If Airbnb is willing to pay 14 weeks (3.25 months) of severance, they must believe this is going to go on significantly longer than that. Or they're using this as an opportunity to cut underperformers at the same time.
Because if they believed things would start to recover by fall, wouldn't you just pay the people as normal and make a judgement call around then? You're spending the payroll money either way -- 14 weeks of severance and people stop working immediately, or 14 weeks of payroll and people are still working.
I personally suspect that travel related industries will be one of the last to recover, both due to consumer reticence and due to lower levels of disposable income during the recovery.
> lower levels of disposable income during the recovery.
There's also going to be a lot of pent-up demand from people who didn't lose jobs and had no outlet for leisure spending during the quarantine. I'm not sure which will win out.
The pandemic doesn't end simply because quarantine is lifted. People will seriously question flying or passing through airports, especially as case counts are getting worse while the restrictions are being lifted.
Looking at what is happening in the US as of right now, I'm fairly sure the second wave will be more like in July 2020. Unless you count it as still the first wave moving in from the coasts to the heartland and then as it moves back out is that the second wave?
Their analysis has new case rates falling off the peak as quickly as we arrived at it. And new case rates almost zero by end of June? This is wildly optimistic. Italy’s chart looks nothing like their forecast for the US.
"Through the success of the global eradication campaign, smallpox was finally pushed back to the horn of Africa and then to a single last natural case, which occurred in Somalia in 1977. A fatal laboratory-acquired case occurred in the United Kingdom in 1978. The global eradication of smallpox was certified, based on intense verification activities in countries, by a commission of eminent scientists in December 1979 and subsequently endorsed by the World Health Assembly in 1980." (from https://web.archive.org/web/20070921235036/http://www.who.in... )
The Wikipedia page starts with "Smallpox was an infectious disease". I believe this is one of the most powerful sentences I've ever read on the Internet, and it gives me so much hope for what we can achieve.
> The debate centers on whether or not the last two remnants of the virus known to cause smallpox, which are kept in tightly controlled government laboratories in the United States and Russia, should finally and irreversibly be destroyed.
But most people are capped to how much they'll spend on leisure by their vacation time. So there probably isn't much headroom to be gained for people who are regular travellers post this pandemic.
Sure, but like vacation money, vacation time has also been curtailed. I'm currently not on a vacation I had previously planned and working instead, saving both time and money I would have otherwise spent.
I'm in the same boat. Dearly wish I could take a vacation but the state has banned short term rentals for some reason (hotels still open though). So when they let us out of house arrest I plan to get out of town asap.
With the United States heading for unemployment numbers estimated to be as high as 15%-20%, I find it hard to believe that people who are still employed are going to be ramping up their discretionary spending.
Just because you still have a job in May doesn't mean you'll still have one in August.
On the other hand we're almost certainly heading for a recession so (you would hope) there would be some reticence to over spend on luxuries like holidays.
Many folks are booking family vacations like crazy using current low prices and hoping to leverage rebooking flexibility. So there will definitely be at least some pent-up demand. This demand could evaporate though if folks who consider their jobs safe start feeling insecure.
But I think that if the leisure travel collapses it would be because of the economic declines, not medical risks. My 2c.
Even people with jobs tighten their belts in a recession. Your job could be gone tomorrow. Who was taking vacations in 2008, or 2009 for that matter? Maybe if you have scratch, but 4 in 10 American's can't come up with $400 let alone a vacation.
Also, companies are realizing that maybe they don't need to spend thousands of dollars for last minute business trips if they can just do a zoom meeting instead.
Personally I don’t think this is true. The entire sales team where I work is itching to be able to travel to potential customers again. They’re not at all satisfied with Zoom as a replacement.
Administrators above them though are beginning to see their desire to travel isn’t actual justified in greater business value, so their mere preference or their assertion is less likely to be believed.
Travel for current or prospective customers has some of the best ROI of nearly any expense at the company, and this is well understood. To the contrary, everyone up the chain including the CEO is even more eager to resume sales travel.
I have a friend desperate to get out to his overseas clients before they start thinking about not renewing his contract in favour of a local option. (He is a specialised architect working with a luxury auto brand.)
We cancelled a trip to the US from Australia that would've been in full swing right about now and would normally be very keen to reschedule. However, even once restrictions lift, travel insurance is not likely to cover health issues in the US (especially a declared pandemic) and the risk of incurring huge costs is too great. That sort of thing may be a factor for many people.
I'm not so sure. Airlines have sent huge numbers of their aircraft to the desert for storage, so quickly spinning up flight supply and then spinning that back down will be expensive.
I find it unlikely this will be the limiting factor in flight demand. Flights are typically booked a few weeks in advance, which is adequate time to go retrieve the planes from the desert and inspect them to insure they are airworthy.
It's not like people are going to be showing up at airports overnight buying flights for the same day.
Oh yeah. I feel like there are going to be totally crazy parties popping up everywhere like there is no tomorrow. And then we will have a spike in births around Feb/Mar 2021
All indications are that we are going to experience a not-so-great depression. Not a recession, an honest-to-goodness depression. 2020 will be down YoY in terms economic output probably across the world, and it wouldn't surprise me if that's not only true for Q2-Q4, but if it also lingers into Q1. My guess is that we will feel like things are growing again this time next year.
Some economists are hoping for a better outcome than this of course, but you can connect the dots and see what people are planning for, as you've done here. Airbnb is not alone in planning for depression, and the travel industry will be worse than most.
Australia's gov't owned ABC news company has started spreading articles filled with either optimism or "why a depression wont be so bad". The people who know these kind of things can see the way the wind is blowing.
Are we looking at the same markets? We are still below where we were, and a pullback after an initial legdown is expected. Look at the chart from 2008. Leg down, pull back, some time at the top of the roller coaster to look around, then the real big second leg down that just pummels the market.
Nasdaq is nearly flat for the year. 2008 was systemic failure of financial system. Unless you’re suggesting something much worse will be unearthed by this shock, this is looking like 1987.
Which markets? If you are referring to the S&P 500, hope is outweighing fear right now, I'll give you that. If you mean crude oil markets, well, they reflect the narrative. If you mean bond markets, yields are declining.
Also, it would be remiss of me not to point out that the markets != the real economy. They are correlated, but that correlation is not perfect. 20M newly unemployed Americans would disagree with you that things are largely unchanged from 3 months ago.
You need to operate the company under the assumption that this will happen for a very long time, and that even afterwards people will think about travel differently
Depends. I'm a finance noob but I think there's a big difference from an accounting perspective to say "we have a big expense to pay for the next ~14 weeks" versus "we have a big yearly expense that will continue in perpetuity". I think this bookkeeping is especially important when looking for funding. Perhaps someone with more savvy and better articulation of the nuances can chime in here. (I'm interested myself on if I'm way off the mark here.)
The economic consensus is that COVID growth and an underwater economy will mutually reinforce each other for the next two years.
If you accept that scenario your decisions in the present about finances, investments, and employment all radically shift. My decisions have radically shifted to accommodate even though I have two essential industry employers with virtually no risk of being laid off.
What I personally use as a thermostat on how to proceed during adjusted life is the military. How they conduct business is bound by finances not beholden to a profit stream and they do not conduct business out of political ideals/favors. When they lift travel restrictions I will feel more confident about traveling. Once they reopen schools I will more confident about going back to work in an office building. When they drop the need for face masks or mandatory forced quarantine I will feel more confident stepping away from social distancing. Until those things happen I will continue to play it highly conservative in accordance with the suggested medical guidance to avoid exposure.
Underperformance is always relative to some degree. They most likely decided that much of the stuff that 25% is working on - the article mentions "experimental and costly endeavours" - won't be feasible even after the crisis is over and people book short-term rentals again.
I mean, personally I think a year is a better time estimate for connectivity returning (and maybe 3+ for economic recovery) but you are also looking at some specifics to airbnb here - much of their growth was people converting long-term rentals to short-term rentals - many of those will either get locked back up in the long-term rental pool or go into foreclosure
You also have the case that like stock prices employee hiring is often based on projections for anticipated need in a high-growth business - it's such a friction point, you are trying to stay ahead of the curve to build the capacity to grow now and handle that growth 12 months from now
Airbnb employee here (opinions are my own)-- Brian Chesky referenced making decisions so that Airbnb would be able to weather a 1.5-2 year storm. It likely will take that long before travel begins to recover.
The optimist in me wants to think that the executive team realized they had about 4 or 5 months before they had to lay off these folks, so they decided to give them a few months of time to look for work and be with their families since there wasn't that much work to do anyways. Maybe if they do this, then in a few years when the economy recovered those ex employees would want to return to Airbnb.
Either way, it's a good package, since most people are getting zilch at other places.
I think it's quite obvious that tourism isn't going to recover back to 100% where they were in 3 months, no...
Note that '100%' includes the growth prospects that Airbnb still had in January 2020. 'startups' like airbnb hire for growth. 25% workforce cut is roughly the growth prospects (20-30% per year) that airbnb had last year.
So no, that recovery won't come in just a few short months. For one because there's still a global pandemic related global lockdown. Second, because an effectively rolled-out vaccine is not expected until at least next year. Third because tourism is hardest hit in a normal economic crisis, in a recession and 20% unemployment figures like now, the first thing you stop doing is taking international trips for fun. Fourth because in a virus pandemic, tourism (concentrated populations gathering in hotspots like a museum, bus, airplane etc, and transporting the virus across borders) is a high-risk activity that gets restricted way more than other economic sectors like farming, manufacturing, or work from home office jobs. Fifth because most of airbnb's stock is caught up in one of two categories: people renting out their home when they're away on vacation, these people are staying home and aren't making their real estate available. Or professional airbnb companies which purchased real estate that's only economic with large revenues, financed with leveraged mortgages, many of these companies are set to collapse in a 3-month shutdown, let alone a 6-month low-activity industry. A lot of these will be folding and selling their properties. Both the demand side and supply side is going to take a hit, airbnb will run much less business for the next year at least and will need to bounce back. It won't be easy. Especially in an industry where you'll see dirt-cheap hotel prices competing for a few years.
> Or professional airbnb companies which purchased real estate that's only economic with large revenues, financed with leveraged mortgages, many of these companies are set to collapse in a 3-month shutdown, let alone a 6-month low-activity industry. A lot of these will be folding and selling their properties.
I wonder how this is or will impact the real-estate market? Are enough people going to foreclose without interested buyers that the market takes a plunge?
This conversation has come up a lot in real estate circles. I think it depends on the debt load that people have, which means that more expensive places that have lots of Airbnb's will be hit the hardest. Anecdotally, my friend outright bought a house outside of Detroit to use as an Airbnb. With no mortgage to pay and property taxes low, he's deciding whether to wait it out until people start travelling again, or put it up for rent.
I think it's highly unlikely...but I'd be very happy to be wrong, too.
These highly-leveraged "new" companies and individuals make up only a portion of AirBnB-rented homes, which themselves are only a small portion of the entire housing market. There was a very recent interview or article with AirBnB's CEO where he (I'm sure he was fudging the numbers a bit) said only 1/3 of AirBNB homes are actually owned by these kinds of speculative home-buyers. The remaining 2/3 are split evenly between traditional real estate leasing companies and homeowners with only 1 house.
Also, worth considering that short-term rentals can easily be transformed back into long-term rentals. In any case, I think a national housing market plunge is highly unlikely.
> These highly-leveraged "new" companies and individuals make up only a portion of AirBnB-rented homes
That's what AirBnb very much likes you to believe. In my opinion they lie a lot.
> which themselves are only a small portion of the entire housing market.
That really depends on the city. Barcelona, Amsterdam, Prague and other cities were literally killed by AirBnb and by extension by AirBnb slumlords.
> Also, worth considering that short-term rentals can easily be transformed back into long-term rentals.
That maybe true. Then again, if you max out your credit card to speculate on highly leveraged financial products the time window for clean-up may be very short and you may be forced to sell at a very bad price.
I, for one, are really not sorry for this bunch of city killing assholes. For short term financial gains they make life miserable for everybody else.
Yes that's of course what the CEO wants to say, because professional airbnb = hotel company not playing by the hotel regulations/license rules, plus it's pushing out locals. So he downplays that and wants to make it seem as if airbnb is majority-driven by mom n pop folk, who make available a free room or their home some of the time to supplement income a bit, harmless.
In reality, a typical person (like me) would rent out their space about 10 days a year, while an airbnb company aims for 365. Could very well be that 2/3rd of listings are average-joes and 1/3rd are professional.
But in terms of nightly stays, it could still be about 20 professional to 1 average-joe. And those nightly stays ultimately reflect the revenue that drives the economics of these properties, airbnb's business and the impact on the local market.
When Warren Buffett completely divests Berkshire Hathaway of all airline stocks, as he recently did, I think it's a reasonable bet that travel is going to be down for a while.
Airlines are very capital-intensive, and those are exactly the type of industries that do not weather recessions very well. One does not simply lay off a 50 million dollar jet. It needs to be maintained -- regardless of whether or not it is in the air, making you money, or it's grounded in a hanger.
I have heard of people taking a luxury Airbnb near where they live for a month since kids can be remote from school along with parents, and I just don't trust hosts or previous guest enough to ensure that the place is clean.
All indications at this point are that the virus spreads a lot more through the air than via surfaces. And it only stays active up to 3 days on plastic and metal surfaces, and that's in ideal conditions.
If you bring cleaning supplies and just wipe down high-contact areas like counters, doorknobs, refrigerator handle, etc. when you arrive, it doesn't really seem any more risky than something like bringing in groceries from the grocery store, which may have been touched by other people, the cashier, etc. Or to be extremely cautious, you could pay for an extra 3 days prior to arriving to make sure nobody has touched anything in that time. If you're gonna be there a full month anyway, what's another 3 days added on to the cost.
Take any sane model of the virus and you'll see that we're headed for a rebound due to early re-opening of states. I'm starting to bet against this entire year at this point.
Tourism won't even come close to recover until at least half a year after a corona vaccine gets available, countries will do everything they can to avoid the need for a second lockdown, and that includes drastic border controls. And it is not sure yet how many airlines will survive the crisis, combined with planes being perfect spreading ground for corona... and without airlines there will be no tourists.
The whole industry is fucked and it will probably kill some countries too, a lot have a massive, unhealthy dependency on tourism.
Even if we "open up" the virus won't be gone and society will have to function in a cautious state to mitigate the spread of the virus still. Lockdown was simply the most extreme portion, but the rest of the mitigation efforts will still have to continue at least until a vaccine is available. This means the economy is not going to return to normal for a long time.
It's going to go on far, far longer than 14 weeks.
Airbnb are going to have issues, as the longer this drags on, the more landlords are going to be forced to sell or commit to long-term rentals, limiting the number of eligible places, even if there is some later snap-back (due to say a very effective vaccine).
Because if they believed things would start to recover by fall, wouldn't you just pay the people as normal and make a judgement call around then? You're spending the payroll money either way -- 14 weeks of severance and people stop working immediately, or 14 weeks of payroll and people are still working.