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Like so many of the other fast-growing tech businesses, Airbnb does its best to hide its performance from the public and competitors.
Of course as a private company it has every right to so, but that makes judging its financial performance very difficult.
Airbnb Inc. is based in Delaware, the U.S. state. While Airbnb’s claims of $900 million revenue are impossible to verify, the potential is strong enough to attract investors, who continue to hand over cash.
The company’s rapid growth has generated massive hype. In the most recent round of funding Airbnb allegedly secured a further $850 million, valuing the company at $30 billion.
This veil of secrecy has been lifted, albeit ever so slightly, through the publication of a set of accounts at Companies House in the UK for a company called Airbnb Payments UK Ltd. These disclosures are required for UK businesses.
A cash collecting machine
Airbnb Payments UK Ltd is responsible for collecting all guest fees in every single territory where Airbnb is active except for the U.S., China and India. These three countries have their own corporate entities processing payments.
Looking at the terms and conditions on the Airbnb website, it is easy to see just how important Airbnb Payments UK Ltd. is to its whole operation.
The accounts in question cover a period of just less than a year from January 16, 2015 until December 31 of that same year.
Airbnb’s global business model is pretty simple: it charges guests between 6 and 12 percent of the total booking cost before returning 97 percent of the reservation subtotal back to the hosts. In other words, it charges the hosts 3 percent of the rental.
Given, that Airbnb Payments UK Ltd is responsible for collecting all this cash you would expect it to show up as revenue in the accounts. Well, it doesn’t.
Instead, the company has made it very clear that it is doing the cash collecting on behalf of another part of the Airbnb empire.
The Irish connection
While the principal activity of Airbnb Payments UK Ltd. is described as “cash collection,” the activity was conducted on behalf of Airbnb Ireland.
Airbnb’s Irish operation is arguably its most import outside of its base in San Francisco. Earlier this year the company opened a new 40,000-square-foot international headquarters in what has become known as the Silicon Docks area of Dublin.
There are plenty of reasons to choose Ireland as a business base but one of the main reasons companies such as Google, Apple, and Microsoft put some of their operations there is because of the business-friendly tax regime, which includes the corporate tax rate of just 12.5 percent. Apple is currently appealing an EU ruling that it owes Ireland $14.5 billion in back taxes.
In a submission to the Irish finance minister last year, Airbnb Ireland said: “Ireland is the primary base for our business outside the United States. All transactions relating to non-U.S. users are handled by Airbnb Ireland, pursuant to applicable Irish laws and regulations.”
Instead of earning money from guests and hosts using the Airbnb system, Airbnb Payments UK Ltd gets its money from the “recharge of certain costs and an annual fee paid to the company by Airbnb Ireland,” the filing states.
According to the accounts this resulted in turnover of $53.6 million. After deducting costs and adding back certain administrative expenses and interest, Airbnb Payments UK Ltd. was left with a pre-tax profit of $1.3 million. UK corporation tax amounted to $255,464. As this is the first time the company has filed accounts there is no way to compare it to the previous year.
Assessing Airbnb’s “rest of the world” business using the profit and loss account is pretty much impossible because of the way the company is set up.
The revenue booked doesn’t come from the global accommodation marketplace but rather from a related company. Instead it is more instructive to look at two other components of company accounts: the balance sheet and cash flow statement.
What can we learn?
While we can’t find out how much money Airbnb makes from its “rest of the world” operation, the accounts for Airbnb Payments UK Ltd offer some clues as to the scale of the business.
Both the balance sheet and cash flow statement give some strong indications about how much money is involved.
Unlike a profit and loss account, the balance sheet and cash flow statement only offer a snapshot of a company’s finances on the last day of its financial period (in the case of Airbnb Payments UK Ltd, December 31, 2015). Nevertheless, they are still useful.
Airbnb Payments UK Ltd had plenty of cash in the bank at the end of last year: $546,655,809, to be precise. Together with $297 million owed to it by debtors, its assets amounted to $843 million.
Coincidentally it owed almost exactly the same amount ($842 million) to its creditors, giving it total assets of $1 million.
The cash flow statement is even more remarkable.
The term “cash flows from operating activities” means the amount of money brought in through the regular business activities of the company, which in this case we know to be “cash collection.” In just under a year the figure for Airbnb Payments UK Ltd was $547 million.
So how much money did Airbnb make?
Although the figures give an idea of the amount of cash flowing through Airbnb’s non-U.S. business it is impossible to tell exactly how much it makes because of Irish company law.
Airbnb Payments UK Ltd. carries out its cash collection on behalf of Airbnb Ireland and it turns out that Airbnb Ireland is what is known as an “unlimited company.”
An unlimited company carries a number of risks for shareholders. In the event of it being wound up, those involved have an unlimited liability to the company’s debts on insolvency.
However, for those that are happy to take on the risk, there are a number of advantages. One of the key ones is that in many cases they are not required to file accounts.
Since it was registered in April 2012, Airbnb Ireland Unlimited Company has only filed its accounts once: an abbreviated set published in 2013. A spokesperson for Airbnb confirmed that Airbnb Ireland was not required to submit financial statements.
According to its annual return, Airbnb Ireland Unlimited Company is majority-owned by another Irish company, Airbnb International Unlimited Company, which in turn is owned by a company based in the offshore tax haven of Jersey.
A spokesperson for Airbnb said: “We follow the rules and pay all the tax we owe in the places we do businesses. Corporation tax is a tax on profit, and Airbnb is a young company investing heavily in our future. Airbnb hosts keep 97 percent of the price they charge to rent their space and the overwhelming amount of money generated by the Airbnb platform stays with hosts and their communities. The Airbnb model is unique and empowers regular people, boosts local communities and is subject to local tax. It also makes Airbnb fundamentally different to companies that take large sums of money out of the places they do business.”
Airbnb Payments UK Ltd. has three directors. Lex Bayer, the San Francisco-based Group Head of Business Development, Payments, and Airbnb for Business; Sharda Mehta, the company’s Deputy General Counsel; and Hadi Moussa, Head of EMEA Partnerships.
The company has no employees other than the directors and their remuneration is taken care of by an “associated company” Airbnb UK Ltd.
Airbnb UK Ltd is essentially the face of Airbnb in the UK and is responsible for promoting it in the country.