US: Airbnb is to receive $1 billion [£816 million] in investment from California-based Silver Lake and San Francisco’s Sixth Street Partners to help the embattled company deal with the fallout from Covid-19.
The substantial financial injection, made up of debt and equity securities is in line with CEO and co-founder Brian Chesky’s announcements last week, where in a public call, he promised to “fix” the situation by paying out $250 million in cancellations back to hosts, laying on a $10 million Super Host relief fund, allowing previous guests to help out hosts with a personal note or financial contribution, and lobbying the U.S. government to provide short-term rental hosts with small business loans and grants.
In a statement, Airbnb said the funds would be diverted towards Airbnb’s host community, enabling the firm to “be in the strongest possible position as travel rebounds from the COVID-19 pandemic”.
As well as facing a major backlash from hosts and guests over its perceived abruptness in cancelling bookings in March and performing a high-profile U-turn over its extenuating cancellation booking policy, Airbnb was forced to lower its internal valuation from $31 billion to $26 billion, as well as halt its marketing spend in order to save an estimated $800 million a year after a collapse of bookings.
The latest move is another indication that Airbnb will be required to delay its scheduled public float, potentially in form of an initial public offering, however the investors believe this is the best option to pave a way for a long-term sustainable future for the company.
Silver Lake co-CEO and managing partner Egon Durban said: “While the current environment is clearly a difficult one for the hospitality industry, the desire to travel and have authentic experiences is fundamental and enduring. Airbnb’s diverse, global and resilient business model is particularly well suited to prosper as the world inevitably recovers and we all get back out to experience it.”
Sixth Street Partners CEO and managing partner, Alan Waxman, said: “Airbnb created an enormous new category, underpinned by the leading brand and technology platform, as well as a community founded on trust. The company’s achievements speak for themselves, and we are excited by the opportunities on the horizon as they continue to grow their geographic footprint, accommodations and experiences.”
The Telegraph reported that the latest deal would not be dependent on any particular performance metrics nor on the firm going public by a certain date.
The Wall Street Journal disclosed that the $1 billion financing would further decrease Airbnb’s valuation from the $26 billion figure that was quoted last week to a new low of $18 billion.
With annual revenue at Airbnb dropping by an estimated 54 per cent, that latest valuation may yet decrease further should an extra agreement be reached between Airbnb and investors for the latter to take on as much as $1 billion in additional debt, as Bloomberg reported on Tuesday.
In the meantime, as the travel industry looks towards entering a recovery period, Chesky confirmed that Airbnb would be focusing its attention on three key targets: its hosts, long-term stays and its Experiences program; the latter which launched in 2016.
He said: “We will invest in our hosts and bring more of them into our community.”
Airbnb’s shift towards a longer-term strategy is motivated by a 20 per cent increase in extended-stay bookings on its platform compared to the same period in 2019. As more hosts warm to the idea of longer-term stays, the company has launched a number of new tools, including a new alert and on-boarding process to make their listings more widely available to long-term guests and new visibility settings when it comes to displaying local listings in the search results.
Finally, Airbnb will place renewed emphasis on its Experiences offering by laying on activities throughout the year on its platform and not just when they are travelling and booking accommodation via its platform.
For more information, visit the Airbnb website here.