Can Airbnb Make It in China?
In July of last year, Uber, the ridesharing company decided to abandon its attempts to crack the Chinese market, merging its Chinese branch with a competitor.[footnoteRef:1] Other internet giants have not fared much better: The Chinese government has blocked access to Facebook, Google and Twitter. But Airbnb, the home-rental giant, is determined to have a go at this market. On March 15th, Airbnb announced that it will increase its workforce in China from 60 to 180 workers and double its investments.[footnoteRef:2] It went so far as to create a new legal entity for China, calling it ‘Aibiying’ which means “welcome each other with love.”[footnoteRef:3] It is also planning to expand its popular “Trips” feature that helps travelers see exciting local spots that tourists often miss. [1: Brian Soloman “Uber Surrenders in China, Will Join Forces With Rival Didi” Forbes, Aug. 1st, 2016 ] [2: Laura Entis, “Airbnb is now going by ‘Aibiying’ in China”, Fortune, March 21, 2017] [3: Soloman, cited above]
Will Airbnb have more luck than other American internet-based firms? It is hardly a surprise that it wants to try. As the Economist said, “The mainland is certainly an attractive prize, with a big sharing economy that is projected to grow by 40% a year for each of the next five years.”[footnoteRef:4] China’s online holiday rental market, which generated nearly $1b in revenue 2016 is expected to go as high as $1.5b in 2017.[footnoteRef:5] [4: “A long way from home: Airbnb belatedly knocks on the door in China,” The Economist, Dec 1, 2016.] [5: Olivia Zaleski and Lulu Yilun Chen, “Airbnb Said in Talks to Buy China Home-Rental Rival Xiaozhu” Forbes, November 23, 2016]
But Airbnb will face significant challenges.
First, while Airbnb is the largest presence in the home sharing market globally, in China it faces a different king of consumer. According to a recent New York Times article, “The cultural barriers are significant. In a country where a home is for family or for investment and tourism is still relatively new for many, the idea of posting homes online for random guests to rent takes some getting used to.”[footnoteRef:6] This is a cultural difference that Airbnb has not confronted before, or at least not to this degree. [6: Amie Tsang and Paul Mozur, “Airbnb’s Rivals in China Hold Hands in a Nervous Market,” New York Times, March 22, 2017]
Second, Airbnb faces established local rivals who know the market well. A major competitor is Xiaozhu, founded in 2012, which has over 100,000 listings in 300 cities, compared to Airbnb’s 70,000.[footnoteRef:7] But the biggest of the local home-sharing firms is Tujia, which has more than 400,000 local listings, many of which it manages itself or through management firms.[footnoteRef:8] Late last year several sources reported that Xioazhu and Airbnb were in merger...