We started this company over a decade ago. I was a designer living in a three-bedroom apartment and my roommate Joe Gebbia and I couldn’t afford to pay rent. It turns out a design conference was coming to San Francisco. Hotels were sold out and we had an idea. What if we turned our house into a bed-and-breakfast for the design conference?
We made enough money to pay our rent but something more important happened. Our first three guests came as strangers and they left feeling like insiders and at that point we realised maybe there’s a bigger idea. I asked Joe who was the best engineer he knew. He said my old roommate Nate was. And the three of us got together and we had this really simple idea. What if you could book someone’s home the way you could book a hotel anywhere in the world? It was hard to trust strangers without developing the components for trust. So we designed a system and over a decade later, we have millions of hosts, homes around the world.
I know Airbnb has raised, I think, $5 billion. Tell us how the business of Airbnb stacks up relative to other large hospitality companies.
Yes, we have raised a substantial amount of money but very importantly, we don’t have to invest billions of dollars because the whole idea of Airbnb is people could provide what they already have in their life. Their extra space, extra time. And we are here to help match guests and hosts. Basically, this trillions of dollars of infrastructure that already exists… millions of people’s homes, we can better leverage them and we can utilise them better. Because it is a capital-light model, it works very well in an economic upturn and downturn. Airbnb was started during the great recession of 2008. And it was started before my cofounders and I could even raise any money.
The theme for today’s session is leadership through crisis… I understand, at one point, your business fell as much as 80% in less than a few months.
At the beginning of March, the world enters a global shutdown. Global travel comes to a standstill and the vast majority of our business drops. It felt like I was captaining a ship and a torpedo hit the side of it. We had more than a billion dollars of guest customer deposits. We didn’t want them to feel unsafe travelling. So we refunded their money but hosts were telling us they needed the money that was being prepaid. So we took $250 million in our own balance sheet and paid out hosts.
And from there we had to make a lot of very difficult decisions and had to essentially restructure the company. Then, all of a sudden, we started seeing some glimmers of hope. People, after having been locked in their homes for months, are saying they wanted to get out of their homes but they don’t want to get on planes, they are not travelling for business and they are not crossing borders, but they are getting in a car and they want to travel not more than maybe a tank and a half of gas. It has been an optimistic resurgence.
I understand you guys had to lay off almost 2,000 employees. How did Airbnb handle it?
One of the hardest things a CEO will ever have to do is to lay off a portion of their workforce. It was certainly one of the most difficult decisions that I have had to take. The problem is, sometimes, corporate processes don’t have the same heart as the people themselves and they sometimes take a playbook and they put it on auto pilot. We didn’t want to do that. So we wrote out a series of principles.
Number one, we don’t want to do two layoffs; so if we are going to lay off, we are going to have to, unfortunately, cut deep enough so that our future is secure and people don’t have to worry about a second layoff.
The cuts we make have to be mapped to the business that we’ll have in the future. We gave all laidoff employees a 14-week severance plus a week per year of service in the US. We also gave them a year’s worth of healthcare. Our team said what if we took a percentage of our recruiting team and turned them into a job placement firm for those that were laid off. And what if we also printed an alumni directory so anyone that was laid off could opt in to put their information online. We ended up publishing this alumni directory and at last count, over half a million people visited their profiles and job descriptions.
How do you see the travel industry over the next six months and even after that?
The travel industry is never going to be the same. It is irreversibly altered. I think there is going to be more travel redistribution.