Airbnb pledges $250 million to reimburse hosts for COVID-19 fallout

The company has come under pressure from guests and hosts alike who've been left out of pocket as travel bans ramp up and appetite for travel evaporates.

Passengers with luggage walking at airport vector. Travelers with bags go home. Tourist man and woma...

Airbnb has announced it has extended its refund window for bookings up to May 31 and will spend up to $250 million reimbursing hosts who have lost income due to canceled bookings. Until now, the company has only been reimbursing guests who've been affected by the coronavirus. Hosts will receive 25 percent of the value of canceled bookings. Guests, meanwhile, will only be able to take advantage of refunds if they made their reservations before March 14.

Like the conventional hotels it has in some instances supplanted, Airbnb has taken an enormous financial hit because of travel restrictions around the COVID-19 pandemic, as has its many, many hosts. The company’s original emergency policy in response to the pandemic did not include any financial compensation for hosts, which left many of them, unsurprisingly, irate about their lost income.

Airbnb's finally responded by making policy changes to help its hosts, who are arguably the backbone of the service. In his letter to hosts, co-founder Brian Chesky also speaks to the potential for reimbursement from the government’s COVID-19 stimulus bill. Though the 25 percent reimbursement may not seem like much, it’s some consolation for hosts who would otherwise be entirely out of pocket. Airbnb is making various cutbacks to enable the reimbursements.

More for superhosts — Airbnb is also rewarding those in its "Superhosts" program with extra funding. Superhosts are those with a 90 percent or better response rate, a one percent cancellation rate, an overall rating of at least 4.8 stars, and the completion of at least 10 trips or 100 total rental nights. Superhost status is renewed on a quarterly basis.

Airbnb has set aside an extra $10 million for its most prized hosts, as well as for those who have served as tour guides in its “Experiences” initiative. Guides can apply for grants of up to $5,000 starting next month.

Airbnb is cutting back — These reimbursements will come at a high cost for Airbnb. Last week the company had a phone meeting with bankers to extend its existing $1 billion debt facility. As a whole, Airbnb is looking to cut $800 million from its yearly budget to keep up with mass cancellations, as reported by Reuters.

In order to hit these numbers, Airbnb has canceled all of its marketing activities for the foreseeable future. Its founders will not take a salary for the next six months, and other top executives will take a 50 percent pay cut, according to sources familiar with the matter. All hiring has been suspended company-wide except for a few critical roles.

When asked about the potential for layoffs, Chesky said that the option has not been taken off the table.

Airbnb relies on travel and tourism to make any money at all; with COVID-19 still very much at large, it’s going be a long time before the platform becomes profitable again. It would be very easy for Airbnb to worry solely about its future as a company and leave its users out of the picture entirely, but doing so could see those users reluctant to return to the platform down the line. It's refreshing to see the company making cuts internally and doing what it can to help hosts... even if it took some pressure to get it to do so.