Airbnb in China has not survived the “seven-year itch”

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Text / Han Ying

Source: Wired Insight (ID: lxinsight)

“I persisted for three years and didn’t give up, but the platform gave up first.” After hearing the news that Airbnb was about to take down Chinese listings, Su Su, the owner of Hangzhou homestay, didn’t have time to respond, but felt very sorry.

On May 24, a news that Airbnb was withdrawing from the Chinese market added to the embattled homestay industry. “As the new crown epidemic continues to recur, the company’s domestic travel business is facing operational challenges such as high costs.” Airbnb described its operating conditions in the announcement.

Withdrawing from China is Airbnb’s helpless move under the epidemic.

Looking back at the seven years that Airbnb came to China. At first, it was the collective outbreak of China’s homestay industry. As a synonym for “small and beautiful” in the homestay industry, Airbnb has also tasted “sweetness” in the Chinese market. Its co-founder and chief strategy officer, Bai Siqi, is personally in charge of China.

But the good times don’t last long, and Airbnb’s life in China hasn’t always been so easy. With more and more players entering the market, Airbnb has little advantage in the Chinese market. In 2020, with the outbreak of the epidemic, it has become an industry consensus that the homestay business is difficult to do, and Airbnb is no exception.

Behind Airbnb’s withdrawal from China are homestay owners who have difficulty accepting the reality.

If you lose such a large platform, the number of homestay orders will undoubtedly be lost a lot, and you will have to start from zero when entering a new platform. More importantly, under the repeated epidemics, low house prices and low passenger flow have made homestay owners miserable.

With the end of the Airbnb China story, Airbnb hosts no longer appear in the new stories of the homestay industry.

Airbnb has no choice but to retreat

The dark cloud of the epidemic is shrouded in the homestay market, and even the leading player Airbnb can’t bear it.

On May 24, the Airbnb community released a “Letter to Chinese Users”, stating that the platform will close its mainland China business in the future.

Subsequently, the official public account of Airbnb’s host community released an announcement on “The latest adjustment of Airbnb’s co-founder and host community to communicate with the host community in China”. Airbnb co-founder and chairman of China, Bo Siqi pointed out in the letter The suspension period is from July 30, 2022.

Specifically, from 11:00 a.m. on May 24 this year, users will not be able to book properties in mainland China with check-in/participation dates on and after July 29 this year, until July 30 this year, mainland China Domestic travel listings, experiences and related booking services will all be closed.

Based on the impact of the sudden change on Chinese landlords and tenants, Bai Siqi said that it will waive all domestic travel order service fees for landlords and users from May 24, 2022 to July 29, 2022.

For confirmed bookings with check-in dates after July 29, 2022 or participation dates after July 30, 2022, Airbnb will automatically cancel and provide a full refund. The gift vouchers and travel funds used at the time of booking can be used by users when overseas travel resumes, and the validity period has been extended to December 31, 2023.

It can be said that Airbnb’s exit this time has given relatively comprehensive policies to both hosts and guests. This also means that Airbnb has long anticipated this “break-up” with China.

Since entering China for seven years, although Airbnb has stepped on the trend of the Chinese homestay market, it is not easy to maintain a long-term foothold in the homestay market with many players. At that time, domestic short-term rental platforms such as Ant Short-term Rental, Tujia, and Xiaozhu Homestay had already entered the market and attracted a number of users.

It’s not easy for Airbnb to cultivate the minds of its users.

In fact, Airbnb’s investment in the Chinese market is not “stingy”. Airbnb’s financial report shows that brand market development expenses in 2020 will increase by US$473.9 million year-on-year, and this incremental expense includes “expenses for supporting the expansion of the Chinese market.”

It is a pity that the investment of high expenses has not exchanged for the increase of income. According to the US CNBC report, although Airbnb has continued to promote its brand in the Chinese market in the past few years and appointed Airbnb co-founder Bo Siqi as the team leader, the revenue from the accommodation business in the Chinese market in the past few years has only accounted for about 1%.

As of the end of April, Airbnb had more than 500,000 active listings in China and more than 6 million globally, according to market research firm AirDNA.

In other words, the current Airbnb listing in China is less than one-tenth of the global listing. In contrast, by the end of 2021, in the homestay market, the number of homes in Tujia will reach 2.3 million, the number of homes in Wooden Bird Homestay will be 1.1 million, and the number of homes in Meituan will be 800,000.

You must know that, as an important part of the homestay industry, housing is the main means for short-term rental platforms to attract users. The more listings, the greater the probability of users placing orders on the platform, but Airbnb obviously failed to expand the scale of listings quickly, which also brought hidden worries for Airbnb’s subsequent development.

From the third quarter of 2019, new users on the Airbnb platform began to decline. For the whole year of 2019, Airbnb’s overall global revenue was US$4.905 billion, of which China’s local listings and experience service business accounted for only about 5% of the overall revenue.

After all, Airbnb is a company in the sharing economy track. The platform itself does not have a house. Airbnb just acts as a bridge between landlords and users, providing accommodation services for users, and then charging commissions from landlords. This single business model is easy to be attacked by competitors, and the landlord is also easy to be taken away by other platforms.

It is worth mentioning that this withdrawal from China does not mean that Airbnb has completely abandoned the Chinese market. The internal letter mentioned that the company will continue to focus on the outbound travel business for Chinese consumers. In addition, according to Times Finance, Airbnb will retain a team of project engineers, customer service and other personnel in China, which is conservatively estimated to be around a few hundred people.

This means that although Airbnb has given up its local business in China, it still hopes for the outbound travel business of Chinese tourists. In the first quarter of 2022, the number of bookings in Airbnb’s Asia-Pacific region did not return to the same period, and Airbnb said in its earnings report that “this region has historically relied on cross-border travel more than other regions.”

It’s just that at the moment when the epidemic is repeated, it is still unknown when domestic outbound travel will pick up.

Airbnb and China’s “seven-year itch”

An “exit letter” from Airbnb made the outside world feel pity and regret, but the story of this exit seems to be traceable.

Looking back, the development of Airbnb in China in the past seven years has not been smooth, especially when the homestay industry as a whole has entered a cold winter after the epidemic, and Airbnb has not been spared.

This is reflected in Airbnb’s financial report and prospectus. In May of this year, Airbnb stated bluntly in its first quarter 2022 earnings report, “Compared to the fourth quarter, we do see a sequential recovery in the Asia-Pacific region in the first quarter of 2022, with the exception of China.”

Although there is no specific disclosure of Airbnb’s operations in China, in 2021, Airbnb’s revenue in the Asia-Pacific region, including China, will only account for 7%, down 3% from 2020.

At the same time, in the prospectus submitted in 2020, Airbnb repeatedly mentioned many problems in the development of its business in China. It is also expected that operating in China will continue to incur substantial expenses and may not be profitable in this market.

Contrary to the attitude of withdrawing today, at that time, Airbnb mentioned that it would further expand its global network and deeply cultivate markets with low market share, including China.

In March of the same year, Bai Siqi said at an online press conference that the epidemic will not change China’s important position in Airbnb’s business map and will continue to invest in China. On the same day, Airbnb officially launched the Airbnb community revitalization “heart” plan in China, and plans to launch a special fund of 70 million to revitalize the shared accommodation industry from three aspects: landlords, tenants, and communities.

Almost at the same time, in order to increase the occupancy rate of the platform, Airbnb launched monthly and weekly rental listings. “We expect the tourism industry to recover from short-distance intra-city and surrounding tours, and then gradually spread to inter-province and inter-city travel,” said Peng Tao, former president of Airbnb in China.

But in the 2021 financial report, there is almost no decision and data about Airbnb’s Chinese market. Obviously, such changes have been accompanied by the outbreak of the epidemic.

Before the epidemic, Airbnb, as a “small but beautiful” platform, attracted many Chinese users through marketing events. A loyal Airbnb user told Wired Insight that he used Airbnb for travel before. “Before the epidemic, I went to Japan for a second time, and I met a very nice host on Airbnb, which gave me a sense of security in a place I didn’t know well,” he said frankly.

According to iiMedia Research, in January 2020, the penetration rate of China’s major homestay booking apps was as high as 0.7%, while that of Tujia Homestay and Ant Short-term Rental were 0.084% and 0.027%, respectively.

Regrettably, the former advantage was shattered by the sudden epidemic. The landlord Susu admitted to Wired Insight that he has been gritting his teeth for the past three years, and the order volume has suffered a cliff-like decline. In addition, in order to reduce losses, renting at reduced prices is a last resort.

In 2020, in order to ease the cash flow pressure of homestay hosts, Airbnb launched a pre-sale and prepayment activity for homestay hosts across the country on the platform. Specifically, the platform promises to prepay 50% of the actual payable amount to the landlord in advance for the orders that the participating landlords meet the conditions of the activity.

As a result, Airbnb has retained many hosts. At that time, Airbnb research data showed that 72% of the hosts who maintained a positive attitude said that the scale of the host will remain the same or increase in the future.

But now, Airbnb obviously does not have enough funds to support the cost behind such a move.

It also needs to be understood that under the epidemic, non-standardized homestays have weaker anti-risk capabilities. A homestay owner told Wired Insight that compared with chain hotels, the isolation policy of homestays will be stricter, “If the policy allows, if guests pass through risky cities, our homestays are not qualified to receive, but standardized chain hotels have .” said the owner of the above-mentioned homestay.

At the same time, affected by the epidemic, consumers have stricter requirements for safety and hygiene than ever before. More importantly, the regulatory policy is like the sword of Damocles hanging over the head of the homestay industry. The market has higher and higher requirements for the standardization and standardization of the homestay industry, which invisibly increases the operating cost of Airbnb. .

As Airbnb said in the farewell announcement, “The epidemic has weakened the synergy between our domestic travel business and our outbound travel business, and the domestic travel business faces operational challenges such as high costs.”

It is worth noting that from the changes of executives, we can also see that Airbnb is experiencing the darkest moment during the epidemic. On September 30, 2021, Peng Tao, who had been the president of Airbnb China for three years, resigned. Xiao Jinhong, the chief operating officer of Airbnb China, was fully responsible for the daily operation and management of Airbnb’s China business. The position of “Airbnb China President” has been vacant. .

To a certain extent, the epidemic was the last straw that crushed Airbnb’s Chinese market. In the third year of the epidemic, there are few signs of the industry recovering, and Airbnb is not fighting back.

Under the cold winter of tourism, homestay owners are still struggling

The sad departure of Airbnb has caused many Airbnb hosts in China to panic.

After receiving the notice, the owner of the homestay, Su Su, fell into confusion and anxiety, and once thought that the persistence of these three years was a denial of herself. It was almost difficult for her to calmly recap her experience as a host at Airbnb for the past three years.

In the past three years, Susu’s 24-hour response rate was 100%. In order to better serve customers, they basically responded in seconds. In the past 90 days, the order acceptance rate of the three houses was 100%, and the overall score reached 4.9 points, which is close to a full score. But now, that has all evaporated with Airbnb’s exit.

Data show that in the first quarter of this year, the number of tourists nationwide dropped by 20%, and the May Day holiday dropped by 30%. With the cold winter of the tourism industry, the spring of the homestay industry has not come yet.

During the May Day holiday this year, Wired Insight interviewed several homestay owners in “From Jiangsu, Zhejiang and Shanghai to Beijing-Tianjin-Hebei, the Homestay Industry Experienced the “Darkest Moment”, and they all said that business is difficult to do.

Xiaoran from Qingdao is a homestay owner with nine listings. She was once a designer and became the first batch of Chinese hosts to enter Airbnb in 2017. Adjacent to the sea view and the ins style decoration allowed her to gain a lot of orders on the platform.

“I have a lot of orders on Airbnb, and more than half of the guests know me on this platform.” Xiaoran told Wired Insight. This change made her quite helpless, but fortunately, she also has online listings on other homestay platforms, “I just need to change the platform in the short term, and the loss will not be too much.”

While Airbnb hosts are pinning their hopes on other platforms, various homestay platforms have also launched host assistance programs, launching a “battle” for Airbnb hosts.

Specifically, Tujia B&B has opened a “green audit channel” to communicate with Airbnb hosts and assist them in point-to-point online-related matters; Meituan B&B conducts courses such as rapid review and special operations for new landlords on the platform; Fliggy B&B , Xiaozhu Homestay has launched a series of measures such as the exclusive green service channel for landlords, the simultaneous release of housing listings, and the support plan for new landlords to settle in to help landlords continue to operate.

Obviously, this is tantamount to giving help to the hosts who used to be “all in” Airbnb. But it should be understood that entering a new platform means that homestay owners need to build their reputation and order volume on the new platform from scratch.

“If Airbnb is down, my listing will be re-listed on other platforms, which is equivalent to starting from 0.” Su Su told Wired Insight.

Previously, Susu’s listings had a high weight on Airbnb and were ranked higher, making it easy for guests to see. And this time it is settled on other platforms, everything is unknown.

After receiving the notice, Su Su was surprised and immediately sent a circle of friends to look for the help of the old tenants, hoping that the old tenants could “bring the pictures”. After all, this is the fastest way to improve your “presence” on the new platform.

What needs to be understood is that this is just behind the changes in the industry, and a very small number of individual homestay owners survived by breaking their arms. Even the founder of a leading homestay brand sighed to Wired Insight, “Under the epidemic, it is difficult for everyone to do it.”

According to data from the China Tourism and Homestay Development Association, in 2020, the transaction scale of China’s online short-term rental users and the online homestay market fell to 182 million and 12.58 billion, respectively. Although there will be a brief recovery in the homestay industry in 2021, and the transaction scale has rebounded to 20.1 billion yuan, it still has not reached the level of 20.9 billion yuan in 2019.

During this period, with the rebound of the epidemic, the impact on the homestay industry cannot be underestimated.

Returning to the event of Airbnb’s business adjustment, Airbnb said, “Although the current cross-border travel business in the Asia-Pacific region has not recovered to the level of 2019, we believe that in the next five years, the Asia-Pacific region will grow into Airbnb’s global reach. One of the most important blue ocean markets in China, and China will surely become a strong cornerstone for the recovery and prosperity of cross-border travel in the Asia-Pacific region.”

From this point of view, if the epidemic improves, Airbnb may still return to the Chinese market, but no one can predict when this moment will come.

(At the request of the interviewee, Susu and Xiaoran in the article are pseudonyms. The header image of this article is from Airbnb’s official Weibo.)

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