Everything you need to know about Airbnb’s 2020 IPO plans

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It’s been a rollercoaster year for Airbnb and its much-anticipated plans for an initial public offering or IPO. The home-sharing platform had planned to file back in March to go public but then coronavirus hit and its revenue nose-dived.

Now, it looks like plans are back on track. Airbnb confidentially filed its IPO paperwork with the securities and exchange commission in mid-August. None of the financial specifics were revealed but the company was valued at US$18 billion in its last funding round in April, which is a long way down from its previous 2017 valuation of US$31 billion.

Of course, like the entire tourism industry, the coronavirus pandemic has had an enormous effect on Airbnb’s finances. New bookings stopped, cancellation rates soared, refunds to hosts and guests cost millions and revenue fell, even as cost-cutting measures like layoffs were implemented. To help mitigate this, it was forced to fundraise US$2 billion in debt and equity securities in April 2020 with onerous terms.

So the decision to file its IPO paperwork and potentially list in 2020 was surprising to some. Critics point to the ongoing pandemic and the many issues it continues to throw up: the hosts and guests that have been angered by changing cancellation policies, new laws and regulations in cities seeking to reclaim housing for locals, as well as the falling revenue and ongoing losses. Others point to the lackluster IPOs from sharing economy bedfellows Uber and Lyft in 2019, not to mention WeWork’s fall from grace.

[Read: These tech trends defined 2020 so far, according to 5 founders]

Reasons to IPO

But there are lots of reasons to go public, including pressure from employees (shares held by early employees will expire this year). But another big motivation is the fact that Airbnb has rebounded better than its competitors from coronavirus. Booking rates were above expectations from June 2020 onwards and the Airbnb model could take advantage of changing host and tourist behavior during the pandemic.

The company’s overheads are far less than the hotel sector due to its limited fixed costs. It also took advantage of the rise in domestic staycations in rural locations across the globe, and the increased demand for countryside retreats where people could safely socially distance. Unlike hotels, short-term rentals tend to facilitate longer stays and can offer full-service amenities, living space, and gardens. Research shows that the more spacious environments of short-term lets have been popular with holidaymakers and people wanting to work from home elsewhere.

Despite broad marketing cuts to reduce losses, Airbnb has strong brand recognition through past campaigns like “Don’t go there. Live there” that tapped into people’s desire to not just visit a place but have a more authentic experience of it. This helped it become the go-to platform for short-term rentals during the pandemic.

Hosts in rural areas also responded to the demand by listing. Meanwhile, urban hosts responded by switching their properties to private rental, or dramatically reducing prices.