Airbnb is an Internet-based company founded in 2008 by Brian Chesky, Nathan Blecharczyk, and Joe Gebbia; it runs on an online marketplace platform model connecting hosts and travelers around the world. Airbnb enables transactions without owning any rooms, providing an inexpensive and different experience to travellers all around the world. As reported by Airbnb, it has over 2,000,000 listings in 34,000 cities and 190 countries worldwide. The primary source of revenue comes from the service fees and processing fee charged to hosts and travellers. Hosts of Airbnb have the opportunity to meet different people from around the world while making a little extra money and travelers can stay for less than the cost of a hotel room. This would provide travellers different experience from a standard hotel room. For instance, a traveller decides to visit Amsterdam for their vacation and Airbnb provides them the opportunity to stay on a boathouse that gives the travellers a unique experience. The marketplace platform of Airbnb disrupts traditional approaches of hotels and motels by creating a different type of supply and relying on quality and hospitality of hosts. Unlike the traditional hotel that invests on land, customer service, inventory and so on, Airbnb scales by increasing hosts and matching hosts and travellers.
Airbnb for the Chinese Travellers
In China, Airbnb has recently raised a $1.5 billion investment from China Broadband Capital, Hillhouse Capital Group and Sequoia Capital (Hulgrave, 2015). The aim in China is to generate a convenient way for Chinese travellers to use the services rather than using it in their country itself. This is a very smart approach, as they are not aggressively trying to build a whole new inventory in China while building a loyal community starting from outbound travels. As stated by Horwitz (2015), Airbnb is currently targeting outbound tourism as China’s outbound travel market is booming. Since 2000, there has been an increase of Chinese travellers of 109 million spending $164 billion and according to Bank of America Merril Lynch, it expects an increase of $264 billion in 2019 with an approval of operating on e-commerce platforms such as Alipay and Unionpay. On a global scale, Airbnb has an absolute advantage over its Chinese competitors in terms of outbound tourism but China has its own unique characteristics and Airbnb may not be able to completely translate its global advantage without facing a few challenges.
Airbnb in China faces Challenges
As the market for this industry grows, Airbnb would face many challenges in order to succeed. A few challenges that Airbnb would face would be the competition for market share in China. These Chinese Imitators such as Xiaozhu and Tujia have spent years to adjust and optimize their business model to suit the Chinese Market. With the difference in management styles, culture might be something Airbnb would have to overcome. Many foreign Internet companies have failed to adjust and adapt themselves to the fast moving environment of China. The adaptation of Airbnb’s operations, management style, and business model would be key to successfully expanding in China’s market. Airbnb, however, could learn from the success story of LinkedIn, which has successfully established themselves in China. Moreover, Airbnb would face regulatory risk in China; though this has not been widely regulated at this moment but as time progresses. There is, however, a way for Airbnb to overcome this problem; by establishing a smooth relation with regulatory authorities. With the experience Airbnb has in other markets would give them the ability to adapt quicker to succeed in the Chinese market. Chinese guest especially has concerns, as culturally they do not like sharing the place with someone they do not know. Also sharing concerns such as properties not matching the description or an unresponsive host.
Competition in China
The current slow approach used byAirbnb may cause them to lose some ground to homegrown competitors such as Tujia, Xiaozhu, and Mayi. Tujia remains as one of the top competitors for Airbnb in China. Established in 2011, the company has raised $300 million with 300,000 properties in 250 destinations in China and 15,000 properties overseas in 100 countries (Mahajan, 2015). According to Horwitz (2015), Tujia focuses on hand on the approach whereby staffs personally verifies each rental space, provide cleaning services and a 24/7 service call. Tujia’s service have been tailored to the Chinese customers and differentiates themselves from their competitors by offering butler services in certain properties, bicycles and even car rental. The CEO of Tujia, Melissa Yang states, “our main strategy is to go where the Chinese tourist goes”. As Tujia focuses on mid to high-end properties, another competitor Xiaozhu went online in 2012 and focuses on low-end properties (Mahajan, 2015). Xiaozhu went online in 2012 and have raised $60 million; they offer accommodations in over 200 cities in China. Yimin (2015) states Xiaozhu’s CEO, Chen Chi made innovations in response to the peculiarities of the local market and opened it up as people were more willing to accept the idea of sharing accommodation in China.
With the goal of allowing travellers to not only book a place to stay anywhere in the world but to find a budget way for travellers to have a vacation in a city; Airbnb seems to be committed to looking for ways to gain more market share which includes North America, Central America, South America, Africa, Europe, Asia, and Oceania.
- Airbnb (2016).“About Us”. [Online] Available at https://zh.airbnb.com/about/about-us
- Yimin, H. (2015). Three Challenges facing Airbnb in China’.[Online]. Available on http://www.businessinsider.com/three-challenges-facing-airbnb-in-china-2015-8?IR=T
- DeAmicis, C. (2015). ‘Airbnb’s Clever Strategy in China May Outshine Uber’s’.[Online]. Available on: http://recode.net/2015/08/19/airbnbs-clever-strategy-in-china-may-outshine-uber/
Contact us at dx@daxueconsulting or Follow us on our Social Media, see below our latest post about the Chinese Leisure activity
— Daxue Consulting (@DaxueConsulting) November 18, 2015