Founder resilience is one of the most crucial inputs in determining startup success. But how do you build this resilience? We dive into how the founders and teams at Airbnb and Zeus Living exercised incredible resilience when COVID-19 sent their businesses virtually down to 0 overnight.
While some industries, such as e-commerce and online entertainment, boomed as a result of the pandemic, others were completely devastated by the ramifications of COVID-19. The hospitality industry was among the hardest hit in the last year, and will also likely be one of the last to recover. The American Hotel and Lodging Association (AHLA) estimates that more than 10 years of job growth have been wiped out, and the industry is not expected to make a full recovery until 2024. As we are all at home wondering when we will be able to travel as freely as before, those in the hospitality industry are dealing with existential threats to their entire business. Airbnb and Zeus Living were two companies that saw their businesses tank when travel restrictions were set in place, but they have not only managed to survive the devastation brought on by the pandemic but have even capitalized on new opportunities.
Surviving through challenges isn’t something new for Airbnb. The RISD-graduated founder duo Brian Chesky and Joe Gebbia sold cereal boxes to help fund their startup in the early days when they were rejected by all investors. This unconventional survival hack actually impressed Y Combinator founder Paul Graham, who saw entrepreneurial grit in their ability and willingness to capitalize on an idea like selling cereal boxes to survive.
Fast forward to early 2020: things were looking stellar for Airbnb, that is, up until the pandemic struck.
The number of “Nights and Experiences” canceled in March and April actually exceeded the number booked. Raising debt, slashing executive salaries by half, and laying off 25% of its workforce were some of the many sacrifices made early on by the company. But they never sacrificed their customer obsession, going the extra mile to learn what hosts and customers were feeling and to address their challenges even at the company’s financial expense. The company issued a blanket refund policy offering last-minute cancellations and full refunds, and also introduced “Enhanced Cleaning” procedures. They provided their laid-off employees with continued benefits and helped out Airbnb hosts by pledging $250M to help reimburse them for guest cancellations as well as a $10M fund to help pay their mortgages.
As the needs of travelers changed, so did Airbnb’s strategy. With international travel remaining nearly non-existent, Airbnb saw that customers were booking more rural or non-urban destinations and they altered their website to reflect this changing demand. The biggest booking rebound was seen for rentals within a 50 mile radius of the guest’s home, while trips more than 500 miles away saw the weakest recovery. In June 2020, the revamped “Experiences” (unique, immersive activities hosted by local experts) moved online and brought in bookings of about $1M.
By focusing on doing right by employees, hosts, and customers, and listening to the evolving needs of the customers, Airbnb was able to turn their company around from the brink of death. In November 2020, Airbnb was heading toward an IPO with an expected valuation of $30B valuation and ended up seeing their market cap double that at a little over $86B. Though their unexpected success was a major victory, they’re not in the clear yet--Airbnb will continue to be tested on their survival skills as new challenges, including new strains of the virus, evolving travel habits, and macroeconomic ramifications.
“I didn’t know if we were going to make it,” recalls Zeus Living CEO and co-founder Kulveer Taggar in an interview. Like Airbnb, TSVC portfolio company Zeus Living has been on an incredible growth trajectory since its founding in 2015. Before coronavirus struck, the property management company was doubling in size each year and expanding into large cities across the US. They’d also just raised a $55 million Series B. In fact, 2020 was going to be the year they would break into the international market. In preparation for the expected growth of 2020, Zeus Living was expanding the number of homes on their platform.
But the moment the travel ban was set in place, everything turned upside down for the company. Bookings stopped and cancellations piled up. Two rounds of layoffs followed and the company’s core business of international business travel seemed entirely gone. The investors that were once eager to work with them had all but gone silent. With no one traveling or renting, things were looking bleak. To try and save the company, they cut down their employee headcount by almost 40%, including some key team members that had been with the company from the very start. It was an emotionally challenging year for the Zeus Living team.
The possibility of needing to shutdown the company was on founder Taggar’s radar, but he didn’t let it get to him. “Being an entrepreneur, I didn’t let that thought settle or stay with me for too long. I quickly shifted my mindset to… let’s find a way. Let’s be creative. I’m not going to give up right now.” The company analyzed their data and, like their investor Airbnb, saw that people were looking for places to stay in more suburban areas. With so many now working remotely, they realized people wanted to take advantage of experiencing and living in other cities while working. They came up with a plan. “In our market of furnished housing, we saw a lot of operators struggling. So we came up with a plan to match our demand with their supply, and take a transaction fee in the middle. And by July, we were at 85% occupancy (from a low of 65% in April).” By doing this, they were able to double the number of homes on Zeus to about 4,000. Amidst all the loss and chaos, Q4 of 2020 turned out to be Zeus Living’s most profitable Q4 in the company’s history.
Going into 2021, Zeus Living remains careful and cautious. They’ve managed to rehire some of the employees that were let go. Though international travel is still at a low, the company is optimistic about its growth this year as vaccines roll out and the pandemic restrictions slowly ease. “2021 feels like it's going to be a bit of a stabilization, plus some growth, kind of a year.” Taggar is looking forward to accelerating that growth in 2022.
Both Airbnb and Zeus Living saw their business model and revenue growth obliterated in a matter of weeks in early 2020. Many thought they were done for good, but Airbnb and Zeus Living not only survived but found new revenue opportunities. Here’s what we’ve learned in watching these two companies navigate and even capitalize on the challenges of the pandemic:
Anyone can demonstrate their values in good times. But during a crisis, companies often choose between two options--doing what is expected of them, or doing less than that in order to keep the business afloat. Both of which, according to Brian Chesky, are wrong. “A crisis is a stage to demonstrate your values,” he explained. Airbnb’s mission is centered around belonging, and the Airbnb CEO used this as the guiding principle to demonstrate their integrity as a company when faced with difficult decisions. “Culture is what you do in the darkest of days…. For us, that meant being really thoughtful of how to take care of people.” He took action by first writing out what he planned to tell the affected employees, and working out a step-by-step plan from that to ensure that the strategy remained true to the company’s ideals. Going above and beyond the expectation was key to Chesky in times in crisis: they created a generous severance package for laid off employees. Given COVID is a health crisis, they gave insurance coverage for a year. They let laid off employees keep their laptops so they could search for work. An alumni directory was created to help those who were laid off get rehired by other companies. All their decisions were people-centric, and showed that they cared about their people and principles, not just about saving their business.
As the needs and demands of travelers changed, Airbnb and Zeus Living analyzed these shifting trends and capitalized on them with renewed strategies. Both companies spent meaningful time listening to guests and residents, understanding their challenges and their needs. Airbnb’s “Experiences” shifted online, bringing in bookings of about $1M. Zeus Living saw that searches for secondary markets like Miami were growing, and “Work from Anywhere” was becoming their main product. Both companies analyzed and identified what was happening in their ecosystem and raced to meet the new demand. “[The Zeus Living] software improved in the way that only maniacal necessity can drive. Our small engineering team spent hundreds of hours rewriting the codebase. Their hard work paid off and we doubled the available homes for Zeus Living residents within three months,” wrote Taggar.
In dark times, it can be helpful to utilize mindful practices to ground ourselves and stay positive. In 2020, it seemed that bad news kept coming in waves. Taggar wrote: “I leaned heavily on The Five Minute Journal and each morning blindly reaffirmed to myself that we would get through this.”
To keep things in perspective, in an interview with CNN, Chesky stated, “Travel is gonna be back. And I think that if our IPO represents anything, I think it represents that our hosts are coming back, and that travel is coming back.” Focusing on optimistic truths about the future have been proven to be a necessary tool for working through disastrous setbacks for these teams.
Though the pandemic has decimated industries like travel and hospitality, leaders at Airbnb and Zeus Living have shown us that they will not let the circumstances define them or their companies. Airbnb’s surprising IPO and Zeus Living’s most profitable Q4 in its company history proves that the brightest futures can be built in the darkest of times.