Airbnb Projects Revenue Could Fall by Half This Year

By Cory Weinberg

 

April 8, 2020 11:59 AM PDT

 

Airbnb, reeling from the coronavirus’ spread, has projected that its revenue will plunge some 54% this year, people familiar with the matter said.

 

In a scenario the company has shown investors, Airbnb’s revenue would fall to about $2.2 billion this year, from $4.8 billion in 2019. The scenario is preliminary, as no one knows how long the virus could linger over the travel industry. But the steep decline underlines why Airbnb felt it needed to raise $1 billion in debt this week from two private equity firms, at a lofty 11% interest rate, as it seeks to avoid making deeper spending cuts.

 

THE TAKEAWAY
Airbnb is projecting that its revenue will tumble by some 54% this year due to the coronavirus pandemic.

 

The extent of the company’s projected losses this year wasn’t immediately clear. CEO Brian Chesky has already told employees the company would cut about $800 million in marketing costs this year, or about 15% of the company’s overall spending from last year. Chesky has said he couldn’t rule out layoffs, and people close to Airbnb still expect the company to make some staff cuts in the coming weeks.

 

The revenue projection has some optimism tied to it. The company also estimated that it would reach about $5.6 billion revenue by 2021—about 15% more than in 2019, the people said.

 

The expectations for 2020 revenue assume that by midyear, bookings would total about half the level they were last year, one of the people said. That might be rosy, considering it is unclear how much people will want to travel even in the second half of this year without a proven coronavirus treatment or vaccine.

 

Internally, Airbnb executives have discussed a strategy that would position the company to try to come out ahead when the virus subsidies, giving it enough of a cash cushion that it could spend on growth initiatives.

 

The company had about $3 billion in cash, cash equivalents, and marketable securities at the start of 2020. Before the coronavirus outbreak, Airbnb had been expected to go public sometime this year.

 

The company is having discussions to raise even more money, a person familiar with the matter said. The $1 billion debt raise gives warrants, or the option to buy shares, to private equity firms Silver Lake and Sixth Street at an $18 billion valuation. That marks a steep drop from Airbnb’s last private financing at $31 billion in 2017.