Sam Parr and a guest analyze Airbnb's survival odds in a recession, noting revenue likely fell 50-80% overnight as travel stopped. Hosts who leveraged properties face zero income and potential defaults. Airbnb holds $3 billion in cash and was profitable before the downturn, making secondary shares potentially attractive despite a projected 70% revenue drop.
So Airbnb, some interesting things are going on. So Airbnb, you know very well, is awesome company, one of the sort of most successful startups of the last decade or so, and was about to go public this year and was preparing for it. And now with coronavirus, you know, travel has stopped Hospitality, you know, hotels, casinos, they're all taking a total beating. And Airbnb, of course, is gonna get caught up in the crossfire as well. And so, a couple interesting things here. So, Airbnb financially, you know, their revenue must have dropped by 50, 60, 70, 80%, essentially overnight and with an indefinite time span. We don't know how long this is gonna last. The second thing is Airbnb not only does have a huge, you know, staff on payroll and now revenue drops, but all the hosts were essentially small, small, small entrepreneurs. So some people did, you know, a traditional thing, they just rented out an extra bedroom in their house. But a lot of people, once they got a taste of that money, they started buying places, renting out places, and subleasing it and basically putting it on Airbnb. And so all those people now— there's this thing that was a moneymaker for a couple years has gone to zero. And so I think there's something very interesting that's gonna happen where What happens to all these hosts who got places just to Airbnb them? And now the Airbnb income has sort of totally dried up. Are they going to default on their mortgages? Are they going to default on their rent payments if they're, if they're subleasing? Or are they going to turn into just normal rentals? Like, I don't know what's going to happen. But what do you think about all this?
So you already know what's going on in Zillow. You're the one who told me, right?
Well, I did see some charts. Yeah. So I saw some charts that basically showed on Zillow normal housing, so just normal rentals, not a short-term Airbnb stay, but just here's an apartment for lease for 6 months, is exploding. So like, it looks like the coronavirus is like— here's last month, one little blue dot. This month, 15 blue dots on the map, right? It's like the number of listings is exploding for rentals, which is also bad for Airbnb because in places like San Francisco where there's a housing shortage, And for years Airbnb has been saying, oh, we don't contribute to the housing shortage. We are— we're a different thing altogether. Well, now it's actually kind of a— whether it's, whether it's truly the proof or not, I don't know. But it certainly does look like if you're somebody who was anti-Airbnb, you have a lot of evidence, a lot of ammunition now to say, hey, look, when we turned Airbnb off, look at how much more housing supply came on the market. Look how that lowers rents for everybody.
Well, you know what Airbnb is doing now, though, is long-term rentals. They've been getting into that for a while where you can rent something for many months, maybe many years, right? And that part is growing still, or it's growing a lot right now, right?
And so I'm curious whether people in cities who are anti-Airbnb are gonna take this and run with it.
And yes, the answer is yes.
Very sensitive to legislation, right? They changed some rules here in San Francisco where it's like you can only do 90 days out of the year and You have to live in the place, you have to prove that, blah, blah, blah. And that eliminated like 30 or 40% of the listings overnight when that legislation happened a year or two ago. And now, I wonder if it's gonna get worse.
Sonder, you know Sonder? I'm Googling them right now, you know them?
No, oh, that's the like, it's the hotel, explain Sonder.
It's basically if you are traveling for work and you wanna go stay somewhere, you'll stay at a Sonder often. Let's see, I'll go to Sonder.com. It's also if you want to stay somewhere for like 3 months, like let's say you're going somewhere for 3 months and you want to and you have to make a lot of money in order to do this. It's high-end shit. Like in San Francisco, it's like 5 or 6 grand a month.
Right.
Need a place to stay or work. We know it's time here. The best. Yeah. The best parts of home and hotel. So it's like it's like an apartment that you can rent for 2 months.
Right. So corporate housing, but done well.
Yes. But they just laid off 20% of their company, it looks like. Oh wow. Yeah, today.
Yeah, breaking news. So I think this is gonna be very interesting how these different companies get affected. You know, I'm rooting for Airbnb. I think it's a great product. I think it's a great company. I hope that they have, you know, a war chest of cash that lets them endure this time. But, you know, we'll see. It's a— keeping an eye on this.
If you could invest a little bit— what you can, you can go and buy secondary shares. If you can invest money at Airbnb's previous valuation, I think they raised money at about a $30 billion valuation. Would you invest in that right now?
Well, I need to know more, right? I need to know about the— how the company's financials look.
And let's say that revenue drops— let's say revenue drops 70%.
I'm not so concerned about the 70% drop because that's— that I think is, is more temporary. So I just need to know, do they have enough cash in the bank to endure this, or—
I think they have $3 billion.
Okay, so the $3 billion, you know, they're probably burning several million a month, but like, okay. $3 billion should still last you through this time. And then the other question is, were the fundamentals good to begin with? So a lot of times these companies don't have great unit economics or fundamentals to begin with. And so when the downturn comes and people start looking for things that are more stable, more sure bets, these high-growth but poor unit economic companies, they struggle.
They were profitable in 2018.
Ah, dude, I love this. It's like an analyst call.
I, I could just— and I think they're also profitable in 2019. Um, this is all public information, right?
So yeah, so if they're pub— if they're profitable right now even with this explosive growth, then yeah, it's probably a pretty good bet, um, to pick up a little secondary there.
