Airbnb to Cut 25% of Work Force

“Since we cannot afford to do everything that we used to, these cuts had to be mapped to a more focused business,” Chesky wrote. “Travel in this new world will look different, and we need to evolve Airbnb accordingly.”

The cuts hit across the company, but most employees focused on software engineering and product were spared, a person close to the company said. As of early Tuesday afternoon, employees didn’t know whether they would be affected. Airbnb already informed contract employees over the last two weeks they would be let go. 

Employees who lose their jobs are being offered at least three and a half months severance pay, more than what most other private tech firms have offered. U.S.-based employees also will receive a year of health insurance coverage. 

The cuts would save between $400 million and $500 million annually, estimated two people close to the company. Details of the layoffs were first reported by The Information. 

Airbnb’s work force had been on tenterhooks since Chesky first signaled last month that layoffs were possible. Other online travel firms that compete with Airbnb, including Booking Holdings, Expedia and TripAdvisor, have already laid off staff. 

But today’s announcement underscored the reversal in Airbnb’s fortunes. Over the past decade, Airbnb had become one of the tech industry’s most celebrated startups. The company said last year that it would go public in 2020, plans that Chesky reiterated as recently as early March. A public offering this year is still possible, but unlikely, a person close to the company said. 

In recent weeks, Airbnb has raised $2 billion in debt, at high interest rates, to help buffer hundreds of millions of dollars in lost booking revenue as the pandemic spread. 

Chesky has tried to maintain an optimistic outlook, projecting to investors that the company could bounce back with more than $5 billion of revenue in 2021, higher than its revenue in 2019.

But Airbnb’s outlook is hazy even once people resume traveling. Its core business is centered on people looking to travel to dense cities, rather than to outdoor destinations. In March, Airbnb alienated some rental hosts after the company decided to refund travelers’ upcoming reservations as the pandemic spread. The company might have to spend heavily to lure those hosts back to its platform. 

The company’s advantage over other travel firms, however, could be its new focus on stays of a month or more. That has helped dull some of the pain of lost travel, people close to the company said. 

Chesky has faced pressure to reduce costs in the meantime. Last month, the company suspended most hiring and marketing, and executives took pay cuts.

The high costs of Airbnb’s 7,500-person employee base, however, became a financial drag on the business during the pandemic. As at other prominent tech firms, the company paid well and had well-outfitted offices. The company lost hundreds of millions of dollars last year, after turning a slight profit the previous year.

To get back on track, executives at the company already had been tightening their belts earlier this year. For months, the company discussed eliminating contract workers. Efforts focused on luxury stays, transportation and a TV production studio also had been scaled back in recent months, The Information previously reported. Instead, the company concentrated on offerings that were less vulnerable to the pandemic, including long-term stays and online activities through its “Experiences” division, such as online cooking classes or dance classes.

In a podcast interview last month, Chesky said the company had always kept positive cash flow, excluding equity-based compensation costs. But he said the company needed to get “back to basics.” Chesky blamed rising costs in part on an influx of employees from large corporations.

“When you raise billions of dollars and then you hire people from other flush companies, maybe they came from Google or maybe they came from like a consumer packaged goods company, but that's like 80 years old and they're used to like having huge budgets, you kind of start to lose a little bit of that startup hustle. And then suddenly what used to take $10,000 to do takes $100,000 or a million dollars. 

“And I used to say, ‘We used to do that for almost nothing,” Chesky said. “There's something about a crisis, about constraints.”