Airbnb lowers internal valuation to $26bn amid drop in bookings
Much like other short-term rental booking platforms and online travel agencies, Airbnb has not been immune to the consequences of the coronavirus which continues to threaten the future of the travel and hospitality industries as we know them.
The firm had been due to start the process of going public with an initial public offering [IPO] or direct listing this month but those plans will have to be shelved for the time being at least, with some bookings down by up to 90 per cent in the worst-hit regions according to AirDNA data. The path to a potential IPO already seemed rocky in February when it recorded net losses totalling $322 million for the first nine months of 2019 and this week, it announced a pause on hirings and marketing expenditure in a bid to save $800 million a year.
A fortnight ago, news emerged that Airbnb had been receiving “significant interest” from private investors interested in a late-stage funding round, however rumours that the company was seeking to acquire a number of assets left distressed by the pandemic were muted.
On Monday, CEO Brian Chesky made an impromptu public announcement that Airbnb would be setting up a $250 million support fund to help its hosts as it seeks to offset losses caused by booking cancellations across its community worldwide and assist hosts who had been forced to give full refunds to guests in light of the pandemic.
Despite Chesky’s offer of financial support, the announcement was seen in some quarters as a futile gesture that would have come too late for short-term rental operators who had already been forced to close. A number of disillusioned hosts have now begun listing their properties on rival sites such as Willow and Trulio, which will come as an increasingly greater concern to the rental platform.
In the meeting with Airbnb employees, the co-founder cited the industry-wide downturn in the travel sector as a reason for lowering the internal valuation, with Expedia and Booking.com reporting 57 and 37 per cent drops in share prices respectively this week.
As the world’s largest online travel agency by bookings, Expedia has seen a similar standstill in bookings and it was revealed that the company tapped its largely untapped $1.9 billion credit facility to provide near-term liquidity in March. Airbnb may be taking note of that, if reports that it has been in talks with lenders about an extension to its $1 billion debt facility are to be believed.
According to Reuters, internal forecasts anticipate that Airbnb will return to somewhere close to its 2019 revenue levels by January 2021. The company is believed to have posted $4.8 billion in revenue in 2019 in a rise by 35 percent compared to the previous year.