Understanding Airbnb’s summer recovery

New financial reporting shows how rough the unicorn's downturn was

New numbers concerning Airbnb’s summer performance were reported this week, with The Information adding to the performance figures that Bloomberg previously detailed earlier this year.

Airbnb announced that it filed privately to pursue a debut this August. We have yet to see its public IPO filing, but, all the same, the flotation is coming.


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If you’re like me, this year’s chaotic news cycles have made it hard to track any single story well. So this morning I want to put together a financially focused chronology of Airbnb’s year, including the new data. Enough has happened over the past few months that any prior work we’ve done is too dated to use.

So, let’s rewind the clock and dig into the biggest financial moment from Airbnb’s 2020, capping off with the latest reporting, including details from the company itself on booking volume recovery as we go.

This should be easy, fun and useful. Let’s go!

Airbnb’s 2020

Heading into 2020, Airbnb promised to go public in 2020. Given that there’s technical pressure from holders of Airbnb stock options for the company go public inside the year, the vow made sense. Airbnb was founded around 12 years ago, meaning that the company was already a bit aged for a private firm on an IPO path. Toss in the options issue, and if Airbnb wanted to hold onto its workforce, this was the year to go.

And Airbnb was well-capitalized heading into this year, so a direct listing was in the cards.

Enter 2020 and a few unexpected events. When COVID-19 hit Airbnb’s key markets it took the travel market with it, leading to this column asking on March 18th whether the company could go public this year given the state of its industry. At that point we knew that Airbnb’s cash balance was about $2 billion heading into the start of the year, and that the company had reported Q4 2019 revenue of around $1.1 billion (+32% YoY, per Bloomberg) and negative earnings before interest, taxes, depreciation and amortization of $276.4 million (+92.4% YoY, per Bloomberg).

The company’s persistent lack of profits heading into 2020 was the subject of our curiosity at the start of the year.

In late March, Airbnb announced that it would pay out $250 million to hosts to soften the blow of the pandemic’s travel declines. That was not a cheap move, and when the company expanded the policy this column wrote that it was “an intelligent if expensive way to help preserve user trust.”

Airbnb was bleeding cash at the time, so it went out to get some more, raising $2 billion in April from a few sources in two tranches. In early April it became known that Airbnb had “raised $1 billion in debt and equity from private equity firms Silver Lake and Sixth Street Partners” per TechCrunch reporting. And around a week later, the company added another $1 billion in debt.

Then came May, and some very public layoffs: Airbnb let 1,900 employees go (around a fourth of its workforce). At the time Airbnb warned that “with revenue this year forecasted to be less than half of what we earned in 2019,” it had to take drastic action.

Then in June, some good news — local demand for Airbnb rentals began to spike, presumably as people got very bored of sitting in the same room for months at a time. On “Good Morning America,” Airbnb CEO Brian Chesky said the following:

From May 17th to June 6th, the three-week period, we did more nights booked than that period of time last year … does this represent a recovery or pent-up demand? No one knows yet … But I will tell you, none of us in our darkest of hours forecasted [that] even [during] that period of time, we would see as many people traveling over Memorial Day this past year as the year before.

More good news.

So, how did the summer period really go? It was improving, but rough. Bloomberg reported that in Q1 2020 Airbnb had revenues of $842 million and an adjusted loss of $341 million. In Q2 2020, the period ending June 30, those numbers fell to $335 million in revenue and an adjusted loss of $400 million.

From a cash perspective, things were slightly worse. Airbnb’s cash consumption in the first two quarters of 2020 came to $850 million, according to The Information. That was a dramatic flip from the year before with a cash flow result of +$400 million in the same period. You can see why the company cut staff and its IPO came into doubt.

Third-party Airbnb performance data looking at July and August shows continued recovery in bookings and demand. It appears that the boom in local demand is driving Airbnb back into comfortable financial territory. Given that the company’s Q3 was presumably far better than its Q2, it’s perhaps not a surprise that we have yet to see an S-1 filing from the company; it will want to have its most recent numbers in the document to show how far back from the brink it has come.

An anecdotal data point: My wife and I wanted to rent a cabin in Rhode Island, where we live, for a weekend. Good luck. Airbnb’s supply of interesting locales was booked up. It appears that everyone else already had the same idea.

A caveat on the recovery story. As we noted above, even heading into the COVID-19 era, Airbnb was struggling to make money. It’s persistent losses were a turnaround from prior periods of adjusted profitability. Those dynamics could still be at play in the recovered Airbnb. If so, we may still see a pretty unprofitable firm looking to go public. This IPO might not be the slam dunk that some are expecting.

Yes, it is fashionable to be bullish on Twitter concerning companies like Airbnb as it makes one appear to very startup-friendly. But have Airbnb’s underlying economics gotten better in 2020? Maybe thanks to cost-cutting layoffs? It’s hard to say. But even if the firm may manage an IPO this year, questions remain about its near-term ability to generate positive net income.