Checking out

Exited China last week

In March 2017, Brian Chesky, co-founder of Airbnb, travelled to Shanghai to unveil the Chinese name of Airbnb. Aibiying, according to Chesky, means “to welcome each other with love”. At the time, the chief executive of the online platform that helps homeowners to rent out rooms to travellers was bullish, saying he believed that the China market could grow into one of Airbnb’s largest, and that he even planned to learn Mandarin as well.

The Chinese name, however, quickly became a subject of ridicule online, with many saying that it was  too much of a mouthful. The pink logo with the upside-down heart also reminded some people of a “sex toys shop”.

The name and logo weren’t the only things Airbnb did not get right about China. Five years on, the company announced last week  it would drastically scale back its operation there by the end of next month. Airbnb will remove nearly 150,000 listings in China (less than 3% of its total around the world). It will now focus on serving Chinese tourists looking to make travel bookings abroad.

“The decision was not easy for us, and I know that it is even more difficult for you,” company co-founder Nathan Blecharczyk said in an online letter to its Chinese clients. 

Through the American firm, Chinese hosts have welcomed 25 million guest arrivals since 2016. Yet Airbnb’s retreat has not surprised  many industry insiders.

The draconian lockdowns in many cities to contain resurgences of  Covid-19 in recent months have been blamed as a factor. Thanks to the so-called ‘zero Covid’ policy, most foreign travellers are still subjected to a two-week mandatory quarantine when entering the country. 

Domestic travel has fallen precipitously too. During the five-day Labour Day holiday in early May, tourism revenue shrank 43% from a year earlier, according to official data.

Nevertheless, Airbnb was already  struggling even before Omicron. At its peak China accounted for just 5% of Airbnb’s total revenue. In the past few years, it had dwindled to just 1%.

Since it entered the country in 2016, Airbnb had been clobbered by domestic rivals like Tujia and Meituan Minsu, which is backed by the popular all-in-one app Meituan. Tujia’s  strategy, while sounding old-fashioned, was strangely effective as it offered coupons and aggressive discounts to draw users to the platform. It also waived commissions for homeowners.

As of the end of April, there were about 500,000 home listings on Airbnb in China. But Tujia had 2.3 million listings as of the end of October 2021.

Tujia has been trying to protect its position as the largest online rental operator by acquiring smaller rivals while forging partnerships with bigger internet firms.

In 2016, Tujia acquired the homestay businesses operated by Qunar. It also bought short-term rental firm Mayi from 58.com, while welcoming the latter, China’s largest classifieds site, as a strategic investor. A year later, it raised $300 million in a fundraising led by Trip.com (formerly known as Ctrip).

“After Tujia cooperated with Ctrip, occupancy was up more than five times. Similarly, over 60% of the traffic of Meituan Minsu came from Meituan Dianping. However, Airbnb has adopted a more ‘Buddha-like’ philosophy, relying on word-of-mouth, hoping that would be enough to attract customers,” ThePaper.cn said.

During the pandemic Tujia was much quicker at adjusting its business model. The company deftly pivoted from mostly short-term rentals to aggressively promoting longer-term stays. On the home screen of its app, users could often find promotions like “80% off for 15 days” and “70% off for 30 days”.

Even though short-term rentals promised much higher margins for Tujia, the offer of long-term stays helped the company shore up sales at a time when there were little tourism business. For a lot of rental tenants, Tujia does not charge an agent’s fee, which is typically one month of rent in China, giving the platform an edge over property brokerages.

As soon as Airbnb announced its retreat from the China market, Tujia said it had created a hotline for landlords that had listed their properties on Airbnb so they could switch to the Tujia platform…

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.