Airbnb demonstrates lack of strategic thinking in response to COVID-19

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.

Related: Amber Carpenter joins VRM Intel’s Amy Hinote to discuss Airbnb’s coronavirus-related decisions over the last 60 days on Wed, May 13, 3:00 pm ET / 11:00 pm PT 

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