Big driver behind soaring rents — the “Airbnb effect” that removed countless properties from global cities’ long-term rental markets — reverses.
With many of the world’s most popular tourist destinations locked down, and many flights canceled, making international tourism all but impossible, the world’s biggest disruptor of global tourism, Airbnb, faces a starkly different market reality. As of mid-April, new bookings on the company’s portal had plunged 85% year over year while cancellation rates were around 90%, according to AirDNA, an online rental analytics firm.
Airbnb has warned that its 2020 revenue could come in 50% lower than its 2019 total. This is a company that wasn’t even able to turn a profit when the Good Times were raging.
To try to keep investors on board, management has unleashed a brutal restructuring of the group’s global operations. Last week, it laid off 1,900 workers, around 25% of its global workforce. The San Francisco-based company also rescinded a contract it has with a call center in Barcelona, resulting in the immediate loss of a further 1,000 subcontracted jobs.
One of Airbnb’s biggest rivals, Amsterdam-based Booking.com, is in similar straits. In March, its American parent company, Booking Holdings, posted a first quarter loss of $699 million, down from $765 million a year ago, as bookings plummeted 43%. Also for March it reported a decline of over 100% in room nights, a feat that was made possible by the fact it received more cancellations than new bookings during the month.
“Looking at things a different way, our newly booked room nights, which exclude the impact of cancellations, were down over 60% year-over-year in March and down over 85% in April,” said chief executive Glenn Fogel at last week’s earnings presentation. “This gives you a clear indication of how much our business is currently impacted by this crisis.”
Things are set to get even worse. In April, Booking warned investors the virus crisis would impact the second quarter of 2020 “much more significantly” than the first, though it declined to offer full second-quarter guidance.
The company recently applied for Dutch government support to help pay its 5,500 workers in the Netherlands, which did not go down well with Dutch taxpayers. Like so many other large listed companies, Booking spent $4.5 billion buying back its own stock in 2019, significantly reducing its capital and impairing its ability to weather future storms such as the current one. Now, to tide it over, the company has borrowed $4 billion of emergency funds.
For companies like Airbnb and Booking that can raise such vast sums of money with such apparent ease, this crisis is likely to be painful but not fatal.
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Nick Corbishley 