When Airbnb’s Dublin-based staff logged in for remote work on Wednesday morning, their first task was to join a video conference for all employees in Europe and the Middle East with the company’s co-founder and CEO Brian Chesky from his own California home.
Overnight, Chesky had announced that the online travel accommodation agent was laying off 1,900 of its 7,500 staff as a result of the Covid-19 pandemic. “While we know Airbnb’s business will fully recover, the changes it will undergo are not temporary or short-lived. Because of this, we need to make more fundamental changes to Airbnb by reducing the size of our workforce around a more focused business strategy,” he wrote in a letter to employees.
Like many other Silicon Valley multinationals, Airbnb has headquartered its non-American operations in Ireland. But what exactly is its Dublin footprint, and how are the cuts likely to affect it?
Three days after the World Health Organisation declared Covid-19 a pandemic on March 11, Airbnb President Greg Greeley wrote to the company’s millions of hosts to inform them that it was extending cancellation policies already in place in worst-hit areas to existing bookings in the entire world. It was one of the first large travel businesses to offer all customers full refunds – no questions asked, no pressure to take vouchers instead.
Since then, the company has extended the policy twice, now covering all bookings made before the pandemic for stays due to take place until June 15. Airbnb is paying hosts a quarter of the cancellation fee they would normally have received from guests, up to a total of $250 million.
The company raised $1 billion in fresh capital from US venture capital funds Silver Lake and Sixth Street Partners on April 6, followed by a $1 billion term loan from a syndicate of institutional investors the following week.
On two occasions in the past month, Chesky said that he expected customers to favour travel options “closer to home” after the pandemic. He has shelved plans for Airbnb to move into transportation and video production for the time being, while the company will scale back investments in “hotels and lux”.
The impact of these changes on the company’s Dublin office, in a converted warehouse overlooking Grand Canal Dock, can only be surmised from the one detailed financial document ever published by Airbnb here: 2018 accounts for Airbnb International Unlimited Company, the group’s Irish-registered holding company for business outside the US and China.
While this filing does provide some information, it is limited. Prior to a change in Irish legislation, the company was not required to publish accounts before 2018, keeping all earlier transactions conducted to locate assets in Ireland under wraps. Airbnb did not reply to earlier questions from The Currency about its Irish operations. And Airbnb International consolidates dozens of group companies in Ireland and abroad, providing no clarity on how much of its business is actually conducted in this country. At the global level, Airbnb remains privately held and exempt from the filing obligations of listed companies. Its publicly stated intention to go public this year now looks uncertain.
What we do know is that Airbnb International owns the group’s intellectual property and its Dublin-based subsidiaries Airbnb Ireland Unltd and Airbnb Global Services Ltd operate the group’s online marketplace for users outside the US and China. In 2018, it owned 29 other subsidiaries, including national units of Airbnb across Europe, Asia, Latin America and Australia who “provide marketing and support services to Airbnb Ireland UC and Airbnb Global Services Limited”. This implies actual transactions with customers are all conducted through the two Irish companies.
Airbnb International is also the parent company of the Canadian-based Luxury Retreats group, which specialises in short-term rentals of high-end villas around the world. Chesky’s announcement that Airbnb would cut investments in the “lux” sector is likely to impact on a string of Luxury Retreats subsidiaries, none of which is based in Ireland. Airbnb International made multiple capital contributions totalling $71.2 million to Luxury Retreats in 2018.
Jersey tax residency
Airbnb International is owned by a Jersey-based holding company, allowing it to claim Jersey residency and its associated 0 per cent corporation tax rate. Up until 2018, the group was operating a typical double Irish tax structure, with fully Irish-based trading companies recording sales and their non-resident parent extracting value by charging them for use of intellectual property rights and other intangible assets.
As of December 31, 2018, Airbnb International and its subsidiaries had acquired a total of $332.6 million worth of intangibles in previous years, including $323.2 million for goodwill, $36 million for intellectual property; $41.7 million worth of customer and listing assets; $21 million for tradenames; and $1.9 million worth of developed technology. By that date, it had amortised most of those assets, leaving $159.4 million worth of goodwill and customer and listing on its balance sheet.
While the group of companies owned through Ireland had a total of 1,361 employees in 2018, its head of Irish operations Aisling Hassell told The Irish Times at the time that around 500 of these were based in Dublin, with plans to double this number to 1,000 in three to five years.
Chesky said on Tuesday that “teams across all of Airbnb will be impacted. Many teams will be reduced in size based on how well they map to where Airbnb is headed”. Should the 25 per cent global redundancy rate apply to the Irish operation in its current size, it would likely translate into around 200 job losses.
Airbnb International and its subsidiaries had consolidated revenue of $2.4 billion in 2018. The company did not disclose whether this was the full value of bookings it collects from guests, or the commissions it retains after paying hosts. It also availed of an exemption from detailing inter-company transactions, making it impossible to measure how much of this revenue is transferred from customer-facing companies paying tax in Ireland to their tax-exempt, Jersey-resident parent under the form of royalties and other payments for IP rights.
At individual company level, Airbnb International declared a net profit of $113 million in 2018. The previous year, it had lost $23.2 million. When consolidated with its subsidiaries, the Irish-registered holding company recorded a $88.7 million profit on ordinary activities before taxation (again an improvement on losses in 2017), and a $42.3 million in tax charges – all described as “foreign corporation tax” outside its Jersey residency. A portion of this is likely to have been paid here by its Irish trading subsidiaries.
At the end of 2018, Airbnb International’s company balance sheet showed net liabilities of $232.2 million, an indication of losses accumulated in previous years. Once consolidated with its subsidiaries in Ireland and around the world, it carried a shareholders’ deficit of $327.8 million.