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Airbnb is forging ahead with an initial public offering, despite a host of challenges.
The home rental service on Wednesday said it had confidentially submitted paperwork to the Security and Exchange Commission for an IPO. The number of shares that it will sell and their price have not yet been determined, the company said.
The move comes just three months after Airbnb cut nearly 2,000 employees, or 25% of its workforce, due to the slowdown in rentals caused by the pandemic. And it’s unclear whether people will continue to shy away from traveling after the outbreak ends.
“This is a very bold, gutsy, counterintuitive move,” Henry Harteveldt, analyst at travel industry research firm Atmosphere Research, said before bringing up the rising share prices of many companies while the economy cratered due to the coronavirus. “But the stock market seems to be divorced from the reality of the rest of the world. … So while the iron is hot, why not strike?”
Here are three of the biggest challenges Airbnb faces.
Coronavirus concerns
As the coronavirus continues to spread, Airbnb will be challenged to convince consumers that its rentals are safe.
In May, the company implemented new cleaning protocols that were developed with former U.S. Surgeon General Dr. Vivek Murthy and other experts in medical hygiene and hospitality. The app identifies hosts who follow the new protocols, which includes using certain cleaning products and leaving a 72-hour window between bookings.
But Harteveldt said that may not be enough compared to the big money that hotels are spending to convince travelers that their facilities are safe. While hotels have been inconsistent in following their own cleaning standards due to reduced staffing, they are better at assuring travelers that they, in fact, are following those new policies, Harteveldt said.
“No one is winning this battle,” he said. “But the public perception is worse for home sharing than it is for hotels.”
Profit problems
Tech investors increasingly want companies to focus on profits rather than growth at any cost. After posting multimillion-dollar losses in 2019, Airbnb will have to show that it make money—even as the coronavirus decimates the travel industry.
During the first nine months of 2019, Airbnb reportedly lost $322 million, compared to a $200 million profit a year prior, according to the Wall Street Journal. Meanwhile, people are traveling less to avoid contracting the virus.