Covid-19 almost killed Airbnb … but then the travel brand used the catalyst of change to drive new innovation and growth
May 4, 2022
Airbnb was on a roll.
Born out of the financial crisis of 2008 when three young guys decided to offer airbeds to rent on their apartment floor, with a bowl of breakfast cereal thrown in as added value, to become a serious alternative to the world’s sterile and standard hotel chains, it had come a long way.
It then started to get bolder ambitions. A brand reimagination, told a story that enabled people to “belong anywhere”, to immerse themselves in local neighbourhood cultures, to embrace the quirky eccentric nature of every home and its location, and then added a diverse range of brand extensions, from trips to luxury.
Then the Covid-19 pandemic hit, and Airbnb almost went bankrupt.
Brian Chesky, co-founder and CEO says “2 years ago, our business dropped 80%, our IPO was put on hold, and some didn’t think we’d make it at all. As bookings were wiped out, Chesky was forced to make many of his close-knit employees redundant.
He famously wrote an incredibly human letter, incredibly offering to let everyone take their laptops with them, as they least he could do to help them.
Then he started to adjust to a locked-down world. Cookery courses, salsa dancing, and many more entertaining yet practical types of content became popular as Airbnb became a place where people could learn and live anywhere, meaning locked in their own homes, yet connected online.
It kept some employees and a hardcore of loyal customers engaged , but struggled financially.
Yet as travel restrictions were lifted, Airbnb quickly saw a new boom. Staycationing, or the trend to vacation close to home, meant many people searched out an independent place to rent. And many others were all too happy to rent out spare bedrooms or homes, to make up for lost earnings.
So how did Airbnb turn things around? Chesky picks up the reinvention:
- First, we simplified our business. We got back to our roots, prioritizing the everyday people who host their homes and offer experiences
- We cut the vast majority of our projects, shuttered our business units, and made the painful decision to do a layoff
- We significantly improved our cost structure, decreasing our cost of revenue (merchant fees and servers), and tightly managed our fixed costs
- Next, we changed our approach to marketing. When travel stopped, we paused all performance marketing and shifted our focus to PR (there have been 1M+ stories written about Airbnb since then)
- By 2021, we started investing in brand marketing again, but reduced our overall marketing spend from 34% of our revenue in 2019 to 20% in 2021
- Soon, people weren’t just traveling on Airbnb, they were living on Airbnb.
And what has changed since the pandemic? Chesky says:
- In 2021, around 20% of our nights booked were for stays of a month or longer, and nearly 50% for a week or longer.
- These trends continue to this day. And now, urban and cross-border travel, which were the majority of our business before the pandemic, are back to 2019 levels
- In 2021, we completely overhauled our product as the world became more flexible.
- We made 150+ upgrades and improvements, including launching the “I’m Flexible” feature, which has been used more than 2 billion times.
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