Airbnb receives $1 billion investment to help recuperate lost revenue

Courtesy+of+Pixabay

Courtesy of Pixabay

Gabriel Rivera

Airbnb rose to prominence in the hospitality industry due to its ability to satisfy the demands of both hosts looking to rent out apartments and homes, and as well as travelers searching for cheaper alternatives to hotels.

“People who share their homes keep up to 97 percent of what they charge for their listings, while guests have easy access to a wide range of places to stay — from budget to luxury — in nearly every country and region in the world,” said Airbnb in a recent statement.

In the past months as travel and tourism have declined worldwide, hundreds of thousands of hosts have seen the demand for short-term and long-term rentals drastically diminish.

Although Airbnb planned to go public this year, it instead “enacted a hiring freeze, slashed its $800 million marketing budget and cut the pay of its top executives,” according to The New York Times.

The billion-dollar investment raised by the company is part of a larger initiative by Airbnb to raise as much money as possible to cover losses caused by the coronavirus outbreak. With non-essential businesses across the world closing and and travel stagnating, Airbnb finds itself in a storm of controversy and potentially on the verge of collapse.

Hosts that relied on renting out homes to customers on Airbnb as a steady source of income are now scrambling to find local tenants to profit off of. Those who have continued to market their property on Airbnb have taken advantage of the ongoing pandemic to generate sales, promoting their homes as an ideal location to remain in quarantine.

BBC News reported that some homeowners in the British countryside have promoted their homes as “COVID-19 retreats” or “perfect for isolating with the family.”Airbnb has addressed these concerns in a statement saying they were banning listings with any correlation to the coronavirus, COVID-19 or quarantine.

Additionally, the company has allowed users to cancel bookings scheduled until May 31. To limit the potential spread of the virus, no one with symptoms or awaiting test results will be admitted to a home they book.

Despite these precautions, Airbnb has witnessed a sharp reduction in business. This is primarily due to widespread fear of contracting the virus and the social distancing guidelines and regulations that have been enforced by local and regional governments.

For example, the Australian government has now deemed it mandatory for all overseas visitors to remain in quarantine upon arrival at their previously booked hotel.

The effects of Airbnb’s struggles have led many to predict major changes in communities that often host short term rentals through the company. In Byron Bay, Australia, real-estate agent Travis Lipshus spoke with The Guardian and claimed he was witnessing a rush of former Airbnb hosts now looking for long-term or permanent tenants.

With the high supply of rentals and low demand of renters, Lipshus claims “there’s not enough tenants to fill these places” and that there will be a sharp decrease in long-term rent for many in the region.

Weeks prior to the investment,, Airbnb began negotiating investment and funding offers with venture capitalist and private equity firms in anticipation of an economic downturn, The New York Times reported. Silver Lake and Sixth Street Partners’ recent billion dollar investment, primarily composed of debt and equity, will help Airbnb immediately financially stabilize. The deal, however,was done by the investment firms with the future in mind.

“While the current environment is clearly a difficult one for the hospitality industry, the desire to travel and have authentic experiences is fundamental and enduring,” said Silver Lake Co-CEO and Managing Partner Egon Durban. Sixth Street Partners CEO Alan Waxman shared a similar perspective. “The company’s achievements speak for themselves, and we are excited by the opportunities on the horizon as they continue to grow their geographic footprint, accommodations and experiences,” said Waxman.

In a statement, Airbnb stated $5 million from the investment would be dedicated towards the SuperHost Relief Fund, which provides grants to frequent hosts in need of financial support due to the decline in renters.

“Silver Lake and Sixth Street applaud Airbnb’s long-standing commitment to their host community, especially in the current environment,” said Airbnb Newsroom.