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Why does AirBnb need a billion dollars?

I can't find anything suggesting they're spending more than $100mm on their ongoing litigation, the technology isn't particularly novel or complex, is the rest just going to compliance or to pay for previous commitments?

Just seems like an absurd amount of money. That's like one year of revenue for them.


AirBnb is in an existential crisis right now... it might take years before their market recovers...

It makes absolutely sense to have enough money to weather this storm....

Even firing people costs money... even just keeping their lights on, and service at bay, (with no new features) costs money....

People that usually comment like the above are either: Young and inexperienced, or just not don't have real life experience on running a business. I used to think like that when I was young, but after some years of experience your view on things changes and becomes more nuanced.

In general, it’s a great question: why does it take such extreme overhead to run a digital company that’s like Craigslist with better pictures. I understand it’s more than that but it’s still a valid philosophical question to ask it there’s a way to run it with say 1,200 employees? Or maybe there’s not.

It’s analogous to the size of government and this trend of doing less with more.

Craigslist has 50 employees. I know there’s a ton of counter arguments to minimize my point but surely there’s a third way between 50 and 12,000.

Craigslist is only the listing part. Airbnb does listings, but it also does booking management, cancellations, payments and refunds, host support, etc as well.

Plus Airbnb has reps all over the world helping hosts. If they had ten staff (photographers, sales, etc) in every city that has more than a million population that'd account for more than 5000 people alone.

Not sure how much "helping" of hosts Airbnb does, at least when it's really needed. They quick and thick with platitudes but thin on support when push comes to shove as they almost always side with guests.

I'm a superhost with only 5 listings one has over 100 reviews with 4.98 average rating. So far Airbnb has remotely adjudicated 2 guest disputes (on my 4 years of operations) that cost me $5k. Not trivial.

That's subjective though. The guests who raised the disputes presumably think Airbnb did a great job.

Dispute resolution is essentially marketing. When a host tells people they lost a dispute most people don't care because they're not going to be in that position. Most people can't afford to buy property to let on Airbnb. Even it they are in a position to buy and let a property, so long as Airbnb have more supply than demand then they're happy - they're getting every booking they can. Having another host in an area that already has hosts doesn't add much to their business. (If you were the only host in the area then you'd be much more likely to win disputes.)

When a guest tells people they lost then everyone can imagine being in that position, and might stop wanting to use Airbnb. That has a measurable impact on Airbnb's revenue.

The key thing to remember with any company that runs both sides of a marketplace is that they care about themselves more than either party in a dispute. I have no idea about the numbers, but if Airbnb side with hosts more than 10% of the time I'd be absolutely amazed. In popular areas it's probably less than 5%.

I agree completely with all you say, particularly the incentives to favor guest outcomes. There is a rising tide of hosts scarred by Airbnb here in Bali. The market is (was) ripe for alternatives.
I think the question is what are they going to do with $1B though? Like why would they ever need that much money? I have the same question about a bunch of unicorns like Lyft and Uber. Their core offering hasn't changed all that much in years. My only guess is that it's like Hitchhikers Guide to the Galaxy where they have spend 10% of operations and 90% on running their complaint department.
"Airbnb Will Give $250 Million to Hosts Who Lost Income to Virus"

https://www.bloomberg.com/news/articles/2020-03-30/airbnb-wi...

When you write it like that, they sound generous. In reality, they tried to pass the hit for Coronavirus related cancellations to the hosts and then realized they were in for legal trouble if they followed through.
Iirc they passed the costs from the end user to the hosts by enforcing a much more lenient refund policy than what many hosts had put on their listings?
Might you or someone else be able to elaborate? Did they simply tell hosts that they were responsible for refunding the money or was it that hosts were on the hook for AirBnBs percentage of the bookings?
Why would they do this? I thought this is what travel insurance is for, at least in Norway I think they are liable for the bill when the government deems an area unsafe to visit
With 13,000 employees at an average fully-loaded cost of $150K/yr (just a guess), $1B will let you keep them all employed for about 6 months.
They have 13000 employees. That's a lot of money in salary alone
Well why do they have so many employees?
The number of countries they operate in and the assumption that the next few years would be growth years. This isn't really rocket-science.
The vulnerabilities of this business model laid bare. If you're a business like Airbnb you have to be global, otherwise a competitor will be and they'll eat you up. You need solid in country representation otherwise competitors with a deeper regional focus (even smaller companies) will have better offerings and eat your market share. It seems being global and local is possible with 13,000 employees.... except when tourism crashes 90+%.
Sure, but why do they need 13,000 employees is the question.
No doubt there's big layoffs coming
Makes sense to borrow at 10%?!?! You are witnessing the end here
And comments like this usually come from people with a warped concept of money and funding. But it doesn't help to comment on the nature of a poster because you don't know much about them.

The comment is not on the necessity of money but the amount. I legitimately can not fathom why AirBnb needs that much money to run a service business on top of a custom app and website when the fundamental complexity of the business (the particular nuances of local markets, their regulatory/compliance needs, etc) has always been a second thought to their management and trawling for articles, it does not seem like they need that much money to continue. Particularly since regulatory bodies and courts have closed worldwide.

They are a middleman but a very complex one with what I would guess are enormous legal costs. Paypal has the same amount of employees. Uber has twice the amount. Could they exist with fewer employees? I'm sure they can but that means less people employed.
Employees and potential assistance for hosts...
This is something I've struggled with as well conceptually. The company has 12000+ employees and is essentially an online marketplace.

I mean at what point will people stop valuing a business like that like a tech company and start valuing it like a rental company? Because the defining feature of technology is essentially low marginal cost at scale, and these companies just seem to keep growing in their human labour.

This seems generally true for a lot of companies in the "sharing economy" space.

I think a good counter example is Etsy. They're like an old dog in the startup unicorn space. They took an existing market and commoditized it. Grew too fast behind a sneaky CEO and well-publicized tech culture. Went IPO, got sued, fired the CEO, let go off a bunch of staff working on projects outside their core business. And since then have been kinda cruising for a while earning a lot of revenue and keeping their business stable. They have <1000 employees to do all of this which seems like a reasonable number.
> Because the defining feature of technology is essentially low marginal cost at scale

Outside of the current crisis I think this holds true doesn't it? I'd be curious to compare how many employees AirBnb has per bedroom compared to a hotel chain (and then factor in that they are still in the process of scaling).

The issue now means they have pretty much zero revenue, but that's kind of beside the point. I'd venture to guess they can manage costs better than a hotel since they don't actually own any buildings, or employ the folks that maintain those buildings. As far as property costs, they take a one time hit on cancellations.

I feel like it’s unfair to suggest they stop valuing the company like a tech company while simultaneously calling them nothing more than an online marketplace.
Google suggests Marriot has 176,000 employees, and Hilton 169,000. So AirBnB is massively smaller, still.

Underestimating employee counts is a phenomenon similar to underestimating software rewrite costs/time. The happy path seems simple... but then there's thousands of marginal features or requirements that have come up over the years that make the thing more viable that all take more people and more time.

AirBnb doesn't operate any properties. I'd bet 90% of Marriott and Hilton staff are running hotels. Not applying machine learning to the check-in process.
Well, yes, exactly. That's the theory behind their valuation: that they might be able to capture the revenue with much lower overhead.
Your guess of 90% seems in line with AirBnB: 0.1 * 170,000 = 17,000, which is still more than AirBnB's current headcount, right?
A marginal amount considering you need to have far less operational staff "below the line" when you don't have thousands of properties to manage.
Its understandable why a global hotel chain would have so many employees. Each location needs management staff, supervisors, front desk attendants, housekeepers, etc. Makes sense why AirBnB is so much smaller. It's still curious why they have so many employees. Probably a lot of regional support staff but idk.
> Google suggests Marriot has 176,000 employees, and Hilton 169,000. So AirBnB is massively smaller, still.

Marriot et al employ hotel staff, cleaners, chefs, restaurant staff, bar staff... people to run a hospitality business.

Should Airbnb start counting every host on the platform and then every cleaning person that cleans the apartment?

Fairer comparison would be booking.com with 17000 people. Which still seems quite high to be honest.

The core strength of tech startups is the scalability without increasing headcounts. AirBnB is throwing that strength away in the pursuit of growth.
Essentially think of it as a lifeline for a year, they are prepared for things to be rough for a while. Now if the virus persists and things are still as crazy now as late into the summer/fall all these hosts who bought a few houses for airbnb rentals begin to lose the houses to defaults. Millions laid off don't have money to travel for hotels or airbnb rentals and those that do are afraid due to virus concerns. What seemed like a total bulletproof business model is falling apart. But that's if things stay bad for awhile. I truly hope not but the loan keeps them solvent.
Crazy prediction: Airbnb offers financing to leveraged hosts who will decimate the supply side of the marketplace if they lose their property.

Like a Stripe loan, but for the house you bought to Airbnb.

When the market comes back all the loans are sold off (collateralized or just packaged up) and Airbnb can service their original debt with the spread.

But that's if things stay bad for awhile.

Tourism was the first sector to suffer in this crisis and my guess is it will be the last to recover.

When you're large enough it's easy to hire people to gain a 0.01% lift in metrics and still come out ahead. At least on paper/dashboards but that's usually all that promotions and budget allocation is based off of. Downsizing after that is hard and expensive.
So Airbnb has tried to unsuccessfully pivot to a payments infra company for several years now. Notable acquisitions for this effort include acqui-hiring ChangeTip, a bitcoin micropayments platform, and Tilt, a social payments platform. But Square and CashApp are way ahead of the curve. I suspect there's internal political problems.
They are expecting their revenue to basically go to near zero for the next year.
Cheap acquisitions
because their revenue is basically $0 right now?

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