Airbnb Faces Worst Crisis, Lays Off 25% of Employees

Expected $1 Billion Loss in the First Half of the Year

Uber and Other Sharing Economy Companies in Crisis

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Airbnb, a shared accommodation company once valued at $31 billion, has decided to lay off 25% of its entire workforce due to the impact of the novel coronavirus (COVID-19). Although the company announced plans to overcome the COVID-19 crisis by cutting employee wages and reducing marketing expenses, it concluded that it is no longer sustainable without workforce reductions.

According to the Wall Street Journal (WSJ) on the 5th (local time), Airbnb plans to lay off about 1,900 employees, which accounts for 25% of its total workforce. The company also decided to withdraw investments in non-core businesses such as air transportation and film production.

Brian Chesky, Airbnb co-founder and CEO, said in a recent letter to employees, "With global travel halted due to COVID-19, we are experiencing the most devastating crisis of our lives," adding, "This situation is just beginning."

Airbnb’s announcement of workforce reductions is due to the expected snowballing losses caused by COVID-19. The sharp decline in users amid the epidemic fear is the decisive reason for the worsening performance. After recording a loss of $360 million (approximately 358.8 billion KRW) in the first quarter, a loss of $1 billion (approximately 1.2 trillion KRW) is expected in the first half of the year alone. CEO Chesky stated in the letter, "This year’s revenue will be less than half of last year’s level."

Previously, Airbnb announced several measures to overcome the COVID-19 crisis. CEO Chesky declared a six-month unpaid leave, and executives voluntarily cut their salaries by 50%. Additionally, the company announced the suspension of bonus payments this year to further reduce costs, but it could not escape the epidemic fear. Laid-off employees will work until the 11th and will receive at least 14 weeks of base salary and maintain health insurance benefits for one year. Airbnb plans to endure with $2 billion in borrowings while preparing for the post-COVID era.

Airbnb’s workforce reduction clearly demonstrates the collapse of the next-generation growth model, the sharing economy.

Uber and Lyft, also considered representative models of the sharing economy alongside Airbnb, are facing even more difficult situations. These ride-sharing companies were sued by the California government on the 5th following a sharp drop in demand. The lawsuit claims that Uber and Lyft avoided worker protections by classifying drivers as independent contractors rather than employees amid a surge in unemployment due to the COVID-19 crisis. They are now confronted with the dual challenges of declining customers and improving worker treatment. Uber stated in a press release that it will formally contest the lawsuit in court while seeking support measures for drivers. Uber announced layoffs of about 5,400 employees, accounting for 20% of its total workforce, and Lyft announced layoffs of 982 employees, representing 17% of its workforce.

This content was produced with the assistance of AI translation services.