A more streamlined business and a surge in domestic bookings may help Airbnb to turn a corner

Globaldata Travel and Tourism 7th May 2020 (Last Updated May 7th, 2020 16:56)

A more streamlined business and a surge in domestic bookings may help Airbnb to turn a corner

Airbnb CEO Brian Chesky called the pandemic ‘the most harrowing crisis of our lifetime’ in an email to employees, as he stated that Airbnb’s revenue in 2020 is projected to be halved from 2019, which was reportedly $4.8bn. Due to this daunting forecast, the company is terminating the contracts of 1,900 of its 7,500 staff members. This drastic action is necessary as the company has no choice but to streamline its business in order to survive. Similar to the travel intermediary industry, as seen with TripAdvisor, and the airline industry,as seen with British Airways, job cuts are often seen as one of the quickest and most efficient ways to minimise fixed costs.

It seems the company is also re-focusing on its core markets, concentrating on profitability instead of quick growth. Chesky stated that Airbnb is scaling back its spending in growth areas such as luxury homes and traditional hotels. The company can still be a success, as long as it embraces the idea that it may have to be smaller in scale in the short to medium term and operate in a more efficient manner. From the changes that it has now announced, it seems like Airbnb is starting to embrace this concept. The second step to take in order to emerge from the pandemic in the best possible position is to be sensitive to changes in consumer demands. The company has begun to recognise this. Airbnb recently announced that it is bringing on former US surgeon general Dr Vivek Murthy to help develop new cleaning protocols for its hosts. It is critical that Airbnb tries to address this clear issue with its business model, that allows hygiene and sanitation standards to suffer. The company cannot control these standards and instead has to rely on its hosts.

In addition to the proactive steps the company is now taking to ensure a brighter future, there has been a recent surge in bookings in Europe as restrictions are beginning to be relaxed. The accommodation platform recently stated that domestic bookings in Denmark were at about 90% of April 2019 levels, while in the Netherlands it was approaching 80%. This trend is a beacon of hope for Airbnb. The company should now be focusing on maximising domestic bookings. It is likely that a combination of a lack of consumer confidence and increased fear regarding where the virus may still be will push travellers towards domestic trips. Travelling locally will put travellers at ease as they will be familiar with their surroundings, it will also be cheaper. Price is likely to be an important factor for many travellers when restrictions are lifted. This trend of an increase in domestic travel is backed by GlobalData’s week 5 Covid-19 consumer survey. Globally, consumers have a clear preference and trust for their own products during the pandemic. 41% of global respondents stated that they completely trust their own products. This trend will be emulated in tourism through an increase in domestic flows, for at least the short term.

With reduced outgoings due to a decrease in employees on the company payroll and a recent surge in bookings from the European market, Airbnb can start to turn its focus on profitability and steering the company back to the levels of success it received early on in its life cycle.