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Will Airbnb find a home in China soon?

03/29/2017| 9:50:05 AM|

It's never easy for American businesses to make it in China. Cultural differences, government interference and the sheer cost of competing in a market that dwarfs the US have frustrated companies ranging from Wal-Mart to Uber.

This week the home-sharing pioneer announced that it's changing its local brand name in China and doubling its investment there.

In theory, China should be one of the world's biggest and best markets for home-sharing. Chinese travellers took 2.2 billion domestic trips in just the first half of 2016, up nearly 10.5% YoY. Yet China has only 4 hotel rooms for every 1,000 people, compared to 20 in the US. And thanks to China's housing boom, about 50 million empty homes are scattered across the country just waiting (in theory) for paying visitors.

But that doesn't mean Chinese will jump on the opportunity to rent out their properties or stay in someone else's home. The biggest barrier is establishing trust between owners and renters. So renting a room from a stranger advertising on the internet won't come naturally.

Homeowners, meanwhile, have their own concerns. Many of China's vacant properties are purchased as investments, and most affluent homeowners - especially those with desirable vacation rentals - will hesitate to open their doors to poorer tourists, who constitute most Chinese travellers these days and who would be the most likely to forgo a hotel. That reluctance is only heightened by the near-constant stream of news reports about misbehaviour among Chinese travellers at home and abroad.

Bridging this gap in trust will be difficult. But there's some evidence that local companies - which are more familiar with local customs and concerns - are figuring it out. For example, Tujia.com, China's biggest home-sharing site, takes the ambitious approach of managing each of the 400,000 properties on its site (or hiring a third party to do so).

That includes hotel-like services, such as housekeeping, as well as conducting due diligence to confirm that listings are accurate. That doesn't just improve the experience for renters; it also expands the number of properties available by giving owners - many of whom live far away from their investments - less upkeep to worry about and more peace of mind.

Airbnb, with its paltry 80,000 listings in China, hasn't made any such effort, focusing instead on self-starting younger travellers. Where Tujia arranges for home cleaners, Airbnb's new investments are focused on curated 'experiences,' such as tours of local landmarks, that can be purchased alongside a room. That kind of thing won't be enough to overcome the cultural barriers inhibiting home-sharing in China. And so far, there's little evidence that Airbnb is savvy enough to come up with a more appealing approach.

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TAGS: Airbnb | China | short-term rental
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