Airbnb Goes Global With Coronavirus-Related Refunds

Originally published by Forbes on March 16, 2020.

The vacation rental company extended refunds to all reservations with check-in dates between March 14 and April 14, 2020. Hosts are paying the price.

On Saturday, Airbnb took an unprecedented step by granting any guest wanting to cancel upcoming travel plans a full refund for a set time frame. This applies only to existing reservations with check-in dates between March 14 and April 14, 2020, per its new Extenuating Circumstances Policy.

Guests are relieved, hosts are furious, and Airbnb is facing backlash.

Why set a mid-April cutoff, when health officials are urging Americans not to travel and recommending events be canceled through May? One day after Airbnb’s announcement, the Centers for Disease Control and Prevention (CDC) released a recommendation that all in-person events of 50 or more people be canceled or postponed throughout the entire United States until at least May 10.

In response, the company says it is remaining “flexible” and monitoring the coronavirus situation closely. Airbnb CEO Brian Chesky posted this tweet.

Airbnb could decide to extend its policy beyond April 14 and continue to override cancellation policies set by hosts. Meanwhile, the good news is that this automated “self service” function does not require the time-suck customer service approval process that applies to most standard refund requests.

Here’s the simple message you’ll receive by Airbnb, if you qualify:

Hosts Aren’t Happy

Before the COVID-19 crisis, Airbnb's reservations came with one of six cancellation policies set by the host, which range from flexible to super strict. Naturally, hosts are not happy with the new requirement to refund guests through April. They may be tempted to jump ship and move to a competitor such as Vrbo, which has issued no such refund requirement.

“Homeowners and property managers who list their homes on Vrbo set and enforce their own cancellation policies,” writes Vrbo president Jeff Hurst in a letter to travelers regarding COVID-19. To homeowners, Hurst writes: “In the spirit of good hospitality, we strongly encourage you to offer a full refund.”

This is a two-sided marketplace in seesaw mode, and rental platforms are struggling to balance it. Airbnb and Vrbo only get paid when reservations are processed, which requires the cooperation of three parties (host, guest, and their chosen transactional platform). Right now, this dynamic is being put to the test.

It remains to be seen if any relief for hosts will come from Airbnb, though Chesky offers this non-committal reassurance.

Industry-Wide Impact

Airbnb and its competitors are, in fact, incurring revenue losses as travel reservations decrease worldwide. “Looking forward to the beginning of May, most destinations are averaging about half the bookings that were made back during the preliminary impact period in mid-February,” reports AirDNA, a rental market research firm.

Suffice it to say, I’m predicting that Airbnb is not going public this year as planned. With a private market valuation of $31 billion, Airbnb was one of this year’s most highly anticipated IPOs. But, that was before COVID-19. Going public successfully means aiming for the best possible valuation, based on bullish future earnings assumptions. It’s all about growth potential, not recession-proofing.

Trouble is, the bulls have reason to become bears. Airbnb’s losses almost doubled in the fourth quarter of last year, to reach $276.4 million excluding interest, taxes, depreciation and amortization, according to Bloomberg reporting. Now, things are worse. In the first two months of 2020, Airbnb demand sharply decreased in Beijing, Seoul, Rome, and Milan, according to AirDNA data.

The bright side? Supply isn’t going anywhere. The world’s biggest home-sharing company still has listings in more than 220 countries and regions, across more than 100,000 cities. They may not go public this year, but they’re going to survive. Furthermore, rental businesses can actually rely on booking behavior following common-sense logic: Leisure travel locations far removed from the crisis are faring better than dense urban locations facing lockdowns. Sales strategies will follow suit.

Though, brave travelers, be forewarned: no one is guaranteeing a robust toilet paper supply when you get there.