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AirBnb Inc. signage is displayed on an smartphone in an arranged photograph taken in the Brooklyn borough of New York, USA, on Friday, April 17, 2020. Home-sharing leader Airbnb Inc. lined up $1 billion in debt boosting a financial cushion it can use to grow and pay bills as the global coronavirus pandemic crushes demand for travel and diminishes the prospect of an initial public offering. (Photo: Gabby Jones/Bloomberg)

Airbnb CEO: The pandemic will force us to see more of the world, not less

AirBnb Inc. signage is displayed on an smartphone in an arranged photograph taken in the Brooklyn borough of New York, USA, on Friday, April 17, 2020. Home-sharing leader Airbnb Inc. lined up $1 billion in debt boosting a financial cushion it can use to grow and pay bills as the global coronavirus pandemic crushes demand for travel and diminishes the prospect of an initial public offering. (Photo: Gabby Jones/Bloomberg)

In the first month of the pandemic’s onset, Airbnb faced a loss of US$1 billion due to cancelled bookings, leading Chief Executive Officer Brian Chesky to declare: “Travel as we knew it is over.”

Brian Chesky, chief executive officer and co-founder of Airbnb Inc, speaks during an Economic Club of New York luncheon at the New York Stock Exchange (NYSE) in New York, USA, on Monday, March 13, 2017. (Photo: Bloomberg)

Getting on an aeroplane, he postulated, was not something consumers would be ready to do for a long time, leaving travel plans to be dictated more by safety precautions than whimsy. Fast forward a few months, and his outlook hasn’t fundamentally changed. But what once sounded like a cataclysmic doomsday prediction has given way to a more nuanced view of how travel is evolving — not dying.

“Some things will return and some won’t,” says Chesky, forecasting what travel may look like on the other side of COVID-19. “It one day will be stronger than it ever has been. But when it comes back, full force, it’s going to look different.” Among the things that’ll be missing, he predicts, are: overtourism, business travel, and, to a lesser extent, loyalty programmes.

Chesky also sees the rise of new and more varied destinations to visit, including — yes — resilient cities.

“All this suggests that tourism-reliant, fly-to destinations will need to diversify their economies in the short term to weather a protracted drought in visitation, while overlooked spots near big cities will continue to see success.”

The comments come at a critical time for Chesky and his company. Airbnb has wrapped up its summer with an unlikely comeback story, having U-turned from a 90 per cent drop in bookings and reporting US$400 million in adjusted second-quarter losses to notching a 22 per cent year-over-year increase in consumer spending in July and filing for its long-awaited IPO.

“On July 8, we had guests book more than one million nights worth of future stays in Airbnb listings,” Chesky tells Bloomberg. “It was the first time in four months — since March 3 — that we hit that threshold.” (The number is similar to an average day’s sales in the first 90 days of 2019, during which Airbnb booked 91 million room nights.)

That doesn’t mean that Airbnb is out of the woods. Company-provided data shows that while travellers are booking almost twice as many remote stays as last year, home rentals in urban markets — Airbnb’s bread and butter —are still struggling. For US Labor Day, high-density destinations make up just 20 per cent of the site’s bookings, down from 40 per cent last year.

Other stats released by the company, as part of a fall trends report, indicate that long-term rentals are still in demand even as summer breaks wane —and that spontaneous stays, planned just a few days before departure, are on the rise; no surprise given the unpredictability of changing travel restrictions across the world.

An aerial view of Charleston, South Carolina, in the United States Penninsula with the Ravenel Bridge as backdrop. (Photo: WCDB)

But Chesky has a lot to say about the future of travel that can’t be captured by sheer numbers. What we’re seeing, he says, “is a massive revolution” that’s “changing the face of travel forever. Some people are waiting for the world to get back to what it was. But change rolls forward — not backwards”.

A Tale of Two Travel Industries

Americans waiting for their passports to become relevant again may be comforted to hear that Chesky doesn’t see different pictures for European and American vacationers. While interregional travel has been green-lit throughout the Schengen Area, cross-border trips still represent just 15 per cent of Airbnb’s bookings.

That said, there’s still a tale of two travel industries. They’re defined less by border restrictions than the potential for domestic tourism. Take the United States, France, and the UK: “They’re so vast but they’re also popular destinations,” he explains. “So even though they lost cross-border traffic, they’re seeing booms in domestic travel.”

While interregional travel has been green-lit throughout the Schengen Area, cross-border trips still represent just 15 per cent of Airbnb’s bookings. (File photo)

By contrast, Chesky points to parts of Southeast Asia and the Caribbean. These destinations, he says, “rely on people to fly there. You don’t have a huge demand of people who live in The Bahamas who also want to stay in a resort in The Bahamas.”

Germany is another example: “They have a really strong economy, but Germans usually leave Germany when they travel, so they’re not doing as well as France, where there are a lot more destinations that locals have an interest in booking — at least that’s what the data spells out.”

The Eiffel towers stands tall in Paris, France. Airbnb CEO and co-founder Brian Chesky said that some European travel destinatinations are not doing as well as France.
(Photo: Discover Walks)

He says the same contrasts exist stateside, with Hawaii bearing a particularly hard hit and accessible Charleston winning out.

All this suggests that tourism-reliant, fly-to destinations will need to diversify their economies in the short term to weather a protracted drought in visitation, while overlooked spots near big cities will continue to see success. But in the long term, everyone stands to win, Chesky argues. Spreading out travellers to more destinations, rather than concentrating them into a few lucky resort spots, he says, “is more sustaining than people think,” in spite of our collective pre-COVID proclivities.

According to Chesky, the Caribbean is one of the regions in the world that “rely on people to fly there”.

The Future of Cities

“It used to be that the vast majority of people would travel just to a handful of cities, you know, the big, iconic international capitals,” Chesky begins, referring to selfie-stick-saturated tourism hubs like Amsterdam, Venice, and New York.

The well documented phenomenon of overtourism, he says, has finally found its tipping point. Not only are these crowded destinations inaccessible to cross-border travellers, but they run counter to what people now crave: nature, space, room to breathe (without the threat of aerosolised droplets from a stranger less than six feet away).

The genie is out of the bottle,” Chesky says. “People are now discovering small towns, small communities, they’re discovering national parks, falling in love with the outdoors, and realizing they can go to all sorts of other places. This is an irreversible trend.”

If 20 cities previously made up a majority of Airbnb’s business, now none of them capture more than two per cent of the company’s bookings — and consumers are spreading out almost evenly to thousands of small and rural destinations instead. That spells opportunity for Airbnb, which features plenty of unique, rural home rentals on its platform — particularly in markets that don’t have enough density to be served by large hotels.

Some hotel brands are positioning to compete with Airbnb on that front: take Getaway House, whose accommodations are more like secluded cabins outside 13 major cities, or Loge Camps, an outdoorsy brand that renovates motels near naturally pristine settings. 

Some travel brands are positioning to compete with Airbnb with accommodations like secluded cabins outside 13 major cities or motels near naturally pristine settings. (File photo) 

So where does that leave cities?  

“Definitely, this is not the death of cities,” Chesky asserts. But the short term does paint a steep uphill climb.“Here’s what’s going to happen: People will migrate away for the coming years, and then prices will go down. Then a new generation will discover cities as more livable and more affordable, and it will probably lead to a renaissance.” How long will that take? Chesky stipulates three to five years—or more. “The bigger the city, the longer I think it will take to recover.”

Looking in a Crystal Ball

In the long term, Chesky sees trouble for one sector in particular: business travel. This comes at no small cost to Airbnb, which has for years marketed itself to corporate travellers and companies as a convenient, money-saving solution. 

“Even when the world gets the pandemic under control, business travel won’t come back the same way,” Chesky states, adding that people will simply have fewer reasons to get on a plane when remote work has facilitated so much collaboration from afar. That’s problematic to the industry, as business travel has typically represented the lion’s share of profits for airlines and hotels — as well as Airbnb, to a lesser extent. If companies aren’t paying for trips, consumers also aren’t racking up points like they used to, says Chesky — “so that whole [loyalty] game is kind of changing, too.” 

Americans waiting for their passports to become relevant again may be comforted to hear that Chesky doesn’t see different pictures for European and American vacationers.
(Photo: Time Magazine)

And what about Airbnb’s motto, that its purpose is to “foster human connections”? He’s now worried that it will no longer be relevant in a post-pandemic world, even one in which social distancing pervades. On the contrary, he says, “When the crisis hit and we lost 80 per cent of our business in eight weeks, you know, it was really really important that we have clarity of what we’re going to focus our energy on. And what we decided to do was get back to our roots, to get back to basics, back to human connection.”

Right now that doesn’t mean hanging out with your host, Chesky admits. “The kinds of connections we’re seeing are people using Airbnb to reconnect with those they already know and love,” he explains, pointing to family getaways and friend reunions around a large kitchen table.

“We are at possibly the loneliest time in human history,” Chesky declares. There may not be much he can do about it right now—or for the foreseeable future. But eventually, he says, “there will be a yearning to meet new people once again, and when it’s safe to do so, we’ll be there at the ready.”

— Bloomberg