Prior to the virus, Airbnb was quite successful, but the 39-year-old CEO and co-founder was frustrating Wall Street by constantly putting off an IPO, thus blocking investors from, at long last, cashing out some of their holdings. The delays were aggravating since there were several less-attractive start-ups that were launching IPO’s.
Adding further frustration, the CEO was spending an increasing amount of time and money on major distractions such as his pursuit into feature films and television shows that had nothing to do with the core business of the company, and Airbnb “Experiences” that enabled people to book trips focused of things such as mountaintop yoga, wine tasting, and pottery classes!
Fortunately, when the virus hit in March, and bookings were dropping at a rate of -80% versus year ago, the CEO admitted the stats hit him like a bomb. As he said, “I saw my dream going down the drain.” He immediately called an emergency board meeting over the weekend, after which he promptly pursued the following with real gusto:
- Cutting Marginal Projects and Staff and Stopping the Cash Drain – The CEO quickly realized that Airbnb must go back to single-minded focus on its core business. He eliminated/scaled back on all non-core efforts, including his push to become a diversified travel giant which he once had described as “the magical travel world of Airbnb.” This led to the laying-off of 1,900 employees (25% of the staff). Badly needing cash, he generated a term sheet in 72 hours and promptly nailed down $2 billion loans from a group of investors.
- Listening to Loyal Customers – Airbnb loyalists told him they would not get on airplanes, thus wiping out the business potential of Airbnb’s prior bread-and-butter; customers visiting big cities with tourist attractions. Now their interest is in rentals within easy driving distance of their homes, where they can just get away from the monotony of staying at home.
- Refocusing the Strategy and Marketing – The CEO watched the hotel industry bet on travel recovering very fast, which his customers suggested was far too optimistic. Rather than wait for that recovery, he decided to do what his customers were asking for. Specifically, he quickly adjusted Airbnb’s website and marketing strategies to focus on rentals within driving distance of the customers’ homes, where they can just get away, sometimes for weeks, capitalizing on Zoom to continue working while on their mini-vacations.
The virus was clearly a wake-up call to the CEO to put aside his undisciplined projects and spending and to focus on the core. As one Silicon Valley financial investor noted, “What impressed me was how quickly he studied the situation, learned, and acted.” The results have been impressive. According to investors, Airbnb’s swift actions and resulting upswing in the business has put the company on a path to report a 3d quarter profit this year and to begin serious plans for an IPO; things that was unimaginable just a few months ago.
Airbnb reminds us that it is all about the fundamentals; intense focus on the core business, listening to customers and watching the market closely, and reacting quickly and decisively to key trends and opportunities.