Airbnb: A Crisis PR Success Story

On the 3rd of May 2022 Airbnb’s founder and CEO, Brian Chesky, took to Twitter to announce the company’s Q1 results. They looked a little something like this:

• 102M nights booked
• $1.5B revenue (70% Y/Y)
• $(19)M net loss
• $229M adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA)
• $1.2B free cash flow

Strong numbers for a brand which had spent the previous two years circling the drain.

To understand how Chesky and Airbnb arrived at this point, we must first look at the previous two years, and why this announcement was so momentous.

COVID and the travel industry

Covid hit the travel industry, hard. And it hit Airbnb particularly hard indeed. Its business dropped 80 percent, and its IPO was put on hold… there were many who thought the business wouldn’t make it.

Airbnb’s losses during the pandemic years, do not make for easy reading. From 2017 to 2019, it was already a loss-making venture, but in 2020 those net losses spiralled to over $400 million and over $300 million in 2021.

This kind of financial downturn, combined with managing the negative effects of a pandemic, can quickly become a PR disaster.

But that’s not what happened.

The response

Chesky’s own thread on this post gives a play-by-play of how they achieved these numbers, in perilous conditions.

The thread makes for interesting reading, as it shows Airbnb’s recovery strategy leant heavily into PR, and a strategy which involved a great deal of reputation management, earned media, the stripping back of their regular marketing and a whole lot of effective crisis management and effective crisis communications.

Point 1: simplification

When dealing with a potential PR disaster, or a crisis management situation. A core thing to do is address the root of the problem. In Chesky’s case, the problem was too much dead weight within Airbnb’s core proposition. In his own words, they simplified their business and got back to their roots.

This is crisis management 101, remove the risky variables from the equation and focus on what you know you can deliver, and deliver well.

Point 2: respond and react

It’s unfortunate that Airbnb had to shutter units and make layoffs. It was the harsh reality of the pandemic years for many businesses. The need to tighten the belt, and restructure costs and revenue streams is always a hard decision to make. This is where the crisis management strategies and crisis response comes into effect.

To come out of any round of redundancies, or any kind of negative event with, and be labelled as compassionate and emphatic, is a testament to an elite PR crisis management plan.

Redundancy and brand damage

Taking a moment away from the main theme of this article, just to dive a little deeper into the negative effects a business can feel when undergoing rounds of redundancy and how it can damage a brand’s reputation, often beyond repair.

Naturally, it is an awful and unenviable position to be in. But from crisis management and public relations perspective, the way a business handles these kinds of crises can often define its success, or lack thereof, for years to come.

Handling it the wrong way

When a public relations crisis hits, or when it looks like there may be a PR crisis management need on the horizon, know that your recreation and future success hangs in the balance.

Public relations professionals, working as a crisis team and taking the reins, can work to mitigate the negative reactions a crisis can throw up. Deploying media relations, monitoring the news cycle and executing the crisis management plan across all communication channels.

Airbnb’s handling of this situation, compared to the recent P&O Ferries redundancy scandal, is a prime example of how the management of a crisis situation can damage a business’s value.

Point 3: marketing shift

Chesky’s marketing to PR shift is an intriguing one. Those in the PR profession will extol the benefits of a PESO model.

PESO takes in all important forms of media that are relevant to marketing and PR and combines them into a framework. The framework provides an overview of marketing tactics, but it also serves as a helpful planning tool. It enables you to look for opportunities that arise from the areas that overlap.

Developed by Gini Dietrich, it’s a great tool to use when planning for the big picture. It also helps put in context the media channels that you use and how they work together.

What we have here, is a prime example of PESO in action, as Airbnb put its resource into PR and brand protection.

The benefits of ‘earned media’

Earned media has long been a staple of public relations. But consider the changing landscape of both traditional and new media. The rise of social media, influencer engagement and even content marketing means businesses compete for a competitive slice of the earned media pie.

What sets earned media apart from ‘owned’ or ‘shared’ is that earned media comes with the added value of genuine third party endorsement.

A glowing review in The Times, or a positive spread in The New York Times — as in Chesky’s case — can yield incredible public endearment. This is because it comes from a reputable third-party source.

This kind of reputational capital is exactly what Airbnb needed if they were to weather this storm.

The recovery

In December 2020, Airbnb’s stalled IPO finally went ahead. Its valuation surged past $100 billion in the largest IPO that year.

Reuters reported shares doubled in their stock market debut, opening at $146 on the Nasdaq, far above the IPO price of $68 per share that previously raised $3.5 billion for the company.

The stock hit a high of $165 and closed at $144.71.

The value of ‘brand’

This IPO is proof of the value of strong, positive PR. This plugged a much-needed hole for Airbnb, but it’s important to recognise that this happened because the brand was protected.

During the dark times of redundancies, Chesky weathered this potential PR crisis and came through relatively unscathed. The protection of his own personal leadership brand, in turn, protected the overall brand perception of Airbnb.

The risk of getting it wrong

A damaged brand and an IPO is a recipe for financial and reputational disaster.

One of the most recent, high-profile examples of this in action is We Work. Its failed 2019 IPO came off the back of an extended period of reputational distress. The business was not in a healthy place, its customer base was in next-to-open revolt regarding the quality of the service. Its CEO was seen as more of a cult leader, than a business leader.

Adam Neuman’s personal brand certainly had negative effects on the overall WeWork brand. We can see this in this introduction from The Guardian.

Brand matters

The comparisons we can draw between Chesky’s Airbnb and Neumann’s WeWork highlight how brand perception and the crisis management process, can be the difference between failure and success.

WeWork’s downfall all took place in one, catastrophic six-week window. Leading to Neumann being removed in ignominy and the business being taken over by its largest investor. The IPO was called off entirely and thousands of redundancies followed suit. A major rebuild for the brand under new leadership would follow, but for WeWork, the damage was done.

Comparatively, Airbnb found itself in a not too dissimilar situation, albeit in reverse order.

Chesky’s handling of a difficult redundancy situation was applauded, it cushioned the brand during a very difficult period for the travel industry. Airbnb’s PR pivot helped stabilise the organisation during this tumult.

Crisis communication, when implemented correctly, can be a vital business tool.

Originally published at https://www.ambitiouspr.co.uk on May 20, 2022.