're a unicorn by cashflow, three and a half times over. And I'm pretty proud of that. And we are just relentlessly obsessed with creating the most magical experiences, bringing people together. I think that People need travel in connection with other people more than ever before. Because the office is now Zoom, the mall is now Amazon, the theater is now Netflix. And I think travel is increasingly becoming the way that people see their friends. They reunite with others. They meet people. And that's what I want to do. I don't just want to be in the business of travel. I want to be in the business of getting back to that idea of Airbnb, that original idea.

8

Airbnb ft. Brian Chesky - Battling a copycat clone and rebuilding user trust to revolutionize travel

Crucible Moments

(someone): It was literally like we're on a mission and we weren't going to lose.

(someone): The efforts we made were fast and furious. And Ryan was very, very focused on how do we sign up a lot of supply? How do we get hosts to become productive as quickly as possible? How do we make products and services to get them to be great hosts? There was a lot of meetups. He was traveling a lot. He was going all over Europe to host many of the meetups. He also had to talk to a variety of government officials because some various government officials thought that Airbnb was a crazy idea. But that wasn't new to him. People thought Airbnb was a crazy idea from the beginning.

(someone): You know, I think we did a really good job localizing Airbnb. That was really critical. It's probably the biggest ROI thing we ever did. And then we created a playbook, a country by country playbook. And I think we did it actually before Uber and others. And then we became like the model that other companies then built off of, but. We'd get a country manager. I would interview the manager. I would then go to the team. We'd create a whole Airbnb inbox kit. They would build out a local operation. We'd create all the different guidelines for them. Then I'd go to the market.

9

Airbnb ft. Brian Chesky - Battling a copycat clone and rebuilding user trust to revolutionize travel

Crucible Moments

(someone): There's about three or $4 billion of customer deposits where both sides are claiming that they were owed that money.

(someone): And so a real tension of who do you favor, guest versus host? And based on the principle that Brian was very clear with from the onset of the pandemic, we really wanted to balance these different stakeholders to try to do the best we could by all of them.

(someone): We made a decision to override our host cancellation policies and refund a billion dollars of reservations. But this really upset our host. You know, they were really hurting financially.

(someone): The biggest crucible moment that, in my opinion, that we had to solve was that. Because in a marketplace, if you choose one side or the other, even if you come out of it, the other side is going to be annoyed at you for not taking their side. The company didn't need more capital for its own internal operations. They needed to raise capital so they can guarantee both sides. And that was the reason why Airbnb decided to raise money.

(someone): We moved very quickly. So over the course of, I would say, two weeks, we explored a variety of different options in the form of, you know, straight equity, a convertible or debt.

(someone): We ended up raising $2 billion of straight debt. And the interest rate was really high because nobody really understood how to price risk back then. So the interest rate was like 10%.

(someone): In retrospect, the cost of that capital seems extremely high, but if we walk back to that moment when we're facing insolvency and we don't know what the world will look like going forward, the cost of that capital was effectually, you know, the cost of, of solvency.

10

Airbnb ft. Brian Chesky - Battling a copycat clone and rebuilding user trust to revolutionize travel

Crucible Moments

(someone): And I ended up going on a hike in Bolinas, California in late 2019 with Joe and Nate, and I told them about this. And they said, what do you mean? I said, well, the company's successful, but it's not exactly the company I intended for us to build. And they said, what do you mean? I said, well, growth is slowing. Cost is rising. It's like super hard to get work done. There was a lot of bureaucracy. We were doing a billion dollars of marketing, like pretty soulless, like performance marketing. We were increasingly focusing more and more energy on like hotels and property managers and things that weren't central to the original idea of Airbnb.

Roelof Botha: With the company's massive growth, the team strayed from its focus on the original mission of building connection between guests and local hosts.

(someone): I knew some big changes needed to happen, but I didn't quite know how to change them because we were about to go public. And I'm like, oh my God, what do we do? So I come back New Year's Day, after New Year's 2020, and I meet with the executive team and I say, I know we're about to go public, but I think we need to make some changes, but I don't quite know how. And I know this seems like a really bad time. And we didn't quite know exactly what to do. And all of a sudden, the pandemic hits. And within eight weeks, we lose 80% of our business.

11

Airbnb ft. Brian Chesky - Battling a copycat clone and rebuilding user trust to revolutionize travel

Crucible Moments

(someone): I think confidence was restored. The product was better for it. We tried to do our best to make things right with EJ. I always thought a crisis is a terrible opportunity to waste. And ever since then, whenever I had a crisis, I've asked myself, number one, what's the principal decision? What's the right thing to do? Number two, in a crisis, more people are paying attention than ever. So it's an opportunity for you to demonstrate what you stand for, your values. A crisis is a great forcing function to be bold, to do things you wouldn't have otherwise done in normal times.

(someone): It was a defining moment because the company woke up and grew up in a very fast way to knowing that how they respond in a crisis, in a crucible moment, is what defines them. And one of the things that Airbnb does really well is always to find the solution to these problems by being empathetic to the customer, whether it's the guest or their host, and to really think from their point of view. How would we best protect the guest? How do we best protect the host in situations that you don't anticipate?

Roelof Botha: As Airbnb rose in popularity, there came the question, what's next? How should Airbnb expand? Where do you go from here?

(someone): A lot of people like to reason by analogy. And it's very easy to look at Airbnb and the analogy would be an online travel booking site, an OTA. And then you should just accept whatever inventory that can make you money.

12

Airbnb ft. Brian Chesky - Battling a copycat clone and rebuilding user trust to revolutionize travel

Crucible Moments

(someone): I'm not sure that was a compliment or a warning to me, but it was unusual. And there hadn't been any Zoom IPOs. So we didn't even know if that was a good idea. So in the midst of a crisis, a travel company in the middle of pandemic was going to go public on Zoom, having had to rewrite the S1 in basically like eight to 10 weeks. from scratch and all the risk factors and half them had changed and the whole premise of the company had kind of changed a little bit. And so we prepare to go public. And in the beginning of the roadshow, the initial indications are fairly tepid because there's this narrative that Airbnb was going out of business and the narrative was outdated. And we started showing some of the data, the rebound, the recovery. And I basically told the story that Airbnb was born in an inflection point in the world. You know, the Great Recession, mobile, social were all kind of converging. And I said, this is another inflection point, the post-pandemic world.

Roelof Botha: Airbnb went public via Zoom on December 10th, 2020.

(someone): If you think about kind of our expectations for that day, they were pretty low. We had priced the IPO on the initial public filing at $44 to $50, which was already almost double what we had priced warrants at at the time of the financings back in March. We thought we were doing quite well in terms of how this might perform. And yet, as we sat on that kind of morning opening trade, then we saw the first trade cross the wire.

13

Airbnb ft. Brian Chesky - Battling a copycat clone and rebuilding user trust to revolutionize travel

Crucible Moments

(someone): This crucible moment is one of the best stories that I've been part of in my career because I had a front row seat to how you deal with a crisis. And the reason I say that is because this is not just an ordinary crisis. This is a once in a generation, once in a century pandemic that is no doubt going to affect a travel industry way more than almost any other business that you can think of. People stop traveling. So what do you do then?

(someone): I remember a quote by Andy Grove. He said, bad companies are destroyed by a crisis, good companies survive a crisis, but great companies are defined by a crisis. And I said, we will be defined by this crisis because we're going to become a great company. This is a crisis that we will not waste. We put the IPO on hold and we have to make a ton of difficult decisions.

(someone): It was an all hands on deck moment to figure out what is most important at this moment and what do we need to move on most quickly. In a matter of weeks, we had put together a set of various forecasting scenarios to understand not necessarily what was the best bet in terms of what would happen to the business, but more so to understand the variables in the range of scenarios that could occur. so that we could plan for the worst. Brian has described the period of everyone being in a foxhole together, and I think that's actually a great analogy.

(someone): The first thing we did is we paused all marketing 100% overnight. Next, I basically started immediately cutting costs. We reduced the pay of all the executives.

14

Airbnb ft. Brian Chesky - Battling a copycat clone and rebuilding user trust to revolutionize travel

Crucible Moments

(someone): And so over the last couple of years, we've done our very best to grow into that valuation. And I think that hopefully the results now speak for itself.

(someone): When I think about the role of the pandemic crisis on Airbnb's business, we are a fundamentally different and better business today because of that crisis. And the lessons there were act quickly, be decisive, consider your stakeholders, and play the long game. You know, where we are today, we are leaner, we are more focused, and we haven't forgotten the pain that was the forcing function for all the changes that ultimately made us stronger.

(someone): Since we went public, we've made more than 340 upgrades and innovations to the product. It went from a breakeven business to generating. We're a unicorn by cashflow, three and a half times over. And I'm pretty proud of that. And we are just relentlessly obsessed with creating the most magical experiences, bringing people together. I think that People need travel in connection with other people more than ever before. Because the office is now Zoom, the mall is now Amazon, the theater is now Netflix. And I think travel is increasingly becoming the way that people see their friends. They reunite with others. They meet people. And that's what I want to do. I don't just want to be in the business of travel. I want to be in the business of getting back to that idea of Airbnb, that original idea.

15

Airbnb ft. Brian Chesky - Battling a copycat clone and rebuilding user trust to revolutionize travel

Crucible Moments

(someone): Next, I basically started immediately cutting costs. We reduced the pay of all the executives. We punted a lot of key projects. I studied Apple when Steve came back to Apple. He reduced the product line. He went back to a functional organization. That's what we did. Reduced the product line. We went back to a functional organization. We had to do a layoff. We were one of the first big layoffs in Silicon Valley. We cut 25% employees. It was the hardest thing I ever did. We had over a billion dollars worth of reservation requests that came in for guests that wanted to cancel their trips, but they couldn't get a refund because of their cancellation policy. And the hosts were really hoping to get paid.

Roelof Botha: In a two-sided marketplace with guests on one side and hosts on the other, Airbnb faced existential financial risk.

(someone): The hosts are thinking, I'm not going to get any more revenue for a period of time because all of travel is shut down. And the guest is like, well, I don't know what's going to happen. Maybe I'm going to lose my job because of the pandemic and I have to take care of family members. I need that money back. There's about three or $4 billion of customer deposits where both sides are claiming that they were owed that money.

(someone): And so a real tension of who do you favor, guest versus host?

16

Airbnb ft. Brian Chesky - Battling a copycat clone and rebuilding user trust to revolutionize travel

Crucible Moments

(someone): So the interest rate was like 10%.

(someone): In retrospect, the cost of that capital seems extremely high, but if we walk back to that moment when we're facing insolvency and we don't know what the world will look like going forward, the cost of that capital was effectually, you know, the cost of, of solvency. And so quite, quite a good deal in, in retrospect, in terms of shoring up the balance sheet and allowing us the freedom. to navigate the rest of the pandemic.

Roelof Botha: The $2 billion in straight debt allowed Airbnb to pay its hosts what they were owed and protect its community as a whole.

(someone): We got to mid-May and there was a moment of respite and we started to look at the numbers.

(someone): And something crazy happens. It's Memorial Day weekend and we start seeing that people are actually booking Airbnbs again. And they're not going to cities, they're not crossing borders, but they're getting in cars and they're driving like a tank of gas away because they've been sheltering in place to other homes where they're living. And then suddenly this like domestic business of larger homes booms in these small towns, vacation rental communities and rural areas. And all of a sudden, we had this rebound. We pivot the entire company to provide housing in non-urban areas, to provide longer stays. Pretty soon, nearly a quarter of our nights booked were for stays of a month or longer.

(someone): We realized this business is much more adaptable and resilient than even we would have anticipated, which led to the secondary thought, which was maybe that IPO isn't permanently on pause.

17

Airbnb ft. Brian Chesky - Battling a copycat clone and rebuilding user trust to revolutionize travel

Crucible Moments

(someone): And all of a sudden, the pandemic hits. And within eight weeks, we lose 80% of our business.

(someone): I recall that first day staying at home, looking at the daily metrics and seeing that, you know, we had a real problem on our hands. My name is Ellie Mertz. I'm a vice president of finance at Airbnb. It was not just that the business had slowed, but it was that bookings had really evaporated overnight and our guests were canceling at really unprecedented levels, which meant There was a massive sucking out of the business in terms of overall cash flow.

(someone): When you are our size and you lose tens of billions of dollars of business in eight weeks, it's like you're an 18-wheeler and you slam in the brakes. Nothing good happens. I felt like I was the captain of a ship and it was just torpedoed and there was a hole in the ship. We went from the hottest IPO of 2020 to within eight weeks, people predicting the demise of Airbnb. These are actual headlines. Is this the end of Airbnb? Will Airbnb exist? Can Brian Chesky save Airbnb?

Roelof Botha: Crucible moment number three, the COVID-19 pandemic.

(someone): This crucible moment is one of the best stories that I've been part of in my career because I had a front row seat to how you deal with a crisis. And the reason I say that is because this is not just an ordinary crisis.