Latest / The Pivot Podcast with Fexingo: How Businesses Change Direction and Survive Disruption / How Airbnb Survived the Travel Apocalypse
Transcript
- Lucas: So let's talk about a company that had its entire business model evaporate in about eight weeks, and still managed to come out the other side stronger. I'm talking about Airbnb in 2020. Luna: Eighty percent of bookings gone in two months. That's not a slowdown, that's a cliff. Lucas: Exactly. And the wild part is, Airbnb was weeks away from filing its IPO paperwork when the world shut down. So you have a company that had been growing like crazy, valued at $31 billion in its last private round, suddenly staring at zero revenue. Luna: And unlike a lot of companies that could pivot to remote work software or delivery, Airbnb had no Plan B. Their entire product was 'get on a plane and sleep in a stranger's house.' Lucas: Right. So CEO Brian Chesky had to make decisions fast. And he did something that a lot of founders are too proud to do: he admitted publicly that he'd been wrong about the future. He wrote a letter to employees saying the travel industry would never look the same, and that Airbnb had to change fundamentally. Luna: He laid off 25 percent of the workforce, which is brutal, but the way he did it became a case study. He wrote a memo that was incredibly transparent about the numbers, the severance packages, even the fact that he was giving up his own salary for two years. Lucas: And that memo is worth reading if you haven't seen it. He broke down exactly where the revenue was coming from and where it wasn't. Domestic travel was only 30 percent of their business before the pandemic — he realized that had to flip to 100 percent basically overnight. Luna: So they cut $800 million in marketing spend. That's not a trim, that's a chainsaw. Lucas: And they stopped spending on things that didn't directly drive bookings. No TV ads, no brand campaigns, no experimental projects. They killed their transportation business, their hotels business, their luxury trips division. Everything that wasn't core to the new reality was gone. Luna: But here's what's interesting: they didn't just cut. They also added. They redesigned the entire search experience to prioritize local getaways, last-minute bookings, and long-term stays. Because if nobody's flying internationally, maybe they'll drive two hours to a cabin for a month. Lucas: And that long-term stay product became huge. By mid-2020, stays of 28 days or more were Airbnb's fastest-growing category. People were working remotely and wanted to live somewhere else for a month. Airbnb basically stumbled into a new market. Luna: It wasn't stumbling. They redesigned their product in a matter of weeks. Most companies would have spent six months debating whether to add a 'monthly stay' filter. Airbnb just did it. Lucas: And they did it without a huge engineering team, because they'd just laid off a quarter of their staff. So the remaining team had to prioritize ruthlessly. Every feature they built had to directly answer the question: 'Does this help someone book a place to stay right now?' Luna: That's the discipline that most companies lack. When you're not in a crisis, it's easy to say yes to everything. When you're fighting for survival, you learn to say no. Lucas: And the results were dramatic. By the third quarter of 2021, Airbnb posted its most profitable quarter ever. Not just recovered — more profitable than before the pandemic. Revenue was higher than 2019, and they were actually generating free cash flow. Luna: They also went public in December 2020, and the stock doubled on the first day. So the IPO that seemed impossible in March happened anyway, just on different terms. Lucas: But the key insight for me is that Airbnb didn't pivot to something completely different. They stayed in travel, just a different version of it. They didn't try to become a grocery delivery app or a virtual events platform. They doubled down on what they were good at, but adapted it to a new reality. Luna: Which is the opposite of what a lot of companies did. Remember when everyone tried to become a Zoom competitor overnight? Most of those pivots failed. Lucas: Exactly. So what can a normal business learn from this? First, be willing to admit when your assumptions are wrong. Second, cut fast and deep — don't try to preserve optionality when the world has already decided for you. And third, listen to what your customers are actually doing, not what you wish they were doing. Luna: And a fourth one: communicate transparently. Chesky's layoff memo was shared publicly and became one of the most-read documents of the year. It built trust with employees, customers, and investors. Lucas: Look, a lot of this comes down to culture. If you have a culture where people are afraid to deliver bad news, you'll make slow, bad decisions. Airbnb's culture allowed Chesky to say 'I was wrong, here's the new plan,' and the team followed. Luna: And it's not like they didn't make mistakes. They had to refund guests and hosts on conflicting terms. They had to take on $2 billion in debt. But they made decisions fast and adjusted. Lucas: Which brings me to something I think is really important for our listeners. If these kinds of deep dives into how companies navigate crisis have been useful to you in your own work, even just as a way to think differently about a challenge you're facing — it's worth knowing that we're able to keep this show ad-free because of listeners who chip in a couple of dollars a month at buy me a coffee dot com slash fexingo. Luna: Yeah, and it genuinely makes a difference. Small amounts add up, and it means we don't have to run interruptive ads. So if you've gotten something out of these episodes, that's the way to keep them going. Lucas: Back to Airbnb. One thing I left out: in the depths of the crisis, Chesky sent an email to his top 20 executives asking them to cut their own pay to zero. Not all of them did, but the ones who didn't were asked to leave. That's the level of commitment he demanded. Luna: And that kind of leadership creates a culture where people are willing to make sacrifices. It's not just about the CEO giving up their salary — it's about signaling that everyone is in it together. Lucas: So what's the lesson for today? If you're running a business that's facing a sudden shift, don't wait for permission to change. Look at what the data is telling you, make the hard cuts, and focus on the one thing that matters most for survival. Then, once you've survived, you can think about thriving. Luna: And that's exactly what Airbnb did. They survived, then thrived, and now they're a $100 billion company. Not bad for a business that almost died. Lucas: Right. And the question for the rest of us is: what would we do if our core business disappeared tomorrow? If you don't have an answer, maybe it's time to start thinking about it now, not when the crisis hits.