Separated employees will receive 14 weeks of pay, and one more week for each year served at the company (rounding partial years up). The firm is also dropping its one-year equity cliff so that employees who are laid off with under 12 months of tenure can buy their vested options; Airbnb will also provide 12 months of health insurance through COBRA in the United States, and health care coverage through 2020 in the rest of the world.
That strikes me as a pretty generous severance package.
I'm not a fan of Airbnb's business but this is highly commendable.
The severance package is the core metric to judge a company that is doing layoffs. In this case, it sounds like Airbnb did the right thing. Airbnb fired people well in advance of when they were actually forced to. This enabled them to provide an ethical severance.
Some companies wait until the last minute and then provide two weeks or similar. These companies should be publicly shamed for all time.
I wouldn't judge them too softly, they did after all promote having an internal services food team for years and virtue signaled all over the place that they wanted them to be team members and not contractors like every other tech company (they got stock, sick days, vacation, benefits etc), then fired them all over Christmas break one year and replaced them with contractors.
4x12 = 48 weeks of compensation disbursed by the entity. Restated compared to some nightmare no severance scenario meant they effectively terminated 4 FTEs to achieve slightly less than 3 FTEs of cost savings (adjusted for healthcare costs).
I'm not arguing against AirBNBs approach btw. Their CEO had a wonderful podcast on the Masters of Scale pod roughly two weeks ago.
However the Rawlsian philosophy on that marginal employee that got terminated effectively to fund the severance for herself and her colleagues is a tricky ethical consideration.
It's confusing. Some read it as "COBRA is available at full price" and others as "healthcare paid by AirBNB". My understanding is COBRA is just the default. The company can't really block it, for 18 months. No action required.
So if AirBNB went out of their way to mention COBRA, it likely means they're covering it.
You actually have to pay the full premium for healthcare. But still, assuming a months pay covers at least 3 months of Cobra coverage, that is 3 months PTO to get your head straight.
Do you realise you have to find a new job within those four months?! It's not 'time off', it's time desperately searching for a new job until you start eating into your savings and your children end up starving.
I’m surprised they were still handing out options - don’t most later stage startups switch to RSUs? I’d hate to have to decide whether to exercise today, cliff or no cliff.
Does anyone recall if Airbnb were one of the firms to institute more employee-friendly exercise windows? If so that takes some of the pressure off the decision.
That's why when a yet another aspiring startup wants to hire me, I ask for a high sign on bonus as an insurance, monthly vesting cycle, at least 200k in base pay and high severance upon termination. Never been given that, but I don't regret: looking back, all those "just 1 year till IPO" companies are underwater.
Monthly vesting without a year one cliff is not really done, AFAIK. I also don't think that there is a lot of wiggle room for negotiated severance terms. But sign on bonuses and 200k base pay could certainly be on the table.
Same, those clowns are Sky Rocket Ventures wouldn't stop calling me. I told them to match 65% of my then-salary, they realized they weren't talking with a broke 20 year old kid and stopped calling me.
I feel like this is a bit of a sweeping generalisation. Certainly many countries in Europe would not give this. And others would have maximums which are lower than typical Airbnb pay.
If they won’t let you cancel, and you don’t want to go, I’m sure there are plenty of ER nurses that you could donate your booking to. I also keep hearing of hospital bed shortages.
My read of that is that AirBnB is paying the premiums for the next 12 months, as regardless of what the company does all employees are eligible to stay on their employee plan and pay their own premiums for 18 months.
"Beneficiaries then have 60 days to inform the administrator whether or not they want to continue insurance coverage through COBRA."
If you are paying for COBRA you are doing it wrong. You take those 60 days to find private insurance. You basically get 2 free months of health insurance since you cancel on that 60 day mark and never pay. If on day 58 you need health insurance you pay COBRA. Otherwise - your new private insurance kicks in on day 60.
[Yes! You could have history of heart attacks and not find cheaper private insurance but I am hoping that isn't you!]
When I left my last job, I "lived" in Arizona. There was only plan on the Obamacare exchange there, and it was the same price as my employer's plan with much shittier coverage.
Back in the day, severance packages for white collar workers were close to one month per year served. My father received that from Kodak (Not once, but twice... He had the rare privilege of being laid off (From the same team, no less) in 2009, and then again in 2016. The severance package did not change much between each of his stints of employment.)
With that schedule, anyone who worked at AirBnB for four years or less looks to be in a similar position.
This makes me think, they value their reputation a lot more than the greedy 'minimize losses' option. This way, they still save money over 2020, while hopefully hitting the ground running when the whole thing clears up.
Isn't there much better way? Many big cities are projected to start opening up in June. I would expect life coming back to normal around August end. So that's basically 4 months. Why not just keep paying instead of doing severance and lose all these well-trained talent? If you are doubtful if 4 months will be enough, you can still offer option of continued employment at 50% or 75% pay? I feel move like this tarnishes stability aspect of companies. Does anyone now want to sell their houses and move to where AirBnB is so they have their job in future?
Dropping the cliff period for new employees is pretty much useless. The equity/ESOPs new employees will be exercising will be of the last valuation price which would be already high, and after Covid-19, with the struggles of tourism industry as such the notional value would have fallen a lot. So if you exercise those significantly expensive options now, you would probably need to hold it for a long time and really believe that AirBnB can be where it was.
What incentive does an employer have to give a generous severence?
Sure, there is a slight PR benefit, and you have slightly more chance of rehiring those employees later maybe, but as a shareholder it really seems to be throwing money away unless the severance package was agreed upfront when the employee was first hired (ie. as an incentive to join the company).
14 weeks pay, don't they just mean that you are on garden leave while given notice? That's quite common in Europe, have to admit the one year health insurance is a nice extra which is the first time I hear about it.
In parts of countries like Canada, the last part isn't particularly important, but it's not nothing. Typically, white collar employers cover, in part, or in full, medical insurance premiums that every resident is expected to pay. In BC, prior to the recent phase-out, it was ~$900/year. (That money now comes out of income taxes.)
Employers paying for that kind of benefit is either tax-advantaged, or just consistency of policy between their US, and Canadian offices. Not sure which.
However it is hardly comparable as unemployment benefits would kick in (on average 72% of your previous salary after taxes, maximum duration 24 months with decreasing amount).
For instance if you worked 3 years and your annual salary was 80k, you could get a benefit of 57k over 12 months.
it's generous by startup standards, but laid off kickstarter employees are getting an even better deal because they unionized: four months full pay for everyone, up to six months of paid (not COBRA healthcare), recall rights if the jobs open back up, release from non competes
How is this an even better deal? About the same amount of pay, half the healthcare paid (COBRA healthcare is same plan). As for recall rights and release from non-competes, these are slightly better than nothing I suppose.
If Airbnb is willing to pay 14 weeks (3.25 months) of severance, they must believe this is going to go on significantly longer than that. Or they're using this as an opportunity to cut underperformers at the same time.
Because if they believed things would start to recover by fall, wouldn't you just pay the people as normal and make a judgement call around then? You're spending the payroll money either way -- 14 weeks of severance and people stop working immediately, or 14 weeks of payroll and people are still working.
I personally suspect that travel related industries will be one of the last to recover, both due to consumer reticence and due to lower levels of disposable income during the recovery.
> lower levels of disposable income during the recovery.
There's also going to be a lot of pent-up demand from people who didn't lose jobs and had no outlet for leisure spending during the quarantine. I'm not sure which will win out.
Also, companies are realizing that maybe they don't need to spend thousands of dollars for last minute business trips if they can just do a zoom meeting instead.
We cancelled a trip to the US from Australia that would've been in full swing right about now and would normally be very keen to reschedule. However, even once restrictions lift, travel insurance is not likely to cover health issues in the US (especially a declared pandemic) and the risk of incurring huge costs is too great. That sort of thing may be a factor for many people.
All indications are that we are going to experience a not-so-great depression. Not a recession, an honest-to-goodness depression. 2020 will be down YoY in terms economic output probably across the world, and it wouldn't surprise me if that's not only true for Q2-Q4, but if it also lingers into Q1. My guess is that we will feel like things are growing again this time next year.
Some economists are hoping for a better outcome than this of course, but you can connect the dots and see what people are planning for, as you've done here. Airbnb is not alone in planning for depression, and the travel industry will be worse than most.
Australia's gov't owned ABC news company has started spreading articles filled with either optimism or "why a depression wont be so bad". The people who know these kind of things can see the way the wind is blowing.
You need to operate the company under the assumption that this will happen for a very long time, and that even afterwards people will think about travel differently
Depends. I'm a finance noob but I think there's a big difference from an accounting perspective to say "we have a big expense to pay for the next ~14 weeks" versus "we have a big yearly expense that will continue in perpetuity". I think this bookkeeping is especially important when looking for funding. Perhaps someone with more savvy and better articulation of the nuances can chime in here. (I'm interested myself on if I'm way off the mark here.)
The economic consensus is that COVID growth and an underwater economy will mutually reinforce each other for the next two years.
If you accept that scenario your decisions in the present about finances, investments, and employment all radically shift. My decisions have radically shifted to accommodate even though I have two essential industry employers with virtually no risk of being laid off.
What I personally use as a thermostat on how to proceed during adjusted life is the military. How they conduct business is bound by finances not beholden to a profit stream and they do not conduct business out of political ideals/favors. When they lift travel restrictions I will feel more confident about traveling. Once they reopen schools I will more confident about going back to work in an office building. When they drop the need for face masks or mandatory forced quarantine I will feel more confident stepping away from social distancing. Until those things happen I will continue to play it highly conservative in accordance with the suggested medical guidance to avoid exposure.
Underperformance is always relative to some degree. They most likely decided that much of the stuff that 25% is working on - the article mentions "experimental and costly endeavours" - won't be feasible even after the crisis is over and people book short-term rentals again.
I mean, personally I think a year is a better time estimate for connectivity returning (and maybe 3+ for economic recovery) but you are also looking at some specifics to airbnb here - much of their growth was people converting long-term rentals to short-term rentals - many of those will either get locked back up in the long-term rental pool or go into foreclosure
You also have the case that like stock prices employee hiring is often based on projections for anticipated need in a high-growth business - it's such a friction point, you are trying to stay ahead of the curve to build the capacity to grow now and handle that growth 12 months from now
Airbnb employee here (opinions are my own)-- Brian Chesky referenced making decisions so that Airbnb would be able to weather a 1.5-2 year storm. It likely will take that long before travel begins to recover.
The optimist in me wants to think that the executive team realized they had about 4 or 5 months before they had to lay off these folks, so they decided to give them a few months of time to look for work and be with their families since there wasn't that much work to do anyways. Maybe if they do this, then in a few years when the economy recovered those ex employees would want to return to Airbnb.
Either way, it's a good package, since most people are getting zilch at other places.
I think it's quite obvious that tourism isn't going to recover back to 100% where they were in 3 months, no...
Note that '100%' includes the growth prospects that Airbnb still had in January 2020. 'startups' like airbnb hire for growth. 25% workforce cut is roughly the growth prospects (20-30% per year) that airbnb had last year.
So no, that recovery won't come in just a few short months. For one because there's still a global pandemic related global lockdown. Second, because an effectively rolled-out vaccine is not expected until at least next year. Third because tourism is hardest hit in a normal economic crisis, in a recession and 20% unemployment figures like now, the first thing you stop doing is taking international trips for fun. Fourth because in a virus pandemic, tourism (concentrated populations gathering in hotspots like a museum, bus, airplane etc, and transporting the virus across borders) is a high-risk activity that gets restricted way more than other economic sectors like farming, manufacturing, or work from home office jobs. Fifth because most of airbnb's stock is caught up in one of two categories: people renting out their home when they're away on vacation, these people are staying home and aren't making their real estate available. Or professional airbnb companies which purchased real estate that's only economic with large revenues, financed with leveraged mortgages, many of these companies are set to collapse in a 3-month shutdown, let alone a 6-month low-activity industry. A lot of these will be folding and selling their properties. Both the demand side and supply side is going to take a hit, airbnb will run much less business for the next year at least and will need to bounce back. It won't be easy. Especially in an industry where you'll see dirt-cheap hotel prices competing for a few years.
> Or professional airbnb companies which purchased real estate that's only economic with large revenues, financed with leveraged mortgages, many of these companies are set to collapse in a 3-month shutdown, let alone a 6-month low-activity industry. A lot of these will be folding and selling their properties.
I wonder how this is or will impact the real-estate market? Are enough people going to foreclose without interested buyers that the market takes a plunge?
When Warren Buffett completely divests Berkshire Hathaway of all airline stocks, as he recently did, I think it's a reasonable bet that travel is going to be down for a while.
Airlines are very capital-intensive, and those are exactly the type of industries that do not weather recessions very well. One does not simply lay off a 50 million dollar jet. It needs to be maintained -- regardless of whether or not it is in the air, making you money, or it's grounded in a hanger.
I have heard of people taking a luxury Airbnb near where they live for a month since kids can be remote from school along with parents, and I just don't trust hosts or previous guest enough to ensure that the place is clean.
All indications at this point are that the virus spreads a lot more through the air than via surfaces. And it only stays active up to 3 days on plastic and metal surfaces, and that's in ideal conditions.
If you bring cleaning supplies and just wipe down high-contact areas like counters, doorknobs, refrigerator handle, etc. when you arrive, it doesn't really seem any more risky than something like bringing in groceries from the grocery store, which may have been touched by other people, the cashier, etc. Or to be extremely cautious, you could pay for an extra 3 days prior to arriving to make sure nobody has touched anything in that time. If you're gonna be there a full month anyway, what's another 3 days added on to the cost.
Take any sane model of the virus and you'll see that we're headed for a rebound due to early re-opening of states. I'm starting to bet against this entire year at this point.
Tourism won't even come close to recover until at least half a year after a corona vaccine gets available, countries will do everything they can to avoid the need for a second lockdown, and that includes drastic border controls. And it is not sure yet how many airlines will survive the crisis, combined with planes being perfect spreading ground for corona... and without airlines there will be no tourists.
The whole industry is fucked and it will probably kill some countries too, a lot have a massive, unhealthy dependency on tourism.
Even if we "open up" the virus won't be gone and society will have to function in a cautious state to mitigate the spread of the virus still. Lockdown was simply the most extreme portion, but the rest of the mitigation efforts will still have to continue at least until a vaccine is available. This means the economy is not going to return to normal for a long time.
It's going to go on far, far longer than 14 weeks.
Airbnb are going to have issues, as the longer this drags on, the more landlords are going to be forced to sell or commit to long-term rentals, limiting the number of eligible places, even if there is some later snap-back (due to say a very effective vaccine).
I'm shocked that 2020 revenues will come in only 50% below 2019. I don't think anyone will be travelling for the bulk of this year, especially with the looming threat of potentially getting sick in a foreign country or away from your home.
It will take 5+ years for them to get back the same level of inventory/hosts/customers as they had in 2019. Many hosts will foreclose on their rented properties during 2020 or convert to long-term rentals. Airbnb may lost inventory for multiple years, not just months.
The second wave will be the nail in the coffin for a lot of companies, I think Airbnb is one of them unfortunately.
> I'm shocked that 2020 revenues will come in only 50% below 2019
This is a fair point, but it also suggests strongly that a significant minority of their business is month to month rentals, possibly in place of leasing.
And hey, being frank, I wouldn't mind considering going somewhere else for a few months now that I can work remotely for a while.
I have no real data, but anecdotally a large number of my peer group (tech folks in NYC) fled the NY Metro Area in March. Those who had (not at-risk) family nearby stayed with family, while others (like myself and my partner) are quarantined in Airbnbs in more remote areas (although still close to a functioning medical system).
It's costing us an arm and a leg, but we've been very fortunate in that we can afford it. We normally live in a high-traffic apartment building with multiple dogs that require walks, so exposure seemed likely (and indeed a doorman later tested positive).
As someone who's spent a significant amount of time staying in AirBnBs and other transient living, renting month-to-month on AirBnB is a terrible idea unless you're fine paying 2-3x more while AirBnB takes the difference. Also if you show up to the property and aren't satisfied with something (eg. WiFi doesn't work), or need to modify your booked dates, it is extremely difficult to get a refund because AirBnB's customer service is awful (to be fair I last had to deal with them in 2017, so maybe things have improved since then).
The smarter move is to book a 2-3 days and work out a deal with the host.
The current property I'm staying in I originally found on AirBnB for twice the price at which I'm currently paying. And I have the peace of mind of not being locked in to a place for weeks/months in advance since I don't know how long I'll stay here.
I would too, but the thing holding me back is if the shit hits the fan, and I need to do something like buy a freezer to store extra food, I can't conveniently do that in an Airbnb. And if I somehow get sick, I'm at the mercy of the doctors and hospitals in this foreign land. I'd rather be in my own home with the doctors and hospital system that I'm familiar with. I think more than 50% of people feel this way, which is why I think a 50% cut in revenue is too little, I would say its more like an 80-85% cut in revenue. This is catastrophic for Airbnb.
> a significant minority of their business is month to month rentals
I was wondering about that too. My next-door neighbors vacated their place when the lockdown started, but someone else has been living there. Since they often rent their place on Airbnb for weekends, my assumption has been that this is another Airbnb renter. She's been there for over a month now.
I have a potential theory of future revenue for them - as "work from home" becomes more accepted and popular, working vacations or nomadding even within the united states will become a lot more popular for couples looking to get away, singles looking for new locations to try out and even families on trips.
There's been this sweet spot with AirBNB where you can rent a place for 1-2 months for a relatively small monthly premium over a 12-month lease that I've been planning to take full advantage of this year, already having been remote. A lot of AirBNB hosts have started preferring these sorts of arrangements because people are less likely to cause trouble. I can't help but think the AirBNB that replaces hotels might drop by a lot, but the mid-term monthly rentals might bounce back a lot quicker as people become less location dependent on work. I know I absolutely am planning to go somewhere warmer in the winter months.
There's still a huge opportunity in a hassle free monthly rental experience. Month to month through almost any legacy property management company is an absolutely dreadful experience with huge up front deposits and being treated basically like a criminal. I have no idea how big this market is admittedly but its been a very interesting value prop for me.
You might be surprized how many people are "stuck" around the world right now, and are staying in Air B N B's waiting for all the closures to end.
For example Argentina has cancelled ALL plane flights (in/out and domestic) until September.. and unless you have signed authority you can't even drive town to town. So anyone that was travelling there is now stuck, and are essentially forced to rent a place and stay put.
A few friends are caught there, and many others in similar situations around the world.
So Germany basically collected all its citizens that could be found (and that wanted to) around the world back home last month, including chartered airplanes and special permission organized for them to travel to the airport (~200.000 people).
You vastly underestimate how little of a shit is given by Millennial and Gen Z travelers.
Outside of the bubble of Bay Area and North East tech industries, a lot of younger people couldn’t care less, especially when seeing how insanely low the mortality/hospitalization rate is for their age group. Before I get the lecture, I know that them spreading it is also a risk, spare me.
People who think no one is going to travel this summer are deeply deeply entrenched in their preachy sanctimonious echo chamber of friends. Go look at how many young people were having picnics in groups at NYC parks this past weekend and then tell me no ones going to travel this summer. Get real.
Hosts definitely are pulling properties already - based off stories I've heard/read, many AirBNB hosts were/are overleveraged on their properties and have had to sell or convert to long-term now that their income has dried up, to avoid defaulting.
Further anecdotally, I've been closely following the rental market in my city because I'm looking for a long-term place for August. There's been a noticeable drop in prices, and _huge_ quantities of listings in buildings that were notorious for being "AirBNB hotels". Furthermore, lots of listings are obviously ex-AirBNB units - tells include being only available furnished, only available for ~4 month rentals, descriptions that include "Perfect for your next stay!" or words to that effect, and my favourite: hotel-style "No smoking" cards caught in the listing photos.
> I don't think anyone will be travelling for the bulk of this year, especially with the looming threat of potentially getting sick in a foreign country or away from your home.
I became an Airbnb customer in early April because of the disease. I was consulting for a client away from home, but my hotel room's mini-fridge was not cutting it, so I rented an Airbnb suite which contained a washer, dryer, oven, microwave, freezer and full refrigerator. I go to the supermarket, stock up on food, and don't have to leave for a week.
Airbnb is dead, long live Airbnb. Somebody else will take their place but I'm wondering how publicly traded companies like Booking and Expedia are going to handle this crisis.
I was too, but I have a few friends who own multiple AirBnBs. They are all fully booked with long term renters. Some of them were forced to stay because they have nowhere to go.
So I guess it isn't quite as bad as you'd imagine. I'd guess the purely vacation rentals are suffering, but the ones that were typically business renters could be converted to long term.
I think they're going to poach a ton of business away from hotels once things start opening back up. It's way easier to maintain social distance in an AirBnb (hotels have check-in processes, hallways where you have to pass other guests, etc), and I think more people will be travelling to rural areas where Airbnbs have an advantage.
Yeah but do you trust someone to sanitize their home properly after the previous guest or would you trust a hotel to do that correctly? Thats the question my friend circle has been thinking about...
Travel to cities is certainly done for a while. Travelling to rural areas might still have a chance. I have heard of families getting away to cabins in the woods where no human contact was needed. (Of course whether or not that should be allowed is a different conversation.)
I have no idea how big this market is, but I know some people who have fled COVID cities like NYC to spend 2 months in an Airbnb house with a backyard.
My initial reaction is "wow, nice severance package!" My secondary reaction is they must think things are going to be very bad for a very long time for this kind of payout to make sense financially.
Good point. If they're wanting to part ways with 25% of the workforce now, covering 3 months of full salary and 12 months of expensive healthcare, they must be expecting fundamental market shifts.
Also, the debt they took on may have been partly to cover these lavish severance packages while also extending the runway.
And yes, this is extremely lavish. Paying severance that appears roughly equal to the median annual income in the USA.
"Good point. If they're wanting to part ways with 25% of the workforce now, covering 3 months of full salary and 12 months of expensive healthcare, they must be expecting fundamental market shifts."
Why? Can't they rehire the people they laid off during this period?
It is generous by US standards, but it's just nice for many other western countries, where the standard is a few months of salary, or e.g. one month salary for each year worked (that is, if you had worked for the company for 5 years, you get at least 5 months salary on termination -- Israel mandates that one by law, for example, and NOT paying it is considered a criminal violation performed by the employer)
I'm not so sure. Recent news has been that lots of startups are laying people off and Google has slashed budgets and frozen (or at least scaled back) hiring across the company.[1]
Companies like Google and Facebook that rely on ads for most of their revenue aren't going to be doing so well when a lot of the businesses that buy their ads are closed down.
Companies like Apple that sell premium-priced goods are also not likely to do well in a recession - people who have lost their jobs or are afraid of losing their jobs won't be running out to buy a new iPhone.
AirBnb was doing about $4 billion in revenue per year before the crash with 7,500 employees. That's about $500k revenue per employee, which is on the high end of tech industry standards. How is that bloated?
Is that $4 billion in bookings or only their take? If it's the latter, then their "real" revenue per employee is much lower. For marketplaces it seems disingenuous when they use the top-line number for revenue given that they can only increase their rake so much.
Ugh, to be honest I get tired whenever I see the "Why did company XYZ need so many people, they're just a website!"-type comments. While it is definitely possible AirBnB was bloated, it's not hard for me to imagine at all what all these people did.
AirBnB is a relatively high-touch business, so I imagine a huge number of those people were in customer support/customer relations, both for travelers and for property owners. AirBnB also operates in a huge number of countries, and each of those countries need (a) marketers, (b) people with regulatory knowledge (often at a level much more granular than the country level - and to head off any 'but AirBnB ignores the regulations!' comments, while that may be true, I guarantee they still have people that know what they are), (c) again, customer service people knowledgeable with the local language and customs.
Tell us why you think 7,500 employees is too high, in order to implement, maintain, and grow an online lodging and experiences marketplace in 191 countries.
While I don't want to seem like I'm wishing unemployment or hardship on anyone, the implosion of Airbnb is already causing a rent price correction that was sorely needed in many cities that have become severely unaffordable.
Wired published an article about this effect in London [1] and I've seen price drops as much as $500 for condos in the downtown core of Toronto on Zillow already.
It's pretty bold to claim any and all price drops are directly attributable to Airbnb when in the middle of a recession causing pandemic that is heavily impacting normal housing/rental market activity.
I admit that both my observations, and the ones in the Wired article I cited, are anecdotal. And it's certainly not the only factor driving those rent decreases. But it's oddly coincidental that the biggest and most immediate price drops seem to be concentrated in the areas that had the most Airbnb listings, at least based on what i've looked at in Toronto.
It's possible that while AirBnB increased demand for housing, the market could have responded by building and allocating more real estate to housing, resulting in an equilibrium. So it is at least plausible to me that an implosion of AirBnB might be good for renters in the short term as there is an over-allocation of housing, but that without AirBnB, market rates will increase to about where they were before as supply drops over time in response. The whole thing is complicated enough that there's no way I'm going to trust any single, non-academic article on the subject.
If the short-term rental market suddenly evaporates, and you have a chunk of the housing stock full-time serving that much more lucrative market (and not catering to locals), this is the first thing that is going to put downward pressure on rents. Support mechanisms are in place for most "normal" classes of renters and owners.
I can only imagine how much it sucks to be laid off and what a difficult decision it must be for Airbnb executives.
To me, the severance and exit benefits do seem to strike an employee friendly tone. Kudos to the leadership to striking a good balance on keeping the business alive and doing right by their people.
These are abnormal circumstances. I wonder if it is possible to delay the layoffs by cutting salaries - maybe instead of firing 5 out of 10 equally paid people, they can cut the salaries of all 10 people by half (or something like that).
Cutting salaries in half guarantees they lose all the top performers, and probably more than half, instead of the 5 they pick. I don't believe that is the goal.
Never a good time, but especially in this environment!
I recall that airbnb workforce has become very marketing lopsided (vs. tech). Whereas tech folks generally have an easier time landing, I imagine the environment for the next 9-12mos being very bad for marketing/MBA folks.
I'll agree with that, even given how much I hate AirBnB as a company for what they've done to local housing in cities. They're at least doing the right thing here.
Readit News
That strikes me as a pretty generous severance package.
Deleted Comment
The severance package is the core metric to judge a company that is doing layoffs. In this case, it sounds like Airbnb did the right thing. Airbnb fired people well in advance of when they were actually forced to. This enabled them to provide an ethical severance.
Some companies wait until the last minute and then provide two weeks or similar. These companies should be publicly shamed for all time.
4x12 = 48 weeks of compensation disbursed by the entity. Restated compared to some nightmare no severance scenario meant they effectively terminated 4 FTEs to achieve slightly less than 3 FTEs of cost savings (adjusted for healthcare costs).
I'm not arguing against AirBNBs approach btw. Their CEO had a wonderful podcast on the Masters of Scale pod roughly two weeks ago.
However the Rawlsian philosophy on that marginal employee that got terminated effectively to fund the severance for herself and her colleagues is a tricky ethical consideration.
So if AirBNB went out of their way to mention COBRA, it likely means they're covering it.
That just means that it is available to you -- not that they are going to subsidize it.
I was under the assumption that companies offered severance pay as a means to save face.. and this is not part of the offer negotiation.
Deleted Comment
If you are paying for COBRA you are doing it wrong. You take those 60 days to find private insurance. You basically get 2 free months of health insurance since you cancel on that 60 day mark and never pay. If on day 58 you need health insurance you pay COBRA. Otherwise - your new private insurance kicks in on day 60.
[Yes! You could have history of heart attacks and not find cheaper private insurance but I am hoping that isn't you!]
With that schedule, anyone who worked at AirBnB for four years or less looks to be in a similar position.
in Korea this rule is in actual labour law. One month's salary for each year employed fulltime, for everybody.
Sure, there is a slight PR benefit, and you have slightly more chance of rehiring those employees later maybe, but as a shareholder it really seems to be throwing money away unless the severance package was agreed upfront when the employee was first hired (ie. as an incentive to join the company).
Deleted Comment
Separated? Is this American english?
https://gusto.com/blog/people-management/employee-separation...
Separated almost sounds as if this was consensual.
That being said, Airbnb gets some credit for a decent severance.
In California those can last up to six months.
Deleted Comment
Deleted Comment
Employers paying for that kind of benefit is either tax-advantaged, or just consistency of policy between their US, and Canadian offices. Not sure which.
Deleted Comment
However it is hardly comparable as unemployment benefits would kick in (on average 72% of your previous salary after taxes, maximum duration 24 months with decreasing amount). For instance if you worked 3 years and your annual salary was 80k, you could get a benefit of 57k over 12 months.
https://twitter.com/ksr_united/status/1256382357311012871
Because if they believed things would start to recover by fall, wouldn't you just pay the people as normal and make a judgement call around then? You're spending the payroll money either way -- 14 weeks of severance and people stop working immediately, or 14 weeks of payroll and people are still working.
There's also going to be a lot of pent-up demand from people who didn't lose jobs and had no outlet for leisure spending during the quarantine. I'm not sure which will win out.
People will be more willing to stay at a hotel where at least some level of cleaning is guaranteed/expected.
In Airbnb, and I have no such guarantees and no idea who stayed at the property before me.
Some economists are hoping for a better outcome than this of course, but you can connect the dots and see what people are planning for, as you've done here. Airbnb is not alone in planning for depression, and the travel industry will be worse than most.
Deleted Comment
You need to operate the company under the assumption that this will happen for a very long time, and that even afterwards people will think about travel differently
If you accept that scenario your decisions in the present about finances, investments, and employment all radically shift. My decisions have radically shifted to accommodate even though I have two essential industry employers with virtually no risk of being laid off.
What I personally use as a thermostat on how to proceed during adjusted life is the military. How they conduct business is bound by finances not beholden to a profit stream and they do not conduct business out of political ideals/favors. When they lift travel restrictions I will feel more confident about traveling. Once they reopen schools I will more confident about going back to work in an office building. When they drop the need for face masks or mandatory forced quarantine I will feel more confident stepping away from social distancing. Until those things happen I will continue to play it highly conservative in accordance with the suggested medical guidance to avoid exposure.
You also have the case that like stock prices employee hiring is often based on projections for anticipated need in a high-growth business - it's such a friction point, you are trying to stay ahead of the curve to build the capacity to grow now and handle that growth 12 months from now
Either way, it's a good package, since most people are getting zilch at other places.
Note that '100%' includes the growth prospects that Airbnb still had in January 2020. 'startups' like airbnb hire for growth. 25% workforce cut is roughly the growth prospects (20-30% per year) that airbnb had last year.
So no, that recovery won't come in just a few short months. For one because there's still a global pandemic related global lockdown. Second, because an effectively rolled-out vaccine is not expected until at least next year. Third because tourism is hardest hit in a normal economic crisis, in a recession and 20% unemployment figures like now, the first thing you stop doing is taking international trips for fun. Fourth because in a virus pandemic, tourism (concentrated populations gathering in hotspots like a museum, bus, airplane etc, and transporting the virus across borders) is a high-risk activity that gets restricted way more than other economic sectors like farming, manufacturing, or work from home office jobs. Fifth because most of airbnb's stock is caught up in one of two categories: people renting out their home when they're away on vacation, these people are staying home and aren't making their real estate available. Or professional airbnb companies which purchased real estate that's only economic with large revenues, financed with leveraged mortgages, many of these companies are set to collapse in a 3-month shutdown, let alone a 6-month low-activity industry. A lot of these will be folding and selling their properties. Both the demand side and supply side is going to take a hit, airbnb will run much less business for the next year at least and will need to bounce back. It won't be easy. Especially in an industry where you'll see dirt-cheap hotel prices competing for a few years.
I wonder how this is or will impact the real-estate market? Are enough people going to foreclose without interested buyers that the market takes a plunge?
If you bring cleaning supplies and just wipe down high-contact areas like counters, doorknobs, refrigerator handle, etc. when you arrive, it doesn't really seem any more risky than something like bringing in groceries from the grocery store, which may have been touched by other people, the cashier, etc. Or to be extremely cautious, you could pay for an extra 3 days prior to arriving to make sure nobody has touched anything in that time. If you're gonna be there a full month anyway, what's another 3 days added on to the cost.
The whole industry is fucked and it will probably kill some countries too, a lot have a massive, unhealthy dependency on tourism.
Airbnb are going to have issues, as the longer this drags on, the more landlords are going to be forced to sell or commit to long-term rentals, limiting the number of eligible places, even if there is some later snap-back (due to say a very effective vaccine).
It will take 5+ years for them to get back the same level of inventory/hosts/customers as they had in 2019. Many hosts will foreclose on their rented properties during 2020 or convert to long-term rentals. Airbnb may lost inventory for multiple years, not just months.
The second wave will be the nail in the coffin for a lot of companies, I think Airbnb is one of them unfortunately.
This is a fair point, but it also suggests strongly that a significant minority of their business is month to month rentals, possibly in place of leasing.
And hey, being frank, I wouldn't mind considering going somewhere else for a few months now that I can work remotely for a while.
It's costing us an arm and a leg, but we've been very fortunate in that we can afford it. We normally live in a high-traffic apartment building with multiple dogs that require walks, so exposure seemed likely (and indeed a doorman later tested positive).
The smarter move is to book a 2-3 days and work out a deal with the host.
The current property I'm staying in I originally found on AirBnB for twice the price at which I'm currently paying. And I have the peace of mind of not being locked in to a place for weeks/months in advance since I don't know how long I'll stay here.
I was wondering about that too. My next-door neighbors vacated their place when the lockdown started, but someone else has been living there. Since they often rent their place on Airbnb for weekends, my assumption has been that this is another Airbnb renter. She's been there for over a month now.
So... you want to take a holiday during a global pandemic?
There's been this sweet spot with AirBNB where you can rent a place for 1-2 months for a relatively small monthly premium over a 12-month lease that I've been planning to take full advantage of this year, already having been remote. A lot of AirBNB hosts have started preferring these sorts of arrangements because people are less likely to cause trouble. I can't help but think the AirBNB that replaces hotels might drop by a lot, but the mid-term monthly rentals might bounce back a lot quicker as people become less location dependent on work. I know I absolutely am planning to go somewhere warmer in the winter months.
There's still a huge opportunity in a hassle free monthly rental experience. Month to month through almost any legacy property management company is an absolutely dreadful experience with huge up front deposits and being treated basically like a criminal. I have no idea how big this market is admittedly but its been a very interesting value prop for me.
For example Argentina has cancelled ALL plane flights (in/out and domestic) until September.. and unless you have signed authority you can't even drive town to town. So anyone that was travelling there is now stuck, and are essentially forced to rent a place and stay put.
A few friends are caught there, and many others in similar situations around the world.
Is that unusual?
https://de.wikipedia.org/wiki/COVID-19-R%C3%BCckholprogramm_...
Outside of the bubble of Bay Area and North East tech industries, a lot of younger people couldn’t care less, especially when seeing how insanely low the mortality/hospitalization rate is for their age group. Before I get the lecture, I know that them spreading it is also a risk, spare me.
People who think no one is going to travel this summer are deeply deeply entrenched in their preachy sanctimonious echo chamber of friends. Go look at how many young people were having picnics in groups at NYC parks this past weekend and then tell me no ones going to travel this summer. Get real.
I was looking at some listings in Amsterdam and the prices seem really cheap for a weekend at the end of this month.
The inventory seems fairly limited, however. Perhaps hosts are already pulling their properties off the short-term market.
Further anecdotally, I've been closely following the rental market in my city because I'm looking for a long-term place for August. There's been a noticeable drop in prices, and _huge_ quantities of listings in buildings that were notorious for being "AirBNB hotels". Furthermore, lots of listings are obviously ex-AirBNB units - tells include being only available furnished, only available for ~4 month rentals, descriptions that include "Perfect for your next stay!" or words to that effect, and my favourite: hotel-style "No smoking" cards caught in the listing photos.
I became an Airbnb customer in early April because of the disease. I was consulting for a client away from home, but my hotel room's mini-fridge was not cutting it, so I rented an Airbnb suite which contained a washer, dryer, oven, microwave, freezer and full refrigerator. I go to the supermarket, stock up on food, and don't have to leave for a week.
So I guess it isn't quite as bad as you'd imagine. I'd guess the purely vacation rentals are suffering, but the ones that were typically business renters could be converted to long term.
Deleted Comment
Also, the debt they took on may have been partly to cover these lavish severance packages while also extending the runway.
And yes, this is extremely lavish. Paying severance that appears roughly equal to the median annual income in the USA.
Why? Can't they rehire the people they laid off during this period?
I'm not so sure. Recent news has been that lots of startups are laying people off and Google has slashed budgets and frozen (or at least scaled back) hiring across the company.[1]
Companies like Google and Facebook that rely on ads for most of their revenue aren't going to be doing so well when a lot of the businesses that buy their ads are closed down.
Companies like Apple that sell premium-priced goods are also not likely to do well in a recession - people who have lost their jobs or are afraid of losing their jobs won't be running out to buy a new iPhone.
[1] https://www.cnbc.com/2020/04/23/google-to-cut-marketing-budg...
Good to hear that they are giving a decent severance package.
Thought I misread that the first time through. What did those 7,500 do?
AirBnB is a relatively high-touch business, so I imagine a huge number of those people were in customer support/customer relations, both for travelers and for property owners. AirBnB also operates in a huge number of countries, and each of those countries need (a) marketers, (b) people with regulatory knowledge (often at a level much more granular than the country level - and to head off any 'but AirBnB ignores the regulations!' comments, while that may be true, I guarantee they still have people that know what they are), (c) again, customer service people knowledgeable with the local language and customs.
AirBNB is a big company, and big companies have lots of employees.
Wired published an article about this effect in London [1] and I've seen price drops as much as $500 for condos in the downtown core of Toronto on Zillow already.
https://www.wired.co.uk/article/airbnb-coronavirus-london
To me, the severance and exit benefits do seem to strike an employee friendly tone. Kudos to the leadership to striking a good balance on keeping the business alive and doing right by their people.
Any which way these are hard decisions :(
Never a good time, but especially in this environment!
I recall that airbnb workforce has become very marketing lopsided (vs. tech). Whereas tech folks generally have an easier time landing, I imagine the environment for the next 9-12mos being very bad for marketing/MBA folks.