Airbnb predicts its annual revenue will be down 54 percent from 2019 because of the coronavirus pandemic, reports The Information. However, the online accommodations rental platform has taken on $1 billion in debt to mitigate COVID-19’s impact on its operations. The company has also developed a strategy involving long-term stays and virtual experiences to get back on track.
How the Coronavirus Outbreak Affected Airbnb
Before the onset of the coronavirus outbreak, Airbnb was on track for a terrific year. The firm had a $31 billion valuation, invested in a promising new venture, and plans to launch its initial public offering (IPO). But COVID-19 grew to pandemic proportions in the first quarter and significantly disrupted the firm’s plans.
Due to government lockdown orders and consumer travel anxiety, the firm experienced a massive drop in bookings. Indeed, short-term rental analytics firm AirDNA said the company’s reservations dropped by 96 percent in some municipalities. As a result, the firm sought to increase its liquidity and secured $1 billion in debt and equity from two investment groups, which saw its valuation plummet to $18 billion.
The startup also set up a $250 million fund to help hosts who have lost revenue because of the viral outbreak. In light of recent events, the firm has internally lowered its 2020 revenue forecast to $2.2 billion, down from $4.8 billion in 2019. Moreover, the company’s IPO plans are seemingly on hold.
Despite the challenges it is facing, Airbnb is working to revive its business via diversification of services. Also, because it started 2020 with $3 billion in liquid assets, it has the capital to endure its near-term headwinds.
Airbnb Recovery Plans
One part of Airbnb’s recovery strategy involves expanding into long-term bookings.
The firm got the idea for its pivot from its 2019 data, which showed one in seven guests reserved accommodations for protracted stays. In addition, the company saw its long-term bookings double in the last two weeks of March. The startup attributes the occurrence to medical professionals and other essential workers being assigned to new locations due to the pandemic.
Airbnb believes the trend will continue post-COVID-19, so it’s highlighting long-term accommodations on its website. The startup is providing its lodging providers with information regarding the benefits of hosting guests for long periods.
At present, the service hosts 1 million amenity-loaded listings that give consumers the option to book month-long stays.
The company has also revamped its Experiences offering to address the current landscape better.
Launched in 2016, the add-on service allowed guests to book tours, and other activities along with their accommodations. But in light of the coronavirus pandemic, the service has transformed Experiences into a hub for homebound people to have fun virtually.
Consumers can use the startup’s Online Experiences page to learn how to perform magic tricks, enjoy a concert, make Portuguese tapas, or most ominously, “Meet the Dogs of Chernobyl.” While most of Airbnb’s virtual activities have an hourly fee, some, like mingling with adorable farm animals, are free.
At present, the startup’s leadership believes its diversification strategy will help it generate $5.4 billion in revenue in 2021, up 15 percent from 2019. Only time will tell if Airbnb’s pivot from a short-term vacation facilitator to general accommodation and online experience platform will pay off.