Airbnb, Rent the Runway hit by coronavirus outbreak

Yahoo! Finance's Melody Hahm joins The Final Round to discuss how Airbnb and Rent the Runway are being impacted by the coronavirus outbreak.

Video Transcript

MYLES UDLAND: Let's bring in Melody Hahm for a check, Melody, on what, I guess we're calling here, the new economy, companies that I know you've covered very closely for a number of years, Rent The Runway, Airbnb among them.

There are some real challenges here for these businesses that were born during, you know, I wouldn't say boom times, but they were born during an expansion. Money was plentiful. And now they are being faced with an unprecedented slowing in economic activity. And you've got to wonder, can they weather this storm and what the future looks like for companies that I think a couple months ago assumed everything was going to be great.

MELODY HAHM: Yeah. And Myles, I think yesterday you had a prescient comment where you said companies that led us here will have to be the ones that lead us out. And let's just be real now, there was a lot of innovation happening in places like Silicon Valley, but they were not the new normal by any means, right? They tried to disrupt and quote-unquote innovate in ways where we would transform into a peer-to-peer economy.

It's moments like these where we hear about self-isolation, quarantining, social distancing, that is the exact antithesis of what these kinds of new models have been trying to promote. Whether it is We Work, that had already been facing its fair share of struggles.

I want to start with Airbnb, quickly touching on the fact that they were planning to go public this year. Actually, originally the plans were in 2019. That got pushed back, postponed. And it's very unlikely that 2020 will be their year. Their last private market valuation in 2017 was $31 billion. And even over the last couple of months, according to Wall Street Journal reports, folks on the inside were saying, there's no way that that would be the post money valuation when it came to actually hitting the public markets.

And then even thinking about companies like Rent The Runway, there had already been a lot of scrutiny, even in the initial stages before the coronavirus was labeled a pandemic, that people should not be sharing anything, and that it's just very unsanitary. If we're being told to wash our hands for 40 seconds every single time, how can you trust an article of clothing that is being shipped to you that you don't know if it was properly dry cleaned anyway?

There's one tweet that caught my attention. A user tweeted at Rent The Runway, they won't let me pause my membership until I return my items. I just risked myself to go to the store, and of course, it's closed. Please help. Not sure what to do. Rent The Runway, I will note, has not been that responsive on Twitter or on Instagram. I did try messaging them earlier to see what their new policies are.

And then of course, when you think about the upstarts, Rent The Runway was seen as an incumbent in that space. Whether that's Nuuly, which is run by Urban Outfitters, Le Tote, Tulerie, my bet, Myles, is that many of these companies are already figuring out their contingency plans to close up shop entirely.

Because where are you even going to go? Even if you do choose to not halt your subscription, where are you going to be wearing these clothes over the next couple of months? I just think fundamentally, they're at odds with the way that people are trying to survive these days. There's no discretionary income, per se, to be investing in these sorts of non-essential items.

MYLES UDLAND: Yeah. And I think it, again, it puts into stark relief just the severity and the oddity, I think, of the economic slowdown that's about to come. Because you can plan for a lot of contingencies. These companies, we know we've heard a lot of them tell us that they're recessionary or recession-proof or whatever and that they have secular trends in their favor. But a three-month halt in the US economy is not a secular trend that's going to really be helping anybody.