The novel coronavirus has shaken the USA’s economy to its worst not only in terms of lives but business too. The travel industry is one of the most wrecked ones, which has directly impacted the hotels, housing, and rental business due to its negative impact on both people’s ability and willingness to travel.
What’s the Trouble?
Until now, the home rental start-up Airbnb listed among Silicon Valley’s one of the most financially sounded start-ups. As on Tuesday, Brian Chesky, the company’s founder, and CEO gave its employees the biggest shock during this tough time. He said in a memo to employees- “the company’s revenue is predicted to go down to half or even less than what we have earned in 2019”, which was reportedly $4.8 billion. He even added that the company would terminate about 1,900 of its employees out of the workforce of about 7,500 employees. Which is considered to be one of the biggest layoffs that Silicon Valley has witnessed during this time of the pandemic.
Fight to Survive
The company is trying too hard to curtail its losses by cutting down its costs, like transportation services and Airbnb studios, a venture to create TV shows about travel. They have even decided to put a halt on their investment projects like hotels and luxury rental services. Before this, in late March, they called off their marketing activities and saved about $800 million. And they also informed its employees that the founders will take no salary while the top executives would take 50% of their share.
Last month, Airbnb announced that it has secured $1 billion investment in debt and equity security from Silver Lake Partners and Sixth Street Partners. This rose its cash reserves to around $4 billion. It will act as a bolster to its financial stability during this harrowing time.
These last couple of days are quite eerily for Airbnb as there’s a lot of pressure coming from its current and former employees to go public as some of them have waited for more than a decade to cash in their stock options. According to the company, the laid-off employees including those who were there for less than a year will receive their equity but do not ordinarily qualify for vested shares.
One of the Most Generous Lay-offs Ever
Brian Chesky said, “We are collectively living through the most harrowing crisis of our lifetime, and as it began to unfold, global travel came to a standstill”. He promised on the company’s behalf that the laid-off employees in the USA will get 14 weeks of base pay plus one additional week for every year at Airbnb. This means if an employee worked at Airbnb for 5 years that he/she will receive 19 weeks severance package. Also, the workers laid off will receive subsidized healthcare coverage for one year through COBRA. “In a global health crisis of unknown duration, we want to limit the burden of healthcare costs,” he wrote.