Airbnb survived Covid, but the crisis mode in “sharing” economy stays

In this weekly series, CNBC takes a look at companies that made the inaugural Disruptor 50 list, 10 years later.

It’s hard to think of a more quintessential story in disruption than Airbnb — the company made CNBC’s Disruptor 50 list eight times, more than any other company in the last decade, prior to going public at the end of 2020.

And years from now, it’ll be hard to imagine how any company, much less a travel company, made its market debut at the height of a global pandemic the way Airbnb did.

To get through the crisis, the company laid off about 25% of its workforce — about 1,900 of its 7,500 employees — and raised $2 billion in a combination of equity and debt to shore up its balance sheet. The equity portion of the deal valued Airbnb at $18 billion, nearly half of what the company was worth in 2017. At the time, Airbnb also decided to “pause” activities that did not directly support the core of its host community, such as transportation and Airbnb Studios, and scaled back its investments in hotels and luxury properties. 

But as Sequoia Capital partner Roelof Botha told CNBC’s Deirdre Bosa just months before the IPO — after a company that once topped the Disruptor 50 list had just fallen to No. 41 due in large-part to the pandemic — “like all businesses that involve human interaction, the sharing economy took a huge hit when Covid emerged and shelter-in-place was enforced … but people are itching to get out of their homes.”

His thesis was validated when Airbnb shares ended up 112% on its first day of trading, blowing past the market caps of giant travel industry incumbents like Booking Holdings, Expedia, and hotel chains like Marriott and Hilton.

In 2022, it has been a different story, with Airbnb shares negative on the year, but the stock has held up better than other growth-oriented companies and the overall tech-heavy Nasdaq Composite, which is down about 12% year to date.

“When we started Airbnb, it was about belonging and connection. This crisis has sharpened our focus to get back to our roots, back to the basics, back to what is truly special about Airbnb — everyday people who host their homes and offer experiences,” said co-founder and CEO Brian Chesky in a letter to his employees on May 5.

Airbnb implemented measures to keep its guests and hosts happy, but the result was a wave of criticism for seemingly every step it took. Airbnb has also teamed up with rival VRBO, owned by Expedia, to combat the issues.

Problems are recurring for other notable Disruptor 50 companies in the gig economy such as Uber, which has also struggled with user satisfaction, as well as supply and demand imbalances amid the pandemic.

Just weeks ago Chesky, who is now on a nationwide tour of Airbnb stays in an effort to “improve the experience” for customers, told CNBC that a post-pandemic future of decentralized living will be a boon to the company. Chesky famously lived exclusively in Airbnb rentals for a few months in 2010 when the company’s earliest employees were crowding out what little bedroom space was left in his San Francisco apartment.

Twelve years later, it’s an indication that Chesky believes his company’s next act will largely depend on the same level of devotion to its customers that was required early on, in order to win using a gig economy business model that many investors remain skeptical on.

Another key element that will define Airbnb’s future will be the regulatory environment in which the company operates. Despite a number of legal battles that plagued the company’s growth story since those early days, Airbnb has remained largely unscathed when compared to other highly valued tech platforms. In 2014, New York threatened to ban short-term Airbnb rentals, and a year later, the company spent $8 million to combat a citizen-led ballot initiative meant to limit the platform’s listings.

Shortly after that there were even louder rumblings about Airbnb’s impact on the social fabric of wherever it does business. In July 2016, Sen. Elizabeth Warren urged the Federal Trade Commission to look into how such platforms were exacerbating housing shortages. Hillary Clinton also called out the sharing economy as a potential factor in dampened wage growth last year.

Critics have argued that the gig economy enables landlords to turn permanent apartments into high-priced short-term stays, squeezing housing supply in already-expensive markets like San Francisco. Airbnb has maintained that most of its customers are middle class people who boost their income with Airbnb’s services — which for many remains the case.

And, believe it or not, there’s opportunity in crypto.

In fact, Coinbase CEO Brian Armstrong was one of the company’s first software engineers, who Chesky applauded in a CNBC interview last year, saying “Brian actually is one of the original architects of our payment platform and our fraud detection system. So I’m really, really proud of what he’s doing.”

At the time, Chesky said he’s “kept in touch” with Armstrong.

Asked by CNBC’s Deirdre Bosa whether Airbnb has any plans related to cryptocurrency adoption, Chesky said he did not “have anything to announce right now. But I can tell you that we’ve been certainly looking at this.”

In a more recent Twitter thread, Chesky acknowledged that “crypto payments” is among Airbnb users’ top suggestion.

But it’s the blockchain technology underpinning crypto that could become Airbnb’s next act. Proponents expect blockchain adoption to grow in the coming years, with some people comparing its disruptive potential to being akin to the early days of the internet.

For Chesky, it’s “like the revolution in travel” the CEO saw decades ago when Airbnb was clawing towards “ramen profitability” as a a darling of start-up lore.