May 5—Airbnb announced it would slash its workforce by 25 percent later this month following a massive downturn in its business prompted by the coronavirus pandemic. The lodging rentals startup will save between $400 million and $500 million by making the headcount reduction, reports The Information.
In early April, the company determined COVID-19’s impact in the travel industry would cut its 2020 revenue by 54 percent.
Airbnb’s Massive Lay Offs
Airbnb CEO Brian Chesky conducted a companywide call to announce his firm would be laying off 1,900 of its 7,500 employees on May 11. The executive explained the coronavirus pandemic brought global travel to a standstill, which slashed the company’s revenue projections by half.
Airbnb will provide its terminated employees with 14 weeks of base pay, with an additional week’s wages for every year they worked for the company. The startup is also giving its newly separated U.S. staffers one year of health benefits. In addition to its headcount reduction, the firm is pausing plans to list hotels on its platform, offer luxury packages, and launch a transportation service.
In the firm’s all hands on deck call, Chesky expressed deep affection for his team and said Airbnb needed to evolve to address the post-COVID-19 world.
COVID-19 Mitigation Efforts
The San Francisco-based company has worked diligently to mitigate COVID-19’s impact on its business since the outbreak began last year.
In March, the startup initially froze its marketing spending and hiring to stem its financial losses. The firm’s founders agreed to forgo salaries for six months, and its executives accepted a 50 percent pay cut. The company also reportedly shelved plans to launch an initial public offering this year.
Airbnb has also ramped up its fundraising efforts to protect itself after encountering unprecedented headwinds. In April, the service secured $1 billion in outside capital and is currently seeking another billion to bolster its balance sheet. During that process, the firm saw its valuation tumble to $18 billion from its 2017 appraisal of $31 billion.
In light of COVID-19’s impact on its core business, the company has tried to expand its offerings. The firm remade its Experiences feature, originally an activities booking add-on, as a hub for virtual concerts and cooking classes. The company also changed its platform to emphasize long-term stays, which have risen because of coronavirus related work relocations.
Unfortunately, the startup’s pivots could not prevent it from making one of the tech sector’s largest coronavirus prompted staffing cuts.
With its headcount reduction, Airbnb becomes the latest online travel service to make significant employee layoffs.
In February, Expedia slashed its workforce by 3,000 employees to save an estimated $300 million to $500 million annually. Last month, Bookings Holdings reportedly reduced its headcount by 50 contractors after experiencing an 85 percent drop in reservations. Also, TripAdvisor laid off 900 people, 20 percent of its global staff, just last week.
Online booking websites are not the only segment of the travel industry to take a massive hit because of COVID-19. Research group Comscore notes consumer spending on air travel is down 38 percent year-over-year while hotel bookings have fallen by 61 percent.
While COVID-19 related travel restrictions are gradually being lifted, it is unknown when consumers will feel like vacationing again. As such, firms like Airbnb may not return to growth for a long time to come.