Airbnb said that it had seen “substantially more” than USD1bn in revenue in the third quarter, driven by growth overseas and in secondary cities.
The announcement from the platform came as it found a replacement for its CFO ahead of its anticipated IPO and has been negotiating with various jurisdictions concerned with its impact on housing.
Airbnb drew attention to the new markets where it was seeing growth. It reported that the number of people booking homes in the third quarter was up 91% in Beijing, 79% in Mexico City and 70% in Birmingham, from the same period last year.
The detail on the group’s revenue was the first time it had gone into such, albeit light, detail. Speculation remained rife as to when the platform would announce its IPO. It announced the hire of Dave Stephenson, previously with Amazon for 17 years, most latterly as president and CFO of the e-commerce giant’s consumer division. Previous CFO Laurence Tosi left earlier this year amid rumours of tensions in the board room. In a blog post, Airbnb said Tosi, who joined the group in 2015 having been previously been CFO at The Blackstone Group “has decided to dedicate his full time and energy to his investment fund, Weston Capital Partners, and dedicate time to the several external boards he currently sits on”.
Commenting on Tosi’s departure, CEO Brian Chesky said: “Today, the company is one of the world’s fastest growing at our scale and is profitable, as measured by Ebitda, and cash flow positive with a USD5.5bn balance sheet and we continue to see material growth momentum in markets around the world. I want to personally thank LT for his leadership, creativity and lasting contributions to Airbnb.”
He added: “I know people will ask what these changes mean for a potential IPO. We are not going public in 2018. Our primary focus is becoming a 21st-century company and advancing our mission. We’re working on getting ready to go public and we will make decisions about going public on our own timetable.”
Airbnb was last valued at USD31bn and the timing of the IPO has been put at anywhere between mid-2019 and the end of 2020. It is thought that the ongoing delay in going public prompted the company to pay its staff cash bonuses this summer.
The platform continued to try and clarify its position in the property market, with the short-term rental market an area of conflict in many jurisdictions as Airbnb and its fellow sharing companies have been blamed for housing shortages and rising property prices. The platform has made a number of agreements in locations including Berlin and Amsterdam over tax and rental nights, only to see the rulings amended.
The summer saw New York City Council vote in favour of a new law requiring Airbnb and similar home-share companies to share data on their users. “This bill is about transparency and bringing accountability to billion-dollar companies who are not being good neighbours,” said NYC Councilwoman Carlina Rivera.
Airbnb responded: “We’re not surprised the City Council refused to meet with their own constituents who rely on home sharing to pay the bills and then voted to protect the profits of big hotels. The fix was in from the start, and now New Yorkers will be subject to unchecked, aggressive harassment and privacy violations, rubber-stamped by the City Council.”
The platform’s latest issue has arisen in Israel, where it has decided to remove the listings of 200 Airbnb listings in Israeli settlements in the West Bank.
The company said: “We know that people will disagree with this decision and appreciate their perspective. This is a controversial issue. There are many strong views as it relates to lands that have been the subject of historic and intense disputes between Israelis and Palestinians in the West Bank. Airbnb has deep respect for those views.
“Our hope is that someday sooner rather than later, a framework is put in place where the entire global community is aligned so there will be a resolution to this historic conflict and a clear path forward for everybody to follow.”
Israel’s tourism minister Yariv Levin told the local press that the decision was “discriminatory”, and told the ministry to “limit the company’s activity throughout the country”.
HA Perspective [by Katherine Doggrell]: When oh when oh when will Airbnb have its IPO and give us a look at its books? If for no other reason than it would be fascinating to see how much it spends on what must be the hospitality sector’s largest legal department.
For potential investors the question was not one of demand – the consumer has embraced the sharing platform, with their demands changing the face of the hospitality sector in the process – but supply and specifically whether the platform will be legal by the time it lists. There have been some efforts to maintain supply, working with Brookfield to develop specific sharing products, but these can only ever be small scale. It is the four million plus listings it needs to fret about.
The solutions to these are likely to be two-fold, the first fold being that which folds in your wallet – hard cash. The platform puts forward the image of being a happy-go-lucky homespun site where you share homemade apple pie with your hosts. This is simply not the case for many of the listings, where properties are more often investments attracted by the difference in income between short-term and long-term rentals. If you are operating a hotel under the radar, you must contribute as if you were a hotel.
The second fold is transparency. There should be no issue in passing over details of who is operating a business to the relevant authorities, which can then consider zoning laws, preventing hotels from popping up in residential areas, as well as collecting taxes to pay for the added stresses on the system.
The platform has been blamed for skewing the housing market in many cities – in fact it is one of many factors at play and has received disproportionate blame. Airbnb has made much of wanting to act like a grown-up company, not, it says, like much of its competition. And indeed it has made efforts. The sharing economy will not be legislated out of existence, but it is also unlikely to be allowed to expand without constraint. All parties need to work together to find out how it fits in and this means embracing full adulthood – and full transparency.
Additional comment [by Andrew Sangster]: Growing up is never easy and doing so in public is particularly hard. No surprise then that Airbnb has put back its IPO.
And this fits the current fashion with tech companies who are currently preferring to lean on venture capital funding for longer than has historically been the case.
What Airbnb will still have to do, however, is tackle the growing disquiet about its business practices. There are three main areas where it is challenged: life safety; tax; and regulatory compliance, notably planning.
With life safety the fix is simple and ought to be immediate. All hosts should be obliged to demonstrate that they have complied with local regulations regarding short-let accommodation. So in the UK, this should mean gas and electrical safety certification as a minimum. Relying on the “wisdom of crowds” is not adequate if some of the crowd die.
Tax, too, is a problem area. Airbnb has moved to an extent in this area and now collects tax on behalf of some authorities but there is still a sense of a company coming to the alter at the end of a shotgun. And it would certainly help matters if it registered in each major jurisdiction it operates in, rather than using the lowest cost option (which in Europe has it registered as an unlimited company in the Republic of Ireland).
Finally, there is regulation. And here I have a lot more sympathy with the cause of the platforms. The current regulatory environment is not fit for purpose and needs a radical rethink.
Hoteliers have been happy to see the platforms bashed for squeezing out long-term renters. But the same logic that says Airbnb has pushed up the price of accommodation in London is also being applied in Westminster by the council when it requires hoteliers to offer affordable housing when they build new hotels.
Overall, I think hoteliers ought to be making common cause with the platforms against inappropriate regulation. Airbnb has shown a willingness to conform and play by the same rules as other companies in the accommodation business when it comes to taxes. The dynamic new business model it has created should not be snuffed out by incumbents protecting their patch.
The accommodation business is at a far too exciting stage of development to allow the dead-hand of regulation to play a dominant role.