In early 2020, Airbnb was preparing for an IPO.Then global travel stopped almost overnight. Within weeks:
- Revenue dropped by around 80%
- Bookings collapsed
- Refunds surged
- Fixed costs stayed exactly the same
Despite being a fast-growing, high-profile company, Airbnb had a problem many businesses recognise instantly: Its budget was built for growth, not interruption.
Before COVID:
- Headcount had grown rapidly
- Marketing spend assumed constant demand
- Costs were planned around continued expansion
The issue wasn’t that Airbnb had no money.
It was that its cost base assumed tomorrow would look like yesterday.
- Cut around 25% of its workforce.
- Paused non-essential projects.
- Slashed marketing spend.
- Refocused the budget on cash preservation, not growth.
Brian Chesky (CEO-Airbnb) later said that the company went “back to basics” not because the business model was broken, but because the budget assumptions were.
What saved Airbnb wasn’t a clever forecast.
It was recognising that:
- Budgets are built on assumptions.
- When assumptions change, budgets must change fast.
- Cash runway matters more than growth in a crisis.
By rebuilding its budget around survival first, Airbnb stabilised and eventually went public later that year.
The lesson here isn’t about pandemics.
It’s about a budget that only works when conditions are perfect, isn’t a budget.
It’s a plan for one version of the future.