Happy new year fellow hosts!
To start off, I love Airbnb. It provides great opportunities for the common person. But that isn’t why Im writing this.
I have always been interested in the financial sector and the fundamental principles of how the economy operates. The recent FTX bankruptcy saga was just another example of the pitfalls of having policies within a company that do not draw the line between fungible and non-fungible funds. IE all incoming cash flow, whether from clients or investors is just shoved in one pot and used at the company's leisure to invest anywhere, notwithstanding the fact that the company has promised that it would pay its creditors upon demand (or at a certain time like Airbnb).
Clearly, having one big pot of fungible cash available to the company to invest, means if the company makes a bad investment and loses some or all of that money, any creditor who demands their money as per the promise the company made, will swiftly be told "errr, yeah sure.... the cheque is in the mail, I gotta go now".
And this is where I started to think about other companies which value is mostly derived from 'reputation' or 'goodwill'. Airbnb came to mind, as I'm a host. Their end of year 2022 report shows that they value their good will and intangible assets to be around 1 billion and their tangible assets (buildings, computers etc) around 150 million. So there is a billion dollars of stuff they can leverage, that isn't really stuff. However this isnt unheard of.
If the 2021 and 2022 annual report is anything to go by, Airbnb at any one time has, on an interim basis, between 2 to 4 billion dollars on their books from the sale of occupancy licences between guests and a hosts, awaiting payment to hosts.
Their 2022 official report to the securities and exchange commission clearly states that they had 3.715 billion dollars (at the time of making the report) as an asset that was a mixture of cash in transit (funds receivable for the purpose of imminent payment to hosts) and amounts "held" on "behalf of customers" (this would be the money awaiting to be paid to hosts for bookings made months/weeks in advance). This very specific wording is confirmed, as in the liability ledger for the same year, they show this exact 3.715 billion amount, down the last dollar, as a liability.
So to summarise, this is 3.715 billion dollars that was either on a truck being delivered to hosts (24 hours after check in of a guest) , or being "held on behalf of" hosts, to be delivered at a later time (because a guest made a reservation, say 6 months in advance). This is how I interpreted it anyway. Given the wording to the security exchange it seems it was, in some capacity, being held by Airbnb and not being, let's say, funneled through a back door SBF style to pay off some debt from a linked entity. Given the wording to the securities exchange, Airbnb could not use this 3.715 billion in any other way right? Its being "held" for hosts isn't it? Yeah, nah.
Say hello to payment term 3.9. A seemingly innocuous payment term for hosts, that in fact creates a multi billion dollar fungible money moral hazard. I feel we have already learnt from this?
Payment term 3.9 states that;
Airbnb Payments may "combine amounts" that it collects from "Guests" and "invest them as permitted under applicable laws". Airbnb Payments will retain any interest it earns on those investments.
Why are they saying "combine amounts"? Well that's obvious. If the company is in free fall it will not be what you know, but who you know. All the money being combined means first come first served. Or whoever is the coolest gets served first. And you think the hosts are the cools ones?
Airbnb, why are you combining the commissions you receive with the proceeds of the sale of the occupancy licences? Why are you "combining these amounts" in your terms but telling the security exchange a very specific amount, down the dollar, is being held separately for host payouts? The truth is, its not being held at all, hosts will only get paid if the "combined amount" has enough in it to pay them when you "generally" decide to pay them. All this, I feel is vague, ambiguous and screams of moral hazard.
The proceeds of sale of the licences should be restricted and accessible by only two parties; the hosts upon guest checkin and the guests upon a refund. There is no other reason why you should be risking losing that money between the licence sale and the guest check in, off the backs of hosts, which are the lifeblood of your company.
Airbnb is a fantastic way for the common person to see a return on their property investment. I want to ensure it stays. So many people rely on it. That's why I am starting a movement right now to stop any further Enron's or FTX's.
AIRBNB: DRAW A LINE, THROUGH THREE POINT NINE!!!!!
AIRBNB: DRAW A LINE, THROUGH THREE POINT NINE!!!!!
AIRBNB: DRAW A LINE, THROUGH THREE POINT NINE!!!!!
What's that you say? The Airbnb terms say that they must pay the hosts the proceeds of the sale of the occupancy licence right? They have to promise that don’t they? Well strap in my friend, let's take a ride down payment term 3.3.
Payment term 3.3 states;
"Airbnb Payments will generally initiate Payouts to your selected Payout Method…. for Accommodations, 24 hours after the Guest’s scheduled check-in time"
Oh why so vague and ambiguous Airbnb? What is with all these generally's and initiate's?
Firstly, 'will generally' is the biggest pile nonsense I have ever seen. If you want to ensure hosts get paid, you don’t wright this oxymoron nonsense. "Will generally", if given a broad interpretation, could mean hosts could never be paid and Airbnb would not be liable to pay them.
I want you to imagine the next sentence in a posh English accent;
"Well your Honor, yes it is correct that, generally, hosts are paid, but in these circumstances it wasn’t general, it was rather unique, so my client, as per the terms, had no obligation to pay those 15,000 hosts".
Oh and why put initiate in there? 'Payout' is defined in your terms as 'effecting payment'. Perhaps so you can combine it with the "24 hours after the guests scheduled check in time?" I guess the initiation procedure of effecting payment can occur between 24 hours and never, after check in. Good for Airbnb.
So to summarise, Airbnb are promising hosts the following;
Generally, the effecting of payment to a host will be initiated, sometime after 24 hours. So if its not generally, which could be anytime, it could be never. It seems like a figure 8 term to me. The wording, in my view, is laced with pure menace.
Here is a suggested revision of this clause in line with what Airbnb purport to do and what hosts expect;
"Airbnb Payments will payout to your selected Payout Method no earlier than 24 hours and no later than 48 hours after guest check in."
There is no reason they cant change it to this, because according to their annual report, the money given to them by the guests is being "held" for hosts to be paid out. So the money should be there, all ready to go. The fact that the current term is written the way it is, in my view, is due to a lack of confidence that Airbnb will always have the money there to pay.
To finish up, Airbnb can take the commissions they make from the sale of occupancy licences and do whatever they want with it. Its their money, they earnt it. However, to be able to take the actual proceeds of a sale which ought to go directly from purchaser to seller and be able to do whatever they want with them, while promising to "generally" pay a host at guest check in, creates an enormous moral hazard. Its time for Airbnb to replace 3.9 with a clause that says it will hold the money for hosts. Its time to remove "will generally" from 3.3 and replace it with just "WILL". This situation is no different to buying a house. The purchaser, if using a solicitor, gives them the money for the house and they hold it in a trust account prior to sale - the solicitor cant go and invest it between the client giving it to them and house settlement. So why are we allowing Airbnb to do this?
This is our money Airbnb and you WILL pay it to us and promise you WILL pay it to us under your terms.
Miles
