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Airbnb Takes on Local Rivals in China with Staff, New Services

US firm trails competitors badly in number of listings

March 23, 2017 | Retail & Ecommerce

US-based home-sharing service Airbnb renewed its efforts in China with the announcement this week that it rebranded its service in the country to Aibiying, a phrase the company claims translates to “welcome each other with love.” Airbnb is also tripling the number of its China-based staff and expanding the suite of services available to users in China to include trip-planning help and access to tour guides.

Airbnb has good reason for investing more attention and money in China—the home-sharing sector there is expected to experience tremendous growth both this year and the next.

According to data from iResearch Consulting Group, the total transaction value of home-sharing services in China is expected to reach RMB12.52 billion ($1.88 billion) this year, up 42.6% from 2016, and climb another 35.5% in 2018 to RMB16.96 billion ($2.55 billion).

Home-Sharing Service* Transaction Value in China, 2012-2018 (billions of Chinese yuan renminbi and % change)

Younger users have powered much of this growth. In a survey conducted in November 2016, iResearch Consulting Group found that 77.2% of home-sharing service users in China were ages 35 and younger. That finding is borne out by Airbnb itself, which reported that those under 35 accounted for more than 80% of its users, more than in any other country in which it operates.

Airbnb faces some significant challenges in China, however. Although the company doubled the number of listings it offers in the country to 80,000 last year, it still trails local competitors significantly in that regard. Homegrown firm Tujia claims to list more than 450,000 locations, while competitor Xiaozhu has about 140,000.

While local companies such as Tujia, Xiaozhu and Zhu Bai Jia use the same fundamental business model as Airbnb’s, some have already shown ingenuity in expanding services beyond just home-sharing. Airbnb now finds itself in the position of copying its rivals in China.

For instance, Zhu Bai Jia, which was founded in 2012, has long offered its customers help in planning their trips, as well as the use of hosts that also serve as part-time guides for travelers, according to the South China Morning Post. Airbnb only began offering a similar service, which it calls “Airbnb Trips,” to some markets in 2016, and just launched it in China this week.

Local firms have also addressed the significant cultural barrier to the very idea of home-sharing in creative ways. Xiaozhu, for one, lets hosts see prospective users’ scores on Sesame Credit, a service launched by Alibaba-affiliate Ant Financial that relies in part on purchase data to generate something like a credit score.

But Airbnb may not be overly concerned about its domestic rivals in China just yet. A major part of the company’s China strategy seems to be to appeal to the growing number of tourists in the country who travel overseas.

According to January 2016 data (the most recent available) from brokerage and investment firm CLSA, the number of outbound trips in China is expected to reach 200 million by 2020, when the country will account for 14% of outbound trips worldwide. In its blog post, Airbnb noted that it “offers the widest choice of alternative accommodation options in the most popular destinations for Chinese travelers.”

Rahul Chadha

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