With the closure of the borders and the confinement imposed on more than half of humanity because of the Covid-19, the planes remain grounded, de facto causing travel to stop. In this context, the entire travel industry is shaking … And the economic consequences of this sudden stop in the movement of humans around the world were soon felt heavily for industry players to travel.
Over the weeks, a rapid return to normal seems only to be a mirage. The summer of 2020 should therefore look like a white season in a dark year. It will therefore certainly take many months before travel resumes, and even more so that the platforms of the sector cannot regain their cruising speed. Weakened by this unprecedented crisis, most of them could emerge from this delicate period greatly thinned, or even worse. Redemptions or bankruptcies cannot be ruled out.
At the beginning of the coronavirus epidemic in China, and even more, today when Europe and the United States are hit hard, eyes immediately turned to Airbnb, which was to make its entry on the Wall Street Stock Exchange this year. If the American platform can already cancel the festivities around an operation, which should be postponed for a year or more, it must now stand up to limit breakage.
The valuation of Airbnb in free fall
In this sense, the Californian unicorn, still valued at $ 35 billion at the start of the year, raised $ 1 billion in debt and shares in early April with Silver Lake and Sixth Street Partners funds. An operation necessary for Airbnb to strengthen its cash which now stands at $ 4 billion. A reserve which should, however, melt like snow in the sun given the gravity and the duration of the current situation, as well as the valuation of the American company which has been revised downwards to now only reach 26 billion dollars.
In the first quarter, Airbnb suffered a sharp drop in activity, with reservations that experienced a spectacular collapse. Between January and March, they fell by nearly 90% in several areas in China, and even by 96% in Beijing, according to AirDNA.
The same is true in South Korea and Italy, where Airbnb saw its activity reduced by 46% in Seoul and 41% in Rome. “ Although the current environment is clearly complicated for the hotel industry (…), Airbnb’s diversified, global and resilient economic model is particularly well placed to prosper when the world is restored and we can all benefit from it again. “However, believes Egon Durban, co-CEO of Silver Lake.
While waiting to return to a normal level of activity, Airbnb strives to take care of its guests. At the end of March, the American unicorn thus announced an envelope of 250 million dollars to compensate for the losses of its hosts impacted by the cancellations of stay. At the same time, Brian Chesky’s company is taking care of its image by providing free accommodation for nursing staff in several countries, including France. To generate some income, Airbnb decided to virtualize its “experiences” (activities with premises) via the Zoom videoconferencing platform, a big winner in containment.
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TripAdvisor is laying off 25% of its workforce
TripAdvisor too has also turned to online tourism experiences to allow its users to continue traveling through its Viator subsidiary. But unlike Airbnb, which still has enough solid cash to last a few months, the American tourist advice and advice platform no longer have enough back to shock the damage caused by the Covid-19.
Already in difficulty due to competition which has intensified in recent years, the American company has just announced its intention to cut nearly a quarter of its workforce or more than 900 people. Of these job cuts, 600 will be on TripAdvisor teams in the United States and Canada. The company’s offices in downtown Boston and San Francisco will also be closed.
At the same time, the company will ask most of its employees to switch to a 4-day work week which will be accompanied by a temporary salary reduction of 20% for three months from June. An effort that will save a hundred jobs according to Stephen Kaufer, co-founder and CEO of TripAdvisor. These measures are part of a three-phase plan put in place by the American company to deal with the impact of the coronavirus epidemic, mass layoffs being the last step in this emergency plan.
This is more bad news for the company, which had already cut 200 jobs a few months ago due to competition from several players in the sector, including Google. which launched a series of travel search tools that rival TripAdvisor. In search of a new lease of life after poor results and a tumble on Wall Street in 2019, the American company, speeded up by the Covid-19, did not even have time to afford a whiff of oxygen in 2020.
” Unfortunately, there is no manual for this situation in which we are together right now. I never imagined a world where almost each of our employees would suddenly work from home. I never imagined a world where a simple trip to the grocery store would create so much internal anxiety and fear. I never thought that so many people would be alone in a hospital, outside of their families, fighting to survive, “said Stephen Kaufer, the owner of TripAdvisor . Words that pretty much sum up the general feeling of the industry in this very difficult period.
Expedia seeks $ 3.2 billion to “survive”
Expedia will not say otherwise. Already badly developed at the start of the year, as evidenced by the loss of 3,000 jobs in its ranks, or 12% of its workforce, after the year 2019 deemed “disappointing”, the American tour operator now seeks to lift 3.2 billion dollars to keep up with the consequences of the Covid-19 on its activity. By May 5, the company must raise $ 1.2 billion in equity and $ 2 billion to finance the debt. And among Expedia’s bedside funds, we notably find Silver Lake, which already supported Airbnb as part of its billion-dollar fundraiser in early April.
” We have only one goal: to keep cash, survive and use this period to rebuild a stronger business,” said Barry Diller, president of Expedia, which manages a galaxy of travel-related sites (Expedia, Hotels.com, Trivago…). A barely veiled reference to the growth achieved ” in an unhealthy and undisciplined manner ” that the group mentioned at the start of the year. It must be said that Expedia had the greatest difficulty turning the page Dara Khosrowshahi, who let go of the reins of the American tour operator in 2017 to go and save Uber.
Despite the more than delicate situation in which Expedia finds itself, Barry Diller is optimistic with a touch of philosophy: “ As long as there is life, there are trips. The problem is knowing when they will be possible again.
Pending to know the final consequences of the coronavirus crisis on the travel industry, the World Tourism Organization (UNWTO) estimates that the number of tourists in the world will drop up to 3% because of the Covid-19 , instead of the 4% increase initially hoped for. This decrease should translate financially into ” an estimated loss of between $ 30 and $ 50 billion in revenues for international tourism “.
Logically, the Asia-Pacific region should be the most affected according to the UNWTO, with an expected drop in arrivals of around 9 to 12%, against an increase of 5 to 6% for the year 2020 in the estimates before the pandemic. In 2019, around 1.5 billion tourists had traveled the world. It will, therefore, be much less this year.