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  • - [Narrator] Airbnb will go public

  • with an estimated market valuation of over $42 billion.

  • A remarkable feet when considering just eight months ago,

  • the home-sharing giant was in crisis mode

  • with its business being crushed by the Coronavirus pandemic.

  • From April to June, 2020, revenue was down 72%

  • as travel and bookings came to a virtual

  • standstill worldwide.

  • Here's how Airbnb managed to pivot towards profitability

  • during a global pandemic and how it might fair

  • amongst continued travel restrictions and beyond.

  • When the pandemic struck in March,

  • travel restrictions around the world sent Airbnb's bookings

  • and revenues into free-fall.

  • Bookings in Europe alone went down 80%.

  • Airbnb was burning through its reserves

  • and needed a swift infusion of cash.

  • So its first lifeline was securing $2 billion in loans,

  • but these didn't come cheap.

  • - So when the pandemic hit, Airbnb was bleeding

  • through its cash reserves and it needed a swift infusion

  • of cash.

  • But the loan that they got was,

  • came at a very steep interest rate

  • and it was an interest rate of 11%,

  • which is often associated with distressed assets.

  • - [Narrator] At this point, Airbnb's valuation

  • had fallen from $31 billion in 2017

  • to 18 billion in April, 2020.

  • Despite this, Airbnb was still under pressure

  • to go public by year's end.

  • - So Airbnb CEO had toyed with the idea of going public

  • for years, but he'd stopped short of pulling the trigger.

  • Now that was leading to some anxieties setting in

  • among early investors and a handful of employees

  • who were set to lose their stock options next year.

  • - [Narrator] Like many other companies during the pandemic,

  • Airbnb dramatically reduced its cost to get by,

  • costs that have grown significantly over the last few years.

  • Before the pandemic, Airbnb had expanded

  • into new areas like transportation and media

  • and spent big on things like marketing

  • and a new corporate headquarters,

  • increasing the company's total costs

  • more than five fold between 2015 and 2019.

  • - So even before the pandemic,

  • you had board members asking executives,

  • "Hey, why are your costs so high?"

  • Airbnb spent big to expand into all sorts of new areas.

  • It also spent big on a new corporate headquarters

  • and it typically spends heavily on things

  • like sales and marketing.

  • - [Narrator] To alleviate its balance sheets,

  • Airbnb cut big expenses, put many non-corporate projects

  • on hold and laid off a quarter of its staff.

  • - They early on said that their founders

  • wouldn't take a salary.

  • They cut pay in half for top executives.

  • They slashed sales and marketing expenses,

  • but it still wasn't enough.

  • We spoke to CEO, Brian Chesky,

  • and he said he went through his accounts line by line

  • to see what could be cut.

  • - [Narrator] But none of Airbnb's maneuvers

  • would work if people didn't start booking

  • on its platform again.

  • So the third move it made was to adapt its platform

  • for pandemic travel.

  • - People were sitting at home.

  • They still wanted to travel but they couldn't get

  • onto a flight.

  • So what people start doing is that they start driving

  • to smaller towns and cities.

  • And what do they do?

  • They book Airbnbs because big hotel chains

  • don't have a footprint there.

  • So Airbnb gets lucky.

  • - [Narrator] Before the pandemic,

  • big cities visited by tourists had been Airbnb's strength,

  • but these new local stays in primarily suburban

  • and rural locations became the company's focus.

  • - CEO Brian Chesky sees this trend

  • and immediately capitalizes on it.

  • - [Narrator] The company redesigned its website and its app.

  • So its algorithm would show prospective travelers,

  • everything from cabins to lavish beach houses

  • near where they lived.

  • By August more than half of bookings were made

  • for stays within 300 miles of guests location,

  • according to the company.

  • And these moves help stem the losses in reservations.

  • The company reported a surprise profit in the third quarter.

  • This quarter is typically the most lucrative

  • for the company and Airbnb has turned a profit

  • in that period every year since 2017.

  • Airbnb has never had a full year profit,

  • but it's turned around during the global pandemic,

  • and at a time when the hotel industry is drowning,

  • has gooey investors confidence

  • and helped its valuation bounce back.

  • - One of Airbnb's near term challenges

  • is of course the pandemic.

  • What will that look like in the future?

  • How does travel change as a result of that?

  • Separately, the company has traditionally struggled

  • to police crime on its platform,

  • and that is expected to get a lot more scrutiny

  • as the company sells its shares to the public.

  • - [Narrator] Skeptics wonder how long the company

  • can keep costs down and stick to its core business.

  • And questions remain on whether the growth

  • in revenue and bookings is sustainable.

  • Or whether Airbnb is simply the main beneficiary

  • of a battered hospitality industry.

- [Narrator] Airbnb will go public

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How Airbnb Salvaged Its IPO | WSJ

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    joey joey posted on 2021/05/31
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