Airbnb CEO Brian Chesky represents a 'new breed of CEO.' Here's how he led the beloved company from near collapse to an expected $30 billion IPO.
Nov 24, 2020
But it may have a happy ending after all: On Monday, Airbnb announced that it would indeed be going public, and analysts say the much-anticipated IPO could put Airbnb's value somewhere near $30 billion.
Much of that success is due to Chesky himself. Having made a string of strategic decisions that helped the company weather the pandemic, Airbnb was able to turn its losses into a $219.3 million profit in the third quarter. All this against a hospitality industry that suffered particularly substantial losses during the pandemic.
Of course, Airbnb wasn't completely immune. When the pandemic hit, the company found itself facing a flurry of panicked guest booking cancellations and hosts with vacant rooms, with bookings down as much as 96% in cities like Beijing.
But Chesky was quick on his feet to adapt to the changing hospitality landscape. Now, the company is receiving widespread praise as a model for resilience and adaptability. And Chesky, some experts say, could serve as a model for a "new breed" of CEO.
Going "back to our roots"
When the pandemic hit, Chesky immediately realized that Airbnb would have to reassess how it was spending its money, and make cuts where needed. "This crisis has sharpened our focus to get back to our roots, back to the basics," Chesky wrote in a public message to employees in May.
Apart from the widespread layoffs, Airbnb also scaled back on pre-pandemic plans for more ambitious travel services. It cut Airbnb Experience, which guests can use to book activities; cut marketing costs by 54%; and halved executive pay for six months.
Ralph Hollister, a travel and tourism analyst at information services provider GlobalData, said that scaling back was a major factor contributing to Airbnb's recovery.
"The company realized that it can still be a success as long as it embraces the idea that it may have to be smaller in scale in the short to medium term and operate in a more efficient manner," Hollister wrote in an email to Business Insider.
Chesky's decisiveness didn't go unnoticed.
"What impressed me was how quickly he did it," Michael Seibel, the chief executive of Silicon Valley accelerator Y Combinator, told The Wall Street Journal. "Airbnb isn't a small organization anymore. He could've waited it out."
A new kind of travel
The company redesigned its webpage to place emphasis on local destinations. Airbnb
But for Chesky, it wasn't just about making cuts — it was also about reorienting the company towards the new kinds of experiences that pandemic-era travel would necessitate.
"I did not know that I would make 10 years' worth of decisions in 10 weeks," Chesky told the Wall Street Journal.
These decisions included making big predictions about customer behavior — for example, he predicted that more remote workers would be looking for long-term vacation retreats in rural settings.
"We used to do a lot of travel for work, and then we entertained ourselves on screens. That's going to inverse," Chesky told Business Insider in August. "I think we'll work more on screens and entertain ourselves in the real world."
That meant that, for Airbnb, quick business trips were out, while local destinations like countryside cottages were in. Airbnb's low overhead costs and ability to quickly pivot to rural destinations gave it a distinct advantage over hotel chain competitors like Accor and Hyatt, which rely on steep investments in brick-and-mortar hotel buildings.
By June, Airbnb redesigned its website and app so that the algorithm would show prospective travelers more local destinations they could retreat to. It also launched a new monthly stays option for guests looking for long-term rentals. And in place of Airbnb Experiences, Chesky launched Online Experiences, which provides virtual activities guests can partake in without leaving their homes.
"A new breed of CEO"
Chesky hasn't been without controversy over the past few months.
He received criticism in the early months of the pandemic for spiraling costs and for allowing travelers full refunds for any COVID-related cancellations, largely at the expense of property managers' individual cancellation policies.
But Chesky has mostly been praised for his swift, strategic, and, perhaps most of all, compassionate leadership.
After Chesky's decision to refund travelers for cancelled trips, he set aside $250 million for hosts to help cover COVID-related cancellations. He also partnered with local and state governments to launch Frontline Stays, a COVID-relief program where Airbnb funded hosts t0 offer free housing for doctors, nurses, and other frontline responders.
"He's a new breed of CEO that cares about more than just the bottom line of the company," Robert Mollins, an equity research associate at Gordon Haskett Research Advisors, told Business Insider. "He doesn't really have to bow from pressure in a time of difficulty; he's going to do the right thing."
Even the way Chesky laid off workers in May was lauded as an act of compassion: Airbnb gave US based employees in May 14 weeks of base pay, including tenure-related increases; 12 months of health insurance; and dropped the one-year cliff on equity, meaning that employees facing layoffs wouldn't have to wait a year before getting the options to vest their stock options. They also received substantial assistance in searching for new jobs.
"That resonates well," Mollins said. "If you look at people of my generation — millennials — I feel more comfortable supporting a business that has similar values to me. If you're a consumer, you're going to want to support brands that are doing right by their employees."