Airbnb's struggles to capture outbound Chinese market an opportunity for hotels

Airbnb is struggling to grow in China, where global tech companies have had a hard time gaining ground. (Airbnb)

Airbnb is still fighting to grow its footprint in China. Today, the San Francisco-based company named an existing executive, Hong Ge, as vice president in charge of its business in the world’s second-largest economy, where its business is known as Aibiying—“welcome each other with love.”

While Airbnb has around 80,000 listings in China, it is still far behind local businesses like Xiaozhu, which has about 140,000 listings, and Tujia, with more than 430,000 listings.

And if Tujia has its way, Airbnb may have to fight harder to capture the ever-lucrative outbound Chinese market in more Asian cities. With strong brand recognition among domestic travelers, Tujia wants to be the home-sharing service of choice for Chinese people traveling in Southeast Asia, Japan and South Korea. To that end, the company is currently seeking a fresh round of funds, in part to help expand products and properties abroad.

Growing Pains

Tujia set up a Japan team last year, and Tujia co-founder Melissa Yang told CNN that bookings there have quadrupled over the last 12 years. "We know China travelers the best," Yang said. "We follow whatever Chinese travelers want."

Tujia is reportedly valued at more than $1 billion, and a representative told Bloomberg in April that the company was in the midst of raising an extra $300 million to fund its expansion efforts.

Those efforts will step up the competition between the two businesses, especially with both companies out of their home turf. While Airbnb has 3 million global listings (including the 80,000 in China), Tujia has only 20,000 properties listed outside of its home country, where it accounts for more than 30 percent of the domestic market 

Strategies and Opportunities

But partnerships could give Tujia an advantage as it goes global. The company already has an agreement with HomeAway.com, a vacation rental service owned by travel search company Expedia, that could build brand awareness for outbound travelers. As part of the agreement, Tujia translates each HomeAway listing into Chinese, and serves as an intermediary to help Chinese travelers book homes in countries where they are not familiar with the local languages.

A February report by online consulting firm iResearch Consulting Group said that the turnover of China's home stay market was approximately $1.3 billion in 2016, up 106 percent from the previous year. What's more, that number is expected to grow by around 50 percent this year.

Major platforms with more users and a wider range of services will continue to attract more landlords and users, the report continued.  

It is, however, worth noting that other tech-centric businesses have struggled to gain ground in China. The country's internet access is more restrictive than that of other countries—which could also present challenges to foreign companies like Airbnb. The government already blocks Google, Facebook and Twitter, and Uber had to sell its business to local rivals in the face of domestic competition. If Airbnb presents a challenge to the local companies, it may find itself unavailable to domestic users, clearing the way for Tujia and Xiaozhu to capture the lucrative demographic. 

The infighting among these home-sharing sites could also clear the way for traditional hoteliers to reach out to Chinese travelers and keep building brand awareness. If Airbnb can't reach these travelers, other websites can. A hotel listed on Marriott or Hilton's homepage could be visible to a Chinese tourist while a room on Airbnb could be blocked.

But if they want to capture a share of the outbound Chinese market, hoteliers will have to take steps to catch the eye. Tujia is translating HomeAway listings for Chinese travelers—is your hotel's website available in Mandarin? The China Tourism Academy said outbound trips from the Middle Kingdom reached 122 million 2016, up 4 percent year-on-year. This number is not likely to decline any time soon, but if they want to get these travelers, hotels will have to step up their game now before HomeAway or Airbnb gains any more ground.