Only time will tell how the industry will assimilate the behavior of Airbnb during the COVID-19 pandemic. As the youngest major OTA at the table, Airbnb has proven it is prepubescent at best. Emotionally reactive, inexperienced, and proud, Airbnb turned the volatile COVID-19 pandemic into a deceitful public relations game that ensured no winners.
Mercurial strategies litter the timeline of communications and policy announcements from early March to date. As the timeline suggests, the initial pro-guest policy of offering 100 percent cash refunds quickly deteriorated into a convoluted maze of qualifications a guest had to navigate to seek relief.
“Hosts” have consistently been left out to dry, as Airbnb quickly tried to quell the onslaught of cash refunds and overnight began pushing travel credits.
Timeline (Not exhaustive, but here are the highlights)
- March 11: Airbnb updates the original Extenuating Circumstances Policy, changing vague wording from “endemic” to “epidemic” reasons for canceling.
- March 13: Airbnb updates its Extenuating Circumstances Policy to indicate that guests could cancel reservations without penalty due to COVID-19 for arrivals between March 14 and April 13, 2020.
- March 14: After pushback, Airbnb announces this new policy with additional language that states that the refund will also cover all service fees in addition to the standard rent amounts.
- March 30: Airbnb updates the COVID-19 policy, again, to include the option for guests to receive either a travel credit or a full refund.
- March 30: Airbnb extends the eligible cancellation window to include arrival dates through May 31 and adds “proof” verbiage to its COVID-19 refund policy, stating the following: “In order to cancel under the policy, you will be required to attest to the facts of and/or provide supporting documentation for your extenuating circumstance.”
- March 30: Airbnb announces the $250 Million Host Fund on a live webinar for Hosts with Brian Chesky. Verbiage regarding the 25 percent payout for cancellations is vague during the webinar, and Hosts (and homeowners who were listening) leave the webinar thinking Airbnb will pay 25 percent of the full reservation amount. The Airbnb web page for the Host Fund clarifies that Airbnb is only going to pay out 25 percent of what should have been paid under the original cancellation policy.
- March 31: Airbnb, again, changes its policy, adding a new clause to its COVID-19 cancellation policy that states the following: “Cancellations will be handled according to the extenuating circumstances coverage in effect at the time of submission.” Guests have no reasonable way to know which policy was in place when they originally requested the refund unless they had a screen capture of the Extenuating Circumstances COVID-19 page from Airbnb.com on the day of their original request.
- April 9: Airbnb updates a clause in the COVID-19 cancellation policy to read, “Cancellations will be handled according to the extenuating circumstances coverage in effect at the time of submission, and reservations that were already canceled will not be reconsidered.”
- April 27: Airbnb announces its “opt-in” Enhanced Cleaning Initiative for the Future of Travel via press release, which offers an option to “buffer” arrivals and departures, either by a 24-hour period if Hosts adhere to Airbnb’s suggested cleaning protocol or by a 72- hour period if the Host cannot meet those standards. Professional hosts scramble to figure out how to operationalize these new requirements and evaluate their revenue impact.
- April 29: Airbnb starts sending letters from Chris Lehane, VP of Global Policy and Communications, to community leaders around the country outlining their cleanliness suggestions for Hosts.
- April 30: Eligible hosts are finally notified of their pending 25 percent payment under the $250 Million Host Fund.
- May 1: Airbnb extends the COVID-19 cancellation window for arrivals through June 15, 2020, although Airbnb also announced it will not be paying 25 percent of those cancellations under the $250 Million Host Fund.
- May 4: Airbnb still has not operationalized the new Enhanced Cleaning Initiative. An account representative at Airbnb states that the ability to opt in to one of the two programs should be available within the next two weeks.
The irony is that experienced hosts around the world were offering travel credits from the beginning, only to be blindsided by Airbnb’s heavy-handed and short-lived campaign to win the hearts of guests with 100 percent cash refunds. This initial move by Airbnb turned property managers’ gracious offers of travel credits into heated debates with guests who claimed that the “right thing to do would be to give a full refund.”
Confused guests who could not get through to Airbnb were attacking property managers through any means possible and demanding the full refund that Airbnb promised, although the hosts did not have any of their funds. Guests who had cancellation requests that did not meet the constantly evolving Airbnb criteria were left in limbo, trying to navigate the complex process of initiating a special refund request on the Airbnb platform. Property managers who dared to try to intervene on their guests’ behalf were turned away and told that only guests could initiate a special refund request.
Travel Credit Applies to Any Airbnb-Listed Property
But the true atrocity against hosts is buried in the details. When Airbnb cancels a reservation with the host and issues a travel credit to the guest, the guest is able to use that travel credit for any property or experience on the Airbnb platform. So the original host is left with $0, and Airbnb is able to book the transaction as 100 percent deferred, or unearned, revenue until a new reservation occurs or until the travel credit expires.
Why is this egregious?
Because in the history of gift cards and credits, there have never been 100 percent redemption rates. There has always been what is known as “breakage,” which is part of what creates profitability for businesses dealing in prepaid gift cards, casino games, lottery games, etc. A certain percentage of customers will never redeem their credit. On the date that the travel credit expires, Airbnb gets to convert the unearned revenue to earned revenue on its P&L, thereby adding to its profits without ever paying the host.
The FAQ on Airbnb’s site explaining why it is issuing generic travel credits for the Airbnb platform instead of for the specific host who lost the revenue reads as follows:
FAQ: Why aren’t you providing Guests with credit toward a future booking specifically for one of my listings?
We considered this, but there are several scenarios where it might not work for you or your Guests. For instance, a Guest may not be able to book when you can host or may not be returning to your area. This credit provides added flexibility for both of you.
Sigh. Airbnb thinks it is doing us a favor.
Enhanced Cleaning Initiative and 24-hour Buffer Time
If the offenses detailed above were not enough to solidify Airbnb’s place as COVID-19’s most tone-deaf travel organization so far, it had the audacity to announce to the world that it was rolling out the most comprehensive housekeeping program for short-term rentals. And yet, Airbnb has never checked in a guest, let alone cleaned a short-term rental. As a consolation prize for Hosts, compliant partners will be rewarded with a new badge on their listing and better rankings for future bookings (that may or may not get cancelled, regardless of your cancellation policy).
As VRM Intel has previously reported, these new policies that Airbnb proposed will cost the individual host thousands of dollars a year in revenue opportunity, not to mention operational costs because property management software systems (PMSs) do not come with a “buffer” setting. How this new 24- to 72-hour “buffer” setting will work is not yet clear. As of the writing of this article, there is no way to select either option, and no one knows how the reservation will be entered into the PMS software. Will the “buffer” book a five-day reservation in the PMS as a seven-day reservation with only five days of revenue? Will we all be scrambling to figure out the actual arrival and departure dates versus the day we can go in and clean? How will this “buffered” reservation show up in confirmation emails and other automated communications? Will our homeowners expect and understand that only five days of revenue will be paid out?
Maybe Brian Chesky and his team could follow through with their promise to collaborate more with their partners, the “hosts,” to create actionable plans that are mutually beneficial. Until then, remember that working with Airbnb—or any other partner that is the merchant of record—is a risk, and the revenue associated with the reservation is not guaranteed until the money is in the bank.
Related Links
- https://www.airbnb.com/help/article/2701/extenuating-circumstances-policy-and-the-coronavirus-covid19
- https://www.airbnb.com/resources/Hosting-homes/a/250m-to-support-Hosts-impacted-by-cancellations-165
- https://www.airbnb.com/help/article/2740/travel-credit-terms-and-conditions
- https://web.archive.org/web/*/www.airbnb.com
- https://medium.com/airbnb-engineering/tracking-the-money-scaling-financial-reporting-at-airbnb-6d742b80f040
Australians have been banned by the Australuan government from any overseas travel. All flights out of the country are cancelled.
I made my booking for July 18 well before the pandemic was declared.
July 18 is not included in the date range for Airbnb Covid19 extenuating circumstances policy.
My Austrian Host in Salzburh insists on keeping 50% of $2,500 – as cancellation fee.
This is unscrupulous behavior. It is theft.
Airbnb has not assisted. It will continue to receive service and other fees. I am a loyal customer of Airbnb and should be strongly supported by them innehieltet instance.
My booking cancellation is through no fault of my own. I don’t have wings! No AUSTRALIAN can leave the country. How does the greedy, thieving, dishonest host imagine I could possibly get to Europe?
Both the greedy host and Airbnb are extremely unethical .
great article – I advertise my Palm Springs area rental on both Airbnb and VRBO. I gave a 100 % refund to each of my guests affected by Covid 19 travel restrictions. These refunds wiped out nearly three years of profit even though I own my condo (HOAs are very expensive here and there is not much rental activity from May to November due to the heat). The difference in the way Airbnb and VRBO treated their hosts was huge. I will not be returning to Airbnb as they obviously do not consider me a customer of their services. I still have not seen a dime from them. Of course, I will not see a dime from VRBO either but they did not cancel my reservations without my consent, I refunded my VRBO guests on my own as it was the right thing to do but not everyone can afford to do so. These decisions should be made by the hosts.
Fantastic article, thanks, will share. AIRBNB deserves to go bust the way they have treated their long term superhosts.
I booked for a family wedding taking place on June 20, 2020 on 8/25/19. I paid $800 down. The wedding facility called off the wedding because of social distancing on 5/8/20. Airbnb’s refund policy only covers through 6/15/20 and I booked for 6/18, 6/19 & 6/20, they told me I get a $20 refund. When I paid $800?!!! How is this right? This is stealing in every way! As you can imagine, I’m furious. They won’t let me speak to anyone in management and told me it is what it is. WRONG! I will no give up until I get some sort of positive resolution. At this point, I would appreciate half back! I will never use Airbnb again. Just horrible!!!
…and in other news over 270,000 people have now died from this awful world crises. ..these Airbnb hosts need to stop complaining about lost income as if they are the only ones in the world that have suffered .. As an Airbnb host myself I am finding emarrassing .
Airbnb have had to make difficult decisions during an ever changing situation. They have done so with honour and have kept their ( and our) reputation intact. When this is all over customers will remember those companies that did the right thing during this pandemic. Airbnb can hold their head high which is something that can not be said of other online booking platforms .
Agreed. It hurts losing income but I won’t add to anyone’s misery. We’ve always treated the income we earn as a bonus that could potentially end one day and planned accordingly. I refuse to throw a tantrum when people are dying and losing their income and homes.
My host refused to refund my deposit. My booking was July 13-16. The cut off was June 30th when I cancelled. They stole $600 from me and they are paying off the host. I will NEVER from Airbnb again. i AM A FRONT LINE WORKER – NOT ABLE TO TRAVEL. SHAME ON YOU AIRBNB
The shame of it all is, the hosts who read the initial rule change and canceled the bookings offering a 100% refund, saving airbnb a load of hassle and stopped all their guests starting a battle calling in the airbnb customer helpline. Get nothing, they have been penalized for doing as airbnb asked. Only the hosts who refused to cancel booking, making the guest cancel and or airbnb step in and cancel get part of the payout to hosts!! Whole this was a mess from start to finish.
Terrific article abc view point of the missteps — if anything’s missing (it’s not) it’s a deeper dive into the legal ramifications and causes of action generated by Airbnb’s unilateral bad acts and omissions. Anyway a great write up all around.
To me the most obvious violation of all is that Airbnb implemented each of these modifications without giving 30 days notice to Hosts as per Airbnb’s own terms of service:
“Airbnb reserves the right to modify these Terms at any time in accordance with this provision. If we make changes to these Terms, we will post the revised Terms on the Airbnb Platform and update the “Last Updated” date at the top of these Terms. We will also provide you with notice of the modifications by email at least thirty (30) days before the date they become effective.”
Hosts need to file for Arbitration…I don’t even see how every Host wouldn’t win every claim against Airbnb in relation to this COVID-EC policy debacle.
As a host, it’s even more frustrating to see the timeline of missteps spelled out. There were many missed opportunities to do the right thing for the community. The decision to leave hosts holding the bag and make them the enemy will go down as one of the worst business decisions of the past 20 years All trust, loyalty, partnership, and good will built over the years is gone on one foul stroke – poof. They turned one of the best brands in the business into a commodity. Wonder how host NPS score looks today.
The future business and recovery for Airbnb is forever impaired because seasoned hosts are moving their inventory off-platform as fast as they can, and Airbnb simply won’t be able to replace the lost homes with such caring and invested hosts. A junior business analyst could have looked at the cost per acquisition, LTV, and then figured out how much of the cancellation costs ABB should have absorbed. Would they have lost $18b in market cap and shut the IPO window if hosts felt supported? Probably not.
I got screwed by airbnb- with their poor business practices and customer service. I lost my deposit and my host is getting a payoff
I will NEVER rent from Airbnb again and I’m sure there are thousands of guests like me. Without guests like me there would be no airbnb