Short-term rental site Airbnb is preparing to go all-in, despite the many problems 2019 has brought to the company.
Working for the gig economy can be tough. It’s harder to get a mortgage, or any kind of loan for that matter, it’s harder to prove your income, the list goes on.
But not only do gig workers have a harder time because of the way they are paid, but is also seems as though the world is out to destroy their jobs. In most markets, as the world moves on, and the next-best-thing is invented, the old jobs fizzle out as new ones arise. Case in point – K-Mart, Toys-R-Us, and my other retailers that are losing out to the new and improved way of shopping – Amazon.
Or the types of jobs we have – artificial intelligence and machine learning take over some of the more mundane tasks where a human hand simply isn’t needed. Need proof? Look no further than McDonalds or Panera Bread, where you can order all of your food yourself right from a little screen.
So jobs being created and destroyed is a normal cycle as the world moves on, creates bigger and better things, new jobs arise and the old ones fall. But the gig economy seems to struggle especially hard. That’s because sometimes it’s not just about the next best thing arising – they have to fight against people that literally don’t want their job to exist.
The fight against Airbnb
There has been strong resentment building against Airbnb and other short term rental sites. Some of it is because large landlords and investors buy up housing stock and turn a profit by using it for short term rentals.
Americans complain that these practices are driving up costs of housing, creating housing shortages and disrupting once peaceful neighborhoods.
The anti-Airbnb movement won one of its latest victories in November with the passage of the first ever voter-approved ballot referendum for tough new home sharing regulations. The ballot referendum was approved overwhelmingly by a 70% to 30% margin despite Airbnb heavily outspending us 5-to-1.
“They thought their money would win and I’m proud that Jersey City said otherwise,” Jersey City Mayor Steven Fulop said at the time. “If I was an investor in Airbnb I would certainly take note, as this message of regulation wasn’t sent by politicians, but it was dictated directly from the people.”
The new restrictions would allow homeowners to rent out portions of their homes, but, and here’s the catch, only if they are present during the stay. But it would prohibit renters from listing their apartments from listing their properties if they don’t live on site, effectively banning large-scale investors.
And other gig economy players are facing similar battles. For example, ride sharing company Uber successfully rallied its riders in New York City in 2015 to help defeat a proposed cap on ride-hailing vehicles, but it failed to replicate that success in 2018 when the city passed a yearlong cap.
But while Airbnb fought hard and invested a lot of money – about $4.2 million – to fend off the new rules, it is not too concerned about the loss.
“From the start of this campaign, we knew this was going to be one of the toughest fights we’ve faced, with the big New York hotel industry determined to fight home sharing, but we had an obligation to stand up for our community,” Airbnb Spokesman Christopher Nulty said. “There are Airbnb listings in over 100,000 cities around the world and we will continue to do all we can to support hosts.”
Airbnb’s future plans
Amid all of these battles, Airbnb announced its loss in the first quarter of 2019 more than doubled from the year before. The company posted an operating loss of $306 million, but not for the reasons you might think.
Airbnb didn’t post a loss because it’s business is going poorly, it actually posted a loss because it is preparing for major growth. The loss is due, in part, to a sharp increase in investment in marketing.
Airbnb increased its investment into sales and marketing to $367 million in the first quarter of 2019, up 58% from the same period the year before. This was the single-largest increase in spending that the company saw at the beginning of this year. The closest to it was product development, which grew 51% and operations and support, which grew by 30%.
But an increase in marketing isn’t the company’s only major plans for the near future. It also announced back in September that it plans to go public in 2020.
The company was last privately valued at $31 billion, according to PitchBook, but that was back in September 2017.
And it even threw out the potential for seeing an IPO plan as recently as March this year, with Airbnb cofounder Nathan Blecharczyk saying it, “had not decided if we will go public in 2019.”
“We have already said that we are taking the steps to be ready to go public in 2019,” Blecharczyk told Business Insider. “That doesn’t mean we will go public in 2019.”
Of course, it is obvious now that this will be a 2020 project.
And again, Airbnb isn’t the first gig-economy company to take this route. Uber and Lyft also went public earlier this year, but each has spent most of its time since then trading below what they opened at.
It remains to be see how Airbnb will fare, especially given the loud, consistent battles against the company and its hosts.
And at the end of 2018, Airbnb announced that it hired Dave Stephenson away from Amazon to be its new chief financial officer.
The company is making a lot of major moves as it prepares to go all-in, even in the face of court battles, regulations, city ordinances being enacted against it and much more. Airbnb seems undaunted and ready to move forward as it continues to invest and prepare for growth.
Founded in 2008, Airbnb has already made it past its first decade. Will it make it to the next?