San Francisco headquartered home rental platform Airbnb is laying off a quarter of its global workforce -- or 1,900 people -- as travel and tourism activities halt across the globe due to the Covid-19 pandemic.
“Out of our 7,500 Airbnb employees, nearly 1,900 teammates will have to leave Airbnb, comprising around 25% of our company,” Airbnb CEO Brian Chesky announced in a memo sent to staff.
Chesky said the company’s revenue this year is forecasted to be less than half of what it earned in 2019.
“While we know Airbnb’s business will fully recover, the changes it will undergo are not temporary or short-lived. Because of this, we need to make more fundamental changes to Airbnb by reducing the size of our workforce around a more focused business strategy,” he wrote.
The revenues of Airbnb, like most other travel companies, has been hit hard due to coronavirus-induced lockdown, which triggered mass cancellations of bookings.
Airbnb set up a $250 million fund in March to offset the losses incurred by hosts and later in April, it went on to raise $2 billion in equity and debt funding rounds to tide over the crisis. In addition, the company had launched a drastic cost-cutting exercise.
Chesky said the company will bring down its investments in activities that do not directly support the core of its host community.
“This means that we will need to reduce our investment in activities that do not directly support the core of our host community. We are pausing our efforts in transportation and Airbnb Studios, and we have to scale back our investments in Hotels and Lux,” the note said.
Teams across its locations and departments are affected. The company also announced a severance package that includes a minimum of 14-weeks’ pay, a full year of health coverage, equity in the company and assistance in finding a new job.
The impact of the downsizing on Airbnb’s India business is unclear at this moment. TechCircle’s email seeking specifics about its Indian workforce was not answered.
Its Indian arm, Airbnb India, saw a significant improvement in its operating profits for the financial year ended March 31, 2019, despite a steep decline in profits, chiefly by keeping costs under control. In FY19, the company reported EBITDA margins at nearly 14% against 9.51% in the previous year. Total expenditure reduced 7.5% during the same period. Its expenses stood at Rs 29 crore against Rs 32 crore in FY18. Despite improving its profitability, the company’s net profits were down 19% to Rs 1.7 crore while top line fell 6% to Rs 32 crore in FY19.
India remains a priority market for Airbnb, which has operations in 191 countries. It was launched in 2008 by Rhode Island School of Design and Harvard graduates Brian Chesky, Joe Gebbia and Nathan Blecharczyk. Airbnb has over 80,000 listings in India.
In February, the company said that over one million Indians used Airbnb globally and there has been a 115% increase in Indian listings.
In India, Airbnb competes with homegrown brands OYO and Treebo, Ctrip-backed MakeMyTrip and a local unit of Netherland headquartered Booking.com.
In April 2019, Airbnb, which has a home-sharing model, invested $75 million in Softbank-backed OYO for a minority stake in the franchise-based hotelier.
According to a study by industry research firm CARE Ratings, the Indian tourism industry is estimated to make a revenue loss of Rs 1.25 trillion in calendar 2020 in the aftermath of the crisis.