(Bloomberg)—Josh Ostroff had a difficult choice to make: Cancel a trip to Japan in March that he’d been promising his 10-year-old son for three years, or ignore travel warnings and put his family’s health at risk amid the coronavirus outbreak.
He decided to cancel the trip.
When the Toronto-based family asked for their money back, citing the Canadian government’s warning to “exercise a high degree of caution” in Japan, they received a refund from their hotels and a voucher from the airline. Airbnb Inc. said no.
The San Francisco-based startup said the family didn’t qualify for a refund under its new “extenuating circumstances” coronavirus policy, which only applies to China, Italy and South Korea. The home-share company’s official response to the family refers to the U.S. Centers for Disease Control and Prevention: “If the CDC’s precautions are followed, you could safely travel to Japan.”
Ostroff was shocked. “I repeatedly asked about bringing a child into this situation and they did not answer,” he said. “I feel like Airbnb is being recklessly irresponsible here.”
Airbnb, which was founded in 2008 during the financial crisis as a cheaper alternative to hotels, is confronting a second major challenge in the coronavirus. The stakes are higher than ever this time around because this is the year Airbnb wants to debut on the stock market. And with more than 7 million listings across the globe and a private market valuation of $31 billion, Airbnb’s reputation has never mattered more or been under more scrutiny.
The Covid-19 virus, which is now active in more than 100 countries, has hit the travel industry hard. Some airlines have canceled flights to certain countries, hotels have closed and the some of the biggest conferences of the year have been scrapped. Many companies have forbidden international travel and told staff to work from home. On Monday, Booking Holdings Inc., the world’s largest online travel-booking site, withdrew its already bleak first-quarter guidance, citing the worsening impact of the coronavirus.
Navigating the global outbreak is trickier for Airbnb than for big hotel chains or airlines who serve only travelers and manage all of their inventory. Airbnb is a two-way platform, connecting people who want to rent out all or part of their home with travelers seeking accommodations. For every guest cancellation the company approves there is a host at the other end who winds up out of pocket.
In its drive to balance the needs of hosts, who sometimes get their entire income from listing property on the site, against travelers’ concerns, Airbnb -- at least for now -- is putting the onus on hosts to be accommodating, such as by offering refunds or loosening cancellation policies. But that’s leaving a lot of travelers disgruntled and feeling like they’re footing the bill for stays they had no choice but to cancel.
Smart companies strive to protect their reputations, especially when bad things happen outside their control, said Micah Solomon, a customer service expert and author of the book Ignore Your Customers And They’ll Go Away. “This crisis is going to be over sometime,” he said, and when it’s over “you still want to be the go-to place for guests.”
Right now not many guests want to be at an Airbnb. Angry travelers have flooded Twitter with complaints over what many are calling a lack of compassion during a global health emergency. Users have vented about four-day waits to speak to a real person and said the company’s policies are implicitly encouraging them to put their health at risk. One user wrote: “Looks like we have to actually get covid-19 to get a 100% refund from @Airbnb. Talk about mixed incentives.” Another said: “No corporate social responsibility? You’re forcing people to take their trips and possibly spread COVID.”
I really wish that @Airbnb would update the places from which people can cancel with a full refund. This is no longer isolated to a few places in the world. We are now affected in the PNW, and your policies need to account for this.
— Dr. Carolyn S. Fish (@cartofish) March 10, 2020
Obviously very bummed we had to cancel our vacation to Paris after all the planning & money we put into it due to #coronavirus concerns.
Shoutout to @Delta, @Marriott & the French travel agencies that ALL fully refunded our bookings.
However, @Airbnb lost a loyal customer...
— Kelly Price (@thekellyprice) March 10, 2020
Part of the problem stems from Airbnb’s shared responsibility with hosts on refunds. Airbnb will give a full refund within the first 48 hours after a guest books a site. After that, it’s up to hosts to set how much of a refund they’re willing to offer. These policies, outlined on each individual listing, can range from very flexible, offering free cancellation up to a day before, to very strict no refund whatsoever. Airbnb says hosts offer flexible and moderate cancellation policies on more than 60% of current listings.
In Ostroff’s case, he had booked three Airbnb’s for the trip to Japan and got three very different responses to his refund requests. The first host granted a full refund, but Airbnb still pocketed a $125 service fee from the reservation. The second host refused any refund and the third simply never replied. In all, the family lost more than $1,000.
After being made aware of the Ostroff’s situation by Bloomberg, Airbnb offered the family a full refund.
Airbnb said not all of its guests are angry. “We have heard from many guests who appreciate that their hosts have been flexible and helped them rearrange or cancel their travel plans with no penalty,” it said in a statement.
Many U.S. companies are basing their policies on guidance from the Centers for Disease Control and Prevention, the national public health institute. The CDC rates Japan an alert level 2, and recommends older adults and those with chronic medical conditions consider postponing nonessential travel there. But the country is taking more drastic action. Schools, museums and sporting events have been canceled, and the Hokkaido region has declared a state of emergency. The government is advising against being in crowds.
Travel companies have varying responses to requests for refunds. Expedia Group Inc.’s vacation-rental site VRBO hasn’t extended its cancellation or refund policy for guests impacted by the virus. The company’s Book with Confidence Guarantee only protects guests from fraudulent listings and misrepresentation. “It does not cover cancellations due to travel advisories from force majeure,” meaning unforeseeable circumstances beyond its control, Expedia said in a statement. Marriott International Inc. is waiving cancellation fees for stays through March 31 for travel to or from several countries in Asia and Italy.
On Tuesday, Airbnb updated its policies to offer hosts more tools to grant refunds and, in turn, allow guests to postpone travel plans. It will reward hosts who are willing to be flexible on refunds by giving their listings more visibility and scrapping the 3% fee it typically charges. The company also offered to return its service fee to guests as a coupon to be used on future bookings if trips have to be canceled due to coronavirus.
“Travel on Airbnb is powered by people, not large corporations,” Airbnb’s head of homes Greg Greeley said in a statement. Because of Airbnb’s “two-sided model, when a crisis like Covid-19 hits, we know that it doesn’t just impact us as a company, but also the individual stakeholders within our community: the hosts who rely on their Airbnb income, and guests who have their travel plans disrupted.” Airbnb is “committed to doing everything we can to fairly support both parties, consistent with how this two-sided marketplace works,” he added.
While gearing up for its public listing, Airbnb has been spending more on marketing and new safety features, causing the company to swing to a loss in 2019 after two years of profit before interest, taxes, depreciation and amortization. “It’s easy to understand why they’re being very prudent with refunds,” said Bradley Tusk, a venture capitalist who advises technology companies in crisis, though has never worked with Airbnb. But, warned that the company risked hurting its brand as it edges closer to a listing. (Tusk also ran the 2009 mayoral campaign of Michael Bloomberg, the owner of Bloomberg LP.)
Airbnb’s updated policy does little for travelers like the Ostroff’s, and others who have had to cancel or postpone trips to the 97 or so countries not covered by the company’s extenuating circumstances policy. Nor does it help those who were planning to attend public events that have since been scrapped.
William Matchin was traveling from South Carolina to Massachusetts for two psychology conferences this month. Both were canceled due to the virus and Airbnb declined to give him a refund. “It took forever to get on the phone with them and basically they just said go and talk to the host and try to get a refund from them,” Matchin said. “This is such a stark contrast to hotels and airlines which have issued automatic refunds no questions asked. It’s crazy.”
--With assistance from Patrick Clark.
To contact the reporters on this story: Olivia Carville in New York at [email protected];
Eric Newcomer in San Francisco at [email protected].
To contact the editors responsible for this story: Molly Schuetz at [email protected]
© 2020 Bloomberg L.P.