Enrico Schaefer - December 10, 2022 - Airbnb
A recent interview by a LinkedIn reporter on LinkedIn News with Brian Chesky, CEO of Airbnb, Inc., reflected on March 2020 when Airbnb stared down the COVID crisis and almost did not survive. Airbnb has to make tough choices but breached its Terms of Service by refunding all guests even when they had agreed to non-refundable reservations and without requiring them to file refund claims or check the documentation. Airbnb was worried about survival and winning back guests once travel returned.
Instead of paying guests out of its own pocket, Airbnb diverted billions of dollars in host payouts for its own purposes, making hosts foot the bill for Airbnb’s survival plan. Airbnb lied about what it was doing and tried to pacify the host community with a 25% payment of a small fraction of the total reservation fees unlawfully diverted by Airbnb.
Airbnb went on to a successful IPO and is now publicly traded. But Airbnb still has not compensated hosts for its misdeeds. And Airbnb hosts filing arbitration claims against Airbnb are winning, with hundreds more filing claims and more evidence coming to light with each claim filed. Even worse for Airbnb, hosts are starting to get organized and flex their own muscles. Individually, Airbnb hosts are powerless against Airbnb’s arbitrary use of host payouts and decisions. But millions of hosts standing together are bigger than Airbnb.
As you can see from the interview Below, Brian Chesky takes pride in navigating the COVID crisis in March 2020. Airbnb faced possible bankruptcy and had to make decisions that would affect its survival. The money that guests pay to hosts for reservations – rental fee – is held by Airbnb’s payment processor Airbnb Payments, Inc. Airbnb Payment is a fiduciary for hosts holding those rental fees from the date the reservation is booked until check-in by guests. That can be months or even longer than Airbnb Payments holds fees. The total payouts held by Airbnb Payments are in the billions, but Airbnb has no interest in that money. The key to Airnb Inc’s survival was gaining access to the billions of dollars it held in trust for hosts. How did Airbnb use those billions for its own benefit to survive COVID?
When COVID hit, guests did not know what rights they had to a refund. Travelers rely on AIrbng to tell them whether they could get a 100%, 50%, or no refund. So did hosts who could not even see the policies they had agreed to because Airbnb deleted those policies from its website. It is likely that AIrbnb simply belvied it coudl do whatever it wanted since it has always done so. Few hosts filed for ariibtration. Holding Airbnb accountable required an attorney willing to take on one of the biggest tech players in the world and hosts wiling to finally stand up to AIrbnb.
The Airbnb Extenuating Circumstances Policy (ECP) allows a guest to file a refund claim, despite the cancellation policy selected by the host. If the host has a strict cancellation policy, the guest who cancels will forfeit half the reservation fee. If the guest cancels in the last seven days before check-in, the guest loses 100% of the rental fee.
The guests and host, who had agreed to the strict cancellation policy, split the cancellation risk 50/50. The extenuating circumstances policy or ECP was implemented to allow a guest to avoid the strict cancellation policy in minimal circumstances and only if the guest follows a defined process. The guest must cancel the reservation and file this ECP refund claim with Airbnb. The COVID pandemic did have some ECP exceptions which might apply. For instance, a border closing where there was no way for the guests to get to the reservation. Or the guest had COVID and submitted a Doctor’s letter stating that they had COVID. Undoubtedly, a small percentage of guests could have met some of these requirements. But most guests did not face impossible travel. Most guests did not want to travel.
In March 2020, Airbnb was in crisis and already had trouble staffing customer support. When COVID hit, Airbnb needed to staff their obligation to process ECP refund claims by guests. So what did they do? Before we get to the answer, let’s examine what Brian Chesky said about March 2020.
"And when you have a crucible moment like we did, losing 80% of business and people question your survival. It's a clarifying thing. And suddenly, it's like the house is burning. And you have to. You can only take half the things out of the house, and then you realize the things you want to save, which become your priorities." Brian Chesky, Nov. 2022.
Airbnb was fighting for its survival in March 2020 and chose guests over hosts and chose Airbnb over everyone. Airbnb decided to refund all guests without following the ECP process. Even worse, Airbnb secretly changed the wording of the ECP and then hid that change.
There was a lot of confusion when COVID hit. Guests felt entitled to refunds because of COVID even if they were only concerned about travel, rather than precluded from travel, despite their rental contracts. Airbnb was taking a hit to its reputation with guests, most of whom could not even reach customer service. Airbnb had a choice. Airbnb needed to drastically increase its customer service staff in order to fulfill its contractual obligations, review and process ECP refund claims and remidn everyone involved that guests had agreed to a strict ‘50% refund’ reservation. Instead of staffing their obligations, they cut their workforce by 25%, gave automatic ‘no questions asked’ refunds and covered its tracks by secretly overrighting its terms and policies.
Airbnb hoped that when travel returned, the guest would remember that they got refunded “by Airbnb” even though Airbnb didn’t fund the 4 billion dollars in refunds. Airbnb hosts lost the rental paymnent and strict cancellation money. Hosts lost 4 billion dollars in rental fees, and Airbnb claimed credit for ‘refunding’ guests and received 4 Billion dollars in goodwill on hosts’ backs. Airbnb used the host payouts to save itself. VRBO and other competitors let hosts and guests work things out themeselves under their rental contracts. Airbnb got an added benefit as the only platform who overode the refund policies in the rental contracts and positioned itself against its biggest rivals.
Our expert STR attorneys argue in arbitration that Airbnb breached the terms of service to avoid going through the ECP process to verify doctors’ notes, travel bans, border closing, or flight cancellations. Airbnb never verified any of that. As part of the fraud, Airbnb quickly added a Airbnb travel credit’ to its survival plan. Starting March 30, 2020, Airbnb required guests to submit documentation to get a refund, or a no questioned asked ‘travel credit’ they could theoretically use when travel returned. The ‘travel credit’ was the rental fee and host payout. For guests who selected a travel credit, AIrbnb, Inc. took the host payout from Airbnbn Payments and transferred the money to Airbnb, Inc. to cover operating expenses. For guest who submitted docuemntation, Airbnb didn’t even look at that documentation. The documentation was simply a barrier to drive guests to accept travel credits and add about two billion dollars to Airbnb, Inc’s operating expenses. Airbnb did what was best for Airbnb.
That’s why we have brought COVID refund arbitration claims on behalf of hosts against Airbnb. Our lawyers have represented clients who have received six figures in payouts that they should have received but for Airbnb’s breach of contract. That’s why arbitrators had decided in favor of those hosts, in many instances, ruling that fact Airbnb breached its terms of service and its extenuating circumstances policy when it arbitrarily decided that it was going to refund all guests.
We can also represent you if you have an ECP refund claim or had a strict cancellation policy that Airbnb did not honor during COVID. You have until march 2024 to file your claim.
Check out the information on our website and YouTube channel. There is also a link to the 10,000 Hosts website, a community of Airbnb hosts providing free resources for those who want to arbitrate themselves. It might be something other than a COVID refund. It might be the air cover claim or host guarantee claim that Airbnb didn’t pay. It may be that you were thrown off the platform unceremoniously by Airbnb for no good reason. You may need to file an arbitration order to get an order from an arbitrator telling them they have to let you back on the platform.