My take on Chesky: Handling of layoffs proves empathy belongs anywhere

US: Three months ago, Airbnb had more than three million hosts and seven million listings worldwide. CEO and co-founder, Brian Chesky, stood on the cusp of taking the company public.

The San Francisco-based startup that launched in 2008 as a “couch surfing” letting service [AirBed and Breakfast] has since expanded into a travel behemoth that some would say transcends the short-term / vacation rental industry altogether.

In March 2020, little did he, or any of us, know that a devastating global pandemic which would alter the entire accommodation landscape was just around the corner. The use of the word ‘unprecedented’ in the last few weeks has truly been unprecedented.

Fast forward to now and Airbnb has the air of a company besieged on all fronts, and Chesky is bearing the brunt of much of the host and guest communities’ lingering frustration. It lost over $1.5 billion in bookings as the Covid-19 virus decimated travel from mid-March, secured $2 billion in emergency refinancing and loanshalted all marketing expenditure, and AirDNA data indicated some of the worst hit regions had seen up to 90 per cent of upcoming reservations cancelled. It also saw its internal valuation drop twice in a matter of days, first from $31 billion [at Airbnb’s last funding round in September 2017] to $26 billion and then to $18 billion by the start of April – a near 42 per cent drop.

More recently, the company sent shockwaves throughout the travel sector by trimming its global workforce by 1900 employees, up to 25 per cent of its overall team. Citing the worldwide downturn of the market, the CEO sent a message to staff, also made public on Airbnb’s blog, outlining the financial situation and why layoffs were an unfortunate necessity.

Airbnb’s communal slogan that users can “belong anywhere” is therefore being severely tested like never before. The coronavirus threatens the company’s very existence, coupled with the fact that all of the business ingredients Airbnb prides itself on in travel cannot be met in the current circumstances.

On top of everything, the co-founder has been caught in the middle of a blood bath between irate hosts and board members at Airbnb, who called for his resignation in the aftermath of this crisis, according to the Wall Street Journal. The newspaper revealed that some investors and board members had grown increasingly concerned about Airbnb’s spiralling costs [its expenses rose to $5.3 billion in 2019] and that they had put pressure on Chesky to dispense with the loss-making Experiences program.

That is not to say Airbnb’s problems do not date back to pre-Covid-19. Its path towards a potential initial public offering [IPO] hit a sticky patch back in February after it posted net losses of $322 million in the nine-month period leading up to September 2019, as opposed to a $200 million profit a year earlier. The lack of proof of Airbnb’s profitability may have deterred some investors who were already sceptical in the wake of failures by co-working office space provider WeWork and Uber to close their own.

But these are unprecedented times: in what other scenario would a company of Airbnb’s size have to part ways with a quarter of its global workforce? At last count, over 40 million Americans had filed for unemployment and so it appears even the largest global tech and service companies are not immune to this downturn. Silicon Valley has never seen times like it.

After the layoffs were announced a fortnight ago, Airbnb launched its own talent directory for laid-off employees to upload their CVs, LinkedIn profiles and work samples. Each employee will also have access to a severance package that includes a minimum of 14 weeks’ pay, a year of healthcare, and support in finding a new job elsewhere.

In his 3,374-word letter issued on the Airbnb website, Chesky said:

“Our goal is to connect our teammates leaving Airbnb with new job opportunities. Here are five ways we can help:

  • Alumni Talent Directory — We will be launching a public-facing website to help teammates leaving find new jobs. Departing employees can opt-in to have profiles, resumes, and work samples accessible to potential employers.
  • Alumni Placement Team — For the remainder of 2020, a significant portion of Airbnb Recruiting will become an Alumni Placement Team. Recruiters that are staying with Airbnb will provide support to departing employees to help them find their next job.
  • RiseSmart — We are offering four months of career services through RiseSmart, a company that specialises in career transition and job placement services.
  • Employee Offered Alumni Support — We are encouraging all remaining employees to opt-in to a program to assist departing teammates find their next role.
  • Laptops — A computer is an important tool to find new work, so we are allowing everyone leaving to keep their Apple laptops.”

Contrast this with the cold, impersonal goodbye email one might often expect from a multinational corporate giant and Chesky’s offer of support appears genuinely well-intentioned.

In the sharing economy space, Uber has announced plans to cut its team by up to 20 per cent, Lyft has laid off around 1000 workers and several thousand employees are reported to have been let go by WeWork, which itself saw its own IPO plans scuppered last year.

The OTAs have been hit hard with a similar standstill in bookings: Expedia Group announced it was cutting 3,000 jobs in February, Booking.com told employees that layoffs were “probable” after receiving a $4 billion loan in bonds from investors, and the likes of TripAdvisor, Trivago and Kayak have confirmed sizeable layoffs in order to navigate the crisis too.

Airbnb is not alone in facing the level of scrutiny it stands up to but equally it deserves praise for the way it has let go workers and provided a pathway for their future career success, rather than dispensing with them at the clinical click of a finger.

It was Cervus Leadership Consulting founder Chris Mumford who outlined the qualities that make true leaders stand out in turbulent times in a recent thought leadership piece for ShortTermRentalz.

In this era where news travels fast and users quickly pounce on social media frenzies, leaders who deliver a clear message as soon as possible after a decision is made eliminate the spreading of misinformation more easily.

Chesky wrote: “Some very sad news. Today, I must confirm that we are reducing the size of the Airbnb workforce.

“I want to provide clarity to all of you as soon as possible. We have employees in 24 countries, and the time it will take to provide clarity will vary based on local laws and practices. Some countries require notifications about employment to be received in a very specific way. While our process may differ by country, we have tried to be thoughtful in planning for every employee,” he added.

The letter addressed employees with a forthright but empathetic tone, showcasing care for his team while explaining why the decisions for cutbacks were necessary.

He told it “like it is” without being disingenuous or sugar coating the situation Airbnb is in, along with the rest of the industry:

“We are collectively living through the most harrowing crisis of our lifetime, and as it began to unfold, global travel came to a standstill. Airbnb’s business has been hit hard, with revenue this year forecasted to be less than half of what we earned in 2019. In response, we raised $2 billion in capital and dramatically cut costs that touched nearly every corner of Airbnb.”

Such leadership qualities are matched by the importance of showing one’s human side and showing real appreciation to the team one is managing.

Chesky wrote: “To those leaving Airbnb, I am truly sorry. Please know this is not your fault. The world will never stop seeking the qualities and talents that you brought to Airbnb…that helped make Airbnb. I want to thank you, from the bottom of my heart, for sharing them with us.”

By its own nature, Covid-19 can reach and affect anyone around the world, no matter their status, role or background within society. That is not to say the wider question about whether those from less affluent backgrounds are more susceptible to contracting the virus if there is less space to adequately social distance or self-isolate is relevant.

There is nothing specifically rooted in the DNA of CEOs and business leaders that makes them immune to this coronavirus – they are just as averse to the physical and mental risks as the rest of us.

Quoting Churchill as Mumford did in his article: “I would say to the House: ‘I have nothing to offer but blood, toil, tears and sweat.”

The key takeaway we can gauge from this is that successful leaders always provide hope in the darkest of times. Chesky speaks from the same base human level as his employees and acknowledges the toll it will take on them and their vulnerability.

A number of leaders have led the way in setting the benchmark for showing sincerity while laying people off. Take a look at this  snapshot piece in our sister Boutique Hotel News website, in which forward-thinking CEOs motivate their teams and share messages of hope during these challenging times: [see Sébastien Bazin – Accor, Arne Sorenson – Marriott, Mark Hoplamazian – Hyatt, Lindsey Ueberroth – Preferred Hotels & Resorts, Oliver Winter – a&o Hotels and Hostels]

Chesky is not as out of touch as many would wish to portray him. He lives a relatively modest lifestyle and in 2016, signed the Giving Pledge that was launched by Warren Buffett and Bill and Melinda Gates, promising to donate the majority of his fortune to charity over the course of his lifetime.

He told Business Insider: “With this pledge, I want to help more kids realise the kind of journey I have had,” Chesky wrote in his pledge. “I want to show them that their dreams are not bounded by what they can see in front of them. Their limits are not so limited.”

To some extent, Airbnb is a victim of its own success. Any firm that provides a service for thousands or millions of people is rightly scrutinised by those who utilise it, but there is a sense that Airbnb has made mistakes in its strategic decisions and must do more to safeguard its long-term future.

In a 2016 lecture for the How To Start A Startup podcast with Alfred Lin, former COO of Zappos and partner at Sequoia Capital, Chesky frequently alluded to the necessity of having “good strong core values” and hiring the right employees that fit the culture of the business.

One part of this, he said, was always “championing the core mission of the business”, bringing people together and incorporating a feeling of belonging. He even admitted to having attended the interviews of the first 300 employees Airbnb ever hired because he wanted to ensure they were well suited to the values and culture of the company. As a CEO, he added it was better to deliberate over decisions even if it meant progress slowed as he was intent on building a company “for the long-term and to endure”.

Ultimately, yearning for travel remains brighter than ever and will do so the longer travel restrictions stay in place.

Conversely, some of Airbnb’s critics argue that the company has diversified too far beyond its traditional accommodation offering roots, that it is disrupting neighbourhoods and taking away housing stock from local residents in cities such as Prague and Barcelona.

Speaking to Conde Nast Traveler, Superhosts Scott and Lisa Brundon said: “Airbnb has strayed a long way from where it started,” Scott says. “The ‘live like a local’ promise is a bit of a con in most places. If you are staying in what is really a serviced apartment, in a building full of similarly used apartments, how is that living like a local?”

Airbnb has also drawn in detractors over its refund policy, which initially only included China, Italy and South Korea, and would have denied guests from getting refunds who had had their own travel plans affected by the virus outbreak. Chesky then apologised in an impromptu recording to hosts and suppliers for abruptly cancelling bookings in March with little notice for consultation, and promised to “fix” the situation.

Chesky made the step to soothe tensions by announcing that Airbnb was extended its extenuating circumstances policy to offer full refunds to guests for any trips taking place on or before 31 May, as long as they were booked prior to 14 March. The refund window has now been extended to at least 15 June.

Meanwhile, guests who cancel stays within that timeframe that meet the aforementioned requirements have the choice of receiving either a full cash refund or travel credit. Hosts can also cancel under the latest policy without being charged and it will not affect their Superhost status either if they have earned it.

Following the criticism, Chesky admitted the previous weeks had been a “wake up call” in planning for market downturns and immediately introduced a list of measures to support disgruntled hosts who had seen their revenue wiped out almost overnight, including:

  • A  $250 million support fund to help hosts who had been forced to give full refunds to guests offset their losses
  • A $10 million Super Host relief fund – providing grants of up to $5,000 that do not need to be paid back
  • Previous guests can send hosts a note and attach a financial contribution as a token of appreciation for their hospitality
  • Airbnb lobbied for hosts in the United States to be able to benefit from small business loans and grants

While some operators who had already been unable to avoid entering into liquidation and hosts who had begun listing their properties on longer-term rival sites such as Willow and Trulio may have seen it as something of a futile gesture, Chesky deserves credit for setting up an ambitious and generous plan to support the platform’s community.

British journalist Martin Lewis might be one of those who agrees, having ranked Airbnb as the third best global travel company for refunds in a recent MoneySavingExpert.com survey.

Meanwhile, Forbes contributor Jennifer Leigh Parker said Airbnb should “thrive” in a post-Covid-19 world due to Chesky’s response.
She said: “Chesky quickly positioned his company during the Covid-19 crisis as a pro-consumer brand by offering guest refunds on a global basis. An inevitable backlash from hosts forced to pick up the slack ensued, leading Chesky to earmark $250 million for their troubles and publicly address their concerns in this letter.

“There is an inherent optimism to the hospitality industry in general, and Airbnb has managed to both capture and hang on to it,” she added.

“Sharpening our focus and returning to our roots” is another priority that Chesky outlines for the eventual recovery of Airbnb. Speaking on Skift’s The Long View Livestream with the publication’s CEO and owner, Rafat Ali, he predicted that “mass tourism will be on the wane and “travel redistribution” will take hold” and said Airbnb was intent on fostering an environment for a better “human connection” with hosts.

When the pandemic does wane, Airbnb will like all other companies in the short-term rental space need to evolve to safeguard their futures, hence its move into multi-month or “indefinite” stays. Chesky hopes by making this a core part of the business’ offering from now on, Airbnb will be able to facilitate more flexible, remote working away from workers’ offices, thus making it less of a “travel” company.

Airbnb is making plans to return to its core offering as well. It says it will scale back investment into hotels and its Luxe platform, reduce its focus on the hotel and aviation markets and scrap plans to operate “high-end apartment-style suites” at New York’s Rockefeller Plaza.

Its downsizing is likely to encourage more people to gravitate towards rural destinations in alternative accommodations, where social distancing is easy to practise and enforce, and travellers can have the authentic experiences they so desire.

Every business in the travel sector is facing the same issues but not everyone is finding the same solutions. Difficult decisions, including layoffs, will have to be made.

As Forbes senior contributor Jack Kelly puts it: “The big questions for executives are how and when things will change and will things go back to where they were before? Without having satisfactory answers, while currently haemorrhaging money, companies have little choice other than to cut costs, which includes downsizing workers.

“This is one of the reasons why millions of Americans have lost their jobs. Due to an uncertain future, lack of revenue and plummets in profits, businesses have been pressured to fire workers,” he added.

The truth is Airbnb faces a long road ahead to get back into the black. Bloomberg reported Airbnb lost $276.4 million in losses in the fourth quarter alone and a letter obtained by The Financial Times revealed the company forecasted its revenue in 2020 would be less than half of what it took last year. It can no longer afford to burn through cash if it is to make it through this crisis.

The pressure showing on him is very telling, but securing $2 billion USD in refinancing over the space of a few weeks is by no means a small feat. It furthermore suggests those investors believe in Chesky’s leadership for now.

Of course there are many ingredients that make a successful leader but the virtue of empathy in any leader should never be underestimated.

That may be scant consolation to those workers who have been laid off but they can leave on good terms, as many of them have taken to LinkedIn to describe the Airbnb team as a “family”. The launch of the talent directory will ensure they leave with enhanced skillsets, reputations and CVs as they re-enter a job market where mass unemployment is already rife.

As we enter a “new normal” for travel, with distancing being encouraged in a physical sense, it may just be those leaders who break down that virtual distance and demonstrate leadership and empathy in equal measure who leave a lasting impression when this crisis does recede.

Read Brian Chesky’s message in full to Airbnb staff here.