Did You Know?

AIRBNB: Great Reservation Cancellation

The number:  43.1.  The context: the percentage of employees in leisure and hospitality that had jobs in March 2020 but not in April.

The crush of business loss resulting from the pandemic is a difficult reality for an industry. The drop in usage and revenue is devastating.

And then there is short-term rental market and its face to millions: Airbnb.

The marketplace that matched people with properties, or even a room in their home, to rent with those who needed a place to stay just laid off about 25% of its 7,500-person workforce. But what about all the people trying to make money via the platform?

Cancellation Wave
Discussing Airbnb hosts as a monolithic block is misleading, finds Apostolos Filippas, assistant professor of information, technology, and operations at the Gabelli School of Business of Fordham University. "[W]e have two kinds of Airbnb owners: the people who took up another lease or bought another property to make it available online and then the people who had an extra room," he said.

Business is down for both types, but the former, being more dependent on revenue to pay a dedicated lease or mortgage, generally will have a tougher time.

"Our bookings in March all cancelled," said Shauna Mahoney, a co-owner with her husband Chris of two properties. One is a family cabin, fully paid for, near Zion National Park in Utah. The other, a house near the Glen Canyon National Recreational Area in Arizona, where Chris works for the National Park Service. They bought the latter property last August and then remodeled it as a family vacation spot that could more than pay for itself—until a pandemic stopped the business this year.

"COVID-19 put a pause on travel," said Karen Xie, and associate professor of service analytics at the University of Denver's Daniels College of Business. She said that Airbnb saw cancellations of 85% of existing bookings.

"Hosts on Airbnb are hit hard, especially those professional hosts who operate multiple Airbnb properties using leverage," according to Xie. "They are struggling to pay back mortgages to banks due to the halt of cash flow." Most have chosen so far to hang in, she said, "selectively blocking off their calendars to comply with local stay-at-home orders, in a hope to re-open the business when travel is back to normal in a few months."

"Luckily, we've been really conservative, and we can float [the Glenn Canyon property] for a year" by using savings for the time being, said Mahoney.

"I don't want to dip into normal paychecks to pay for it," she explained. "It would make things tight and cut into our family budget. Plus, you don't have any of that additional income coming in. And we did dip into our personal savings to do the remodel, so we were hoping to recoup those costs with the additional revenue coming in." The couple had considered selling the cabin near Zion National and putting the money into building on another property they have. "We're holding off because we don't know what to do."