Airbnb Makes money on cancellations- case study

[Inna22]

Let’s break down this specific reservation. All numbers rounded

A guest made one for $2130. Out of that amount $1550 was my portion, $360 in taxes and $220 Airbnb fees. The guest paid in November. She just cancelled her may stay and was offered either a store credit or refund per my cancellation policy which is half. She selected credit. I will get 12.5%, guest got nothing (credit), Airbnb keeps the money. Now, they have had $2130 for 6 months. This contributed to their working capital and earned them interest, approx. $40. They will continue keeping this money until another host needs to be paid, I would assume these people will not travel till next spring so let’s say another $80 for a total of $120. Now, about 10% of all credits are never used. That gives them average of another $210. Not sure if I am paid on my total (cleaning fee plus reservation) or just reservation. Safe to assume reservation only, making it $175 to me. I also do not know what they will do with tax in this case but somehow I have a feeling they will find a way to come out ahead. I will leave it out of my calculations though. Therefore, Airbnb keeps $2130 credit, makes another $310 on the reservation, pays me $175. So they actually come out $135 AHEAD if the guest cancels! Let’s say the guest did not pay that long ago or will travel again soon reducing interest equivalent from $120 to $20. They are still ahead by $35. No wonder everyone is getting an email with a reminder to cancel their May bookings!

[Sarah977]

@Cabo-Platinum0  There's now several coronavirus cases in Cabo. Your guests could have brought the virus with them and spread it around. Just as anyone else there, or anywhere, who's hosting travellers and tourists now could be encouraging the spread of infection. Please stop hosting tourists.

[Maxi13]

Yep, and the problem is not only that, have any one of you tried to apply for one of these "so called relief loans".... none are working and because our losses are listed as $0.00 we can not even proof losses for most of these "so called relief efforts"

[Marc571]

Here is what should be done in addition to what has been announced, which isn't much.

Being that airbnb sees only what would help their bottom  line they may go for tphis idea.

While I and every other host p  superhost or not have valid reasons to be upset and worried right now and feel entitled to more support this idea would provide that while adding to airbnbs potdntial earning mechanism and revenue streams while providing more earning potential, benefits and discounted premium offers for us as hosts to take advantage of as being a host  - like real value not just a 'badge

 I of status which as super as it may be when as it stands less than one percent come with the power to fly over these times of crisis with the bequeathed golden air(heir) chosen invitationon deemed worthy for  being  lost deselect and unworthy this could be used to save the rest of us from drowning in kryptonite.

PROVIDE RELIEF LOANS AND LINEZ OF LOW INTEREST CREDITS.

That those truly in need of the funds can submit forms for immediate supports needed to see through these external say times in which the relief loan could see us through the other side with what is needed so we won't end up you g from super hosts to unsupported, u desirable to homeless once weres upon a time not that long ago .... not a good look for us nor story ij which could  e added to the impressive nightmare portfolio established to which there'll,elymay be as many if  anymore accounts already logged for each one of us super hosts tocountefits I'll affect of public  opinion for better or worse I  perception of the company

This helps all super hosts who need the supports while earning you added value in the end,my streets raisedthroughout the repaymentperiod.Yiu could branch this idea out for those who want to redecorate,repurpose,retrofit or do small renovation to their list vs and create opportunities with sponsorship partners lime Mayfair or home depot that can be featurexproviding disco vs for hosts as nice gives for using the new received line 9f credit loan for emergencies like this,providing small y9u d's for emergency repairsmupgrades, redocarati g, ranks or retrofits that add value to the hosts list g while adding more value to the go to , I e by the repayment plan decided by the host in terms of how , long they who need go repay it by deducting a percentage rate of eachfurthef booking to come, self payments of a combination of the two with theinteret rate fluctuating  a similar fashion  with options as you made our cancellation  policies,  though i sjgges5 with increments of 2.5%-5 intervals.

 Win win.

And a whole new branch of I come streams is made to you while showingmore value and love them 8ncreased value to us as hosts by having the means to acquire and implement the gas and upgrades as we may need or wish while also provide g e,urgency measures of supports to us I dire times of extenuating circumstances 

Your welcome 

Feel free to invite or send a job offer or grant I think that is a multi illi9ndaresay potential billion dollar idea there that would solve a lot of problems you seem to be lacking the proper creativeminds to co e up WITH as it seems to look lime u may be lacking in your tech empire  

[Ute42]

.

Hi @Inna22 

You wrote:

• Now, they have had $2130 for 6 months. This contributed to their working capital and earned them interest, approx. $40

If $2130 earn $40 interest in 6 month, it would earn $80 in 12 month = one year. So the interest rate would be 3.75%.

Here in Germany we get nothing, the opposit is the case. If You have a lot of money in the bank as I have You have to pay negative interest. If You have 100,000 Euro in Your bank account You pay, depending on the specific bank, apprx. 0.25% negative interest. If You start out on jan 1st with 100,000 Euros, by dec 31st You end up with 999.750 Euros. 250 Euros are gone.

Do US-Banks really pay 3.75% interest if You have $2130 in Your bankaccount? To the best of my knowledge only banks in Nigeria pay that much.

[Sarah977]

@Ute42 No, bank interest rates are low. But I doubt that Airbnb earns all the interest from the bank. I'm sure they put it into investments which earn a much higher rate of interest. If they don't, their CFO isn't very bright. Another way they can clean up big is on currency conversion, and I'm sure their financial team is all over that. They'd be fools if they weren't playing the money markets with all the world currencies they deal with. There's people who make their entire living by cleverly buying and selling currency.

[Inna22]

@Ute42 that’s crazy about the negative interest!  @Sarah977  made some excellent points, some of them I didn’t even think about. They also need money in the bank to continue being self-insured legally a.k.a. Host guarantee, they acquire other businesses etc. I picked this number taking all of the factors in consideration as a reasonable minimum percentage this money is worth to them based on all these aggregates. It is probably earning them as high as 10% in reality

[Kathy899]

I have a high-yield online savings account that pays 2.6%.  But I'm sure Airbnb money handlers are much more sophisticated and know how to get at least 8% on floating funds.

[Suzanne302]

@Inna22  I was thinking the same thing as @Ute42 ...Where can I get an interest rate like that? LOL!

I have a "share certificate" with my credit union, which means I have to keep the money in the account for 12 months and still the best interest rate I could get was just under 2%. It's expensive to be poor. 🙂

[Ute42]

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@Suzanne302 

:):):)

[Susan17]

@Ute42 @Inna22 @Sarah977 

Well, just like their recent investors, you could always lend some money to Airbnb if you're looking for sky-high interest rates. As evidenced by the eye-wateringly punitive terms they've agreed to for both their $1 billion funding rounds in the past 10 days, they're clearly desperate enough to agree to just about anything at this stage... around 11.5% interest on last week's billion, and now this, on this week's further billion..

"The terms of the new deal are first-lien debt, meaning these creditors would be paid first if Airbnb were to default, the sources said. The loan is for five years, with an interest rate of 750 basis points over the Libor benchmark"

Chris Lehane, Airbnb Head of Global Policy and Public Affairs, neatly sidestepping the question of just how much of a "financial cushion" Airbnb now has, within the first 15 seconds of the Bloomberg interview video below..

'We Know We'll Get to the Other Side of the Storm' Says Airbnb's Lehane

https://www.bloomberg.com/news/videos/2020-04-15/-we-know-we-ll-get-to-the-other-side-of-the-storm-s...

[Ute42]

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@Susan17 

So airbnb has accepted an investment of $1 B and are paying an interest rate of 11.5%. And they have accepted another investment of $1 B with an interest rate of 750 basis points over the Libor benchmark. This is a flexible interest rate which can go anywhere.

If they accept these kind of deals in times of ever low interest rates worldwide, for me that means:

• They failed to get support from the american government
  
  

• They need money as urgent as a baby needs mothermilk

[Susan17]

@Ute42

Yep. Veering into backstreet loan-shark territory now. Desperate times call for desperate measures. 

Some extremely odd goings-on with the "100% refunds" too. Discrepancies, anomalies and curiosities everywhere you look. Fascinating - and super-enlightening - to have the golden opportunity to study (and document) such a huge volume of cases at once, where one has full and unhindered access to what the host is seeing on their side, what the guest is seeing on the other side, and all the messages customer support is sending to both sides in between. A real education, that's for sure. "Glitches" just doesn't cut it anymore.

We can only imagine the pandemonium that will ensue when all these eagerly-awaited "12.5%" payouts (rumoured to be lump sums) finally start being disbursed.. 

[Mary419]

At first I thought this would be a post about the revenue generated off Flexible and Moderate listings, which have quite a churn of bookings, and cancelations, all at a profit for only Airbnb. But to your actual point, I too have a lot of cancelations with high dollar amounts where my host payout is now $0 and I have learned from the guest they took all voucher and no cash... those were the only cancelations that went smoothly without me getting angry messages from guests begging me directly for money. In that regard I was glad so many accepted the voucher but it surely occurred to me how well Airbnb came out by holding that cash. Obviously we do have positive (not negative) interest rates in the USA on savings accounts but I agree earning interest on the float is currently not the goal, just keeping all that cash in the coffers is an enormous win when travel "fresh spending" has ground to a halt. Eventually people will spend these vouchers but only internally at Airbnb, and no time soon. So the money someone laid out for your house will go to some other host... and at that time a whole new 12-20% service fees will be carved out again from that new host's invoice (service fee % is a moving target based on algorithms for those who thought it was fixed) will be part of that in-house voucher spending. And some will forget to spend it before it expires. 

The really sad part is that if vouchers were the initial offering on March 14, for all the massive wave of cancelations, most guests would likely have accepted this emergency plan willingly. And then Airbnb could so much more comfortably afford to give hosts a meaningful support/payout for the sudden loss of expected income from bookings in the pipeline. 

[Valerie238]

Has anyone received any support during the shutdown? 

[Nina69]

No.  And none of the 25% that they promised either