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- 2020 was supposed to be the golden year for Airbnb,
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it was supposed to be the year that Airbnb went public.
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They were supposed to be the hottest offering
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of this year.
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- [Narrator] In just under a decade,
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Airbnb went from a single air mattress for rent
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to a global company valued at more than 30 billion dollars.
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The home sharing giant has thousands of employees,
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over three million hosts, and seven million listings
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in over 220 countries.
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It even branched out with a new division called Experiences.
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Which allows guests to book outings.
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But travel is now at a stand still.
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Airbnb's planned listing is in doubt.
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Expected revenue is down by at least half,
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and CEO Brian Chesky said 25% of staff will be cut.
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So how did one of the most successful startups of the decade
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become such a vulnerable company?
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- Airbnb was founded in the aftermath
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of the 2008 financial crisis.
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A lot of ordinary people had lost their jobs
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and were looking for secondary income.
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Once the idea of sharing your home with someone took off,
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a lot of people bought into that promise.
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- You know we had revenue from day one.
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And we didn't actually need to raise money
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at any given point.
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We decided that we invest ahead of growth
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and we've always tried to think about it like a throttle.
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So that we could at any given point
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throttle into profitability.
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- Airbnb was profitable by a certain measure
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in 2017 and 2018.
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So that gave investors a lot of confidence
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and excited everyone, really,
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about the prospect of a startup like this
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that has become a household name
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around the world to go public.
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- These are beautiful homes.
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- [Narrator] The company spent big
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during this period of growth.
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Administrative costs increased 113% between 2017 and 2019
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as they hired thousands of employees
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and built out a corporate headquarters
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in a trendy San Francisco neighborhood.
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Then 2019 ended with a tragedy.
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- Airbnb now says it is banning house parties.
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That after a shooting left five people dead
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in San Francisco in a suburb there on Halloween night.
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- This mass shooting was really a moment of reckoning
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for Airbnb and that's what led them to invest
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over 100 million dollars into safety initiatives.
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- [Narrator] These expenses helped bring Airbnb's
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total costs to 5.3 billion dollars last year.
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More than double what they were in 2017.
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- You had board members grilling some of the executives
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and saying, "Hey, your costs
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"are outpacing your revenue growth.
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"Lets reign that in, let's control that."
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And then of course the pandemic hit
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and changed everything for Airbnb.
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- China says the number of people infected
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by a mysterious respiratory virus
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has more than tripled over the weekend.
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- [Narrator] In January, officials in China
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issued local travel warnings and restrictions
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following the spread of Covid-19.
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- It wiped out bookings over night in China.
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So remember at the time,
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no one thought this would become a global problem.
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- [Narrator] And then on March 11th, President Donald Trump
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announced new international travel restrictions.
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As Airbnb bookings fell, Chesky held in-person meetings
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with employees to discuss what these new developments meant
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for Airbnb and their plans to go public.
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- What was happening was a lot of anxiety
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was building among employees
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because a lot of them have stock options.
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And those are set to expire later this year,
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which meant that if they didn't go public this year,
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a lot of valuable options that employees hold
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would just be worthless.
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So Mr. Chesky really took it upon himself
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to reassure employees, to say,
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"It's gonna be okay.
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"We are still very much going to list this year."
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That changed in a matter of days.
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By the end of March, he struck a more cautious tone.
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He held a video conference with employees
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where he said everything is on the table.
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- [Narrator] Around this time many guests
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began to demand refunds for reservations.
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But Airbnb had a long time practice
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of allowing hosts to set their own cancellation policies.
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- But in a world where you have guests fighting back
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and saying, "Hosts are not giving us any refunds,
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"what's Airbnb gonna do about it?"
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I think that really shook the company as well.
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- [Narrator] This led to a sudden decision by Chesky
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to give guests refunds for certain bookings.
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After backlash from some hosts,
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Chesky issued an apology to them.
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- I am sorry.
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I'm sorry we didn't consult you as partners.
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And I've heard from you ever since that decision.
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- [Narrator] Airbnb said it would pay hosts 25%
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of what they would have received for canceled bookings.
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They also created a 17 million dollar mortgage fund
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to help top rated hosts cover mortgages.
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By April the company had barely any revenue
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coming in from short term stays.
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- So they ended up raising a billion dollars in debt
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at a very high interest rate
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that is associated with distressed assets.
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So overnight Airbnb went from being
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the Silicon Valley unicorn
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that is a household name around the world,
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to being reduced to business that is in distress.
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- [Narrator] On May fifth, Brian Chesky announced
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massive staff cuts in a memo
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that has drawn praise for addressing the impending layoffs
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with compassion and clarity.
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Chesky said nearly 2000 employees,
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a quarter of Airbnb's workforce would be cut.
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He also said 2020 revenue would be less
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than half of what it was in 2019.
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- I think everyone would be very surprised
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if they choose to go public later on this year.
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What I'm hearing from investors
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is that Airbnb would need at least two good quarters
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before they go public.
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- [Narrator] The pandemic has shifted Airbnb
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in fundamental ways.
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The company is pivoting to longterm stays,
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and recently rolled out cleaning guidelines
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to help guests feel safe whenever they do return to rentals.
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The sudden collapse of the Airbnb economy
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that was a lifeline for many
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has also exposed deep cracks in the sharing economy.
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- [Preetika] If you think about it,
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Airbnb is really a property manager
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without the property risk.
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Unlike hotels that run and manage their properties,
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Airbnb doesn't own any of the properties.
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The pandemic has really held a mirror
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and has really made us all question
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the very fundamentals of the sharing economy.
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Who takes on the risk.