Airbnb is offering hosts company shares. But millions may miss out

“I’m curious to see how effective it is and if it actually works”

Airbnb CEO Brian Chesky (Getty; iStock)
Airbnb CEO Brian Chesky (Getty; iStock)

Airbnb is inviting hosts to enjoy in its success following a bumpy year of breakups and makeups.

The startup is offering a portion of its shares to people who rent homes on its platform through a directed-share program, a rare move that means those eligible could reap rewards when Airbnb goes public.

But Airbnb has not said how many shares it will offer and the criteria is narrow. Only U.S. hosts are eligible — 86 percent of its 4 million hosts are based outside the US, according to the company’s S-1 — and the offer is only being extended to those who were active within the past two years.

Airbnb, which has changed the hospitality landscape since its founding in 2008, disclosed the program in its Monday filing ahead of the company’s long-awaited IPO. The home-share startup is looking to raise as much as $3 billion, with a valuation of up to $30 billion.

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Airbnb CEO Brian Chesky (Getty, iStock)
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Keeping hosts happy is crucial to the company’s growth because Airbnb relies on their homes.

“Airbnb is a truly asset-light company but it is still in the real estate business,” Dror Peleg, an industry observer and author of “Rethinking Real Estate,” said in an email. “Having exclusive inventory in key locations is still critical.”

The company has been working to win over its hosts after the startup changed its cancellation policy in response to the pandemic in March. Many hosts were angry that they weren’t consulted about the change, which granted guests full refunds on their bookings.

In response, Airbnb CEO Brian Chesky issued a public apology and announced a relief package to support hosts who relied on Airbnb for income.

Travel has picked up a bit in the months since, but there’s still a long way to go. Last year, Airbnb reported $38 billion in total bookings, according to the prospectus. As of Sept. 30, bookings totaled just $18 billion — a 39 percent year-over-year drop.

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The startup’s revenue in that period slid 32 percent to $2.5 billion, and losses totalled $697 million, more than double the amount from the prior-year period.

Airbnb had more than 4 million hosts with 5.6 million active listings through Sept. 30. About 21 percent of hosts were “superhosts” who book 10 stays or more during a 12-month period.

Santosh Rao, head of research at Manhattan Venture Partners, said the share plan was a way of rewarding loyalty. Ride-share startup offered a similar program to its drivers ahead of the company’s lackluster IPO last year.

“This is another method to keep people in the system,” Rao said.

Jesse DePinto, a co-founder of rental startup FrontDesk, said host loyalty translates to more exclusive inventory for Airbnb. “And more exclusive inventory on Airbnb increases their ability to attract more guests directly to their website, with lower marketing expenses than their peers,” he said. “This is one of Airbnb’s core differentiators.”

The immediate reaction among hosts, however, was mixed.

On Reddit, one host put it bluntly: “Without us, the hosts, Airbnb is nothing.” But another felt Airbnb owed him nothing. “I’ve banked a lot of dough I wouldn’t have banked without them … They already paid me. They don’t owe me any favors.”

Scott Smith, a superhost and father of four who lives in the Bay Area, told The Real Deal he “was impressed that the company was considerate or willing to allocate some amount of shares.”

“I’m curious to see how effective it is and if it actually works,” he added.

Airbnb said through Sept. 30, the average annual earnings for hosts with at least one check-in was $7,900. Since Airbnb’s founding, hosts have earned $110 billion. Airbnb collects service fees on both sides of the deal. For a $100 stay, Airbnb would collect $3 from the host and $12 from the guest, according to an illustration included in the S-1.

In addition to shares, Airbnb said in its prospectus that it would put 9.2 million shares of Class H stock into an endowment fund to benefit hosts with “programs, initiatives, and grants.” Chesky will personally invest $100 million into the fund.
“It’s a nice gesture,” said Seth Borko, a senior analyst at Skift who follows Airbnb. But he noted that it represents a half percent of Airbnb’s total shares outstanding. According to the filing, Airbnb will cap the fund at 2 percent of the company’s total shares. It plans to make annual distributions from the fund, as soon as the value of the shares hits $1 billion.
By comparison, Airbnb’s top executives hold a 43 percent stake in the company, according to the filing. Chesky, with 76.9 million shares, owns a 15.4 percent stake.

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