MOVING ON

As the US and Europe crack down on home-sharing, Airbnb turns to China

Obsession
Getting There
Obsession
Getting There

Airbnb is in talks to buy Chinese rival Xiaozhu, according to multiple reports.

With more than 100,000 listings, Xiaozhu is the second-biggest player in China’s alternative lodging market. It raised $65 million in Series C funding earlier this month and is valued at a reported $300 million. The top Chinese company in the space is Tujia, which has more than 400,000 listings and a valuation topping $1 billion.

Airbnb is the world’s fourth-richest startup—as of August, it was valued at $30 billion—but the company’s home-sharing model has come under fire in several US and European cities. Airbnb’s core business model currently risks being crushed by US regulators in San Francisco, New York, Los Angeles, Miami Beach, and Portland, Oregon. In Europe, Barcelona and Berlin have also tightened their rules.

Faced with such a widespread regulatory backlash, Airbnb is hoping China can offer a less obstructed runway for growth. The company plans to double its spending on China in 2017, and says its will expand its staff of 30 local employees to more than 300 over the next 24 months. Airbnb says it currently has 75,000 listings in China, and will reach 100,000 by the end of the year. A spokesman declined to comment on the reported talks with Xiaozhu.

Worldwide, Airbnb claims to have 2.5 million homes listed on its site, and 1 million guests staying in them each night. The New York metro area is its biggest US market, with 34,000 listings as of October, according to data from third-party analytics firm Airdna. Paris is the company’s largest international market, with about 32,600 listings as of the same date.

Last month, at Quartz’s The Next Billion conference in San Francisco, Airbnb co-founder and chief technology officer Nathan Blecharczyk said the company had an eye on China because of its growing middle class and robust population of first-time international travelers.

“So many other places in the world, I have to take someone who might be accustomed to what a hotel is and explain relative to that what is an Airbnb,” Blecharczyk said. “In China, it’s very much a level playing field. There’s a lot of curiosity about what is a five-star hotel, what is an Airbnb, what is a hostel? They want to experience the world; they want to experience all this stuff. And I think it’s fascinating to kind of get in there on the ground floor.”

Airbnb made its first big push into the Middle Kingdom in August 2015, when it became “strategic partners” with investors China Broadband Capital and Sequoia China. Back then Airbnb’s strategy was less about building inventory in the country than getting Chinese tourists to stay in its peer-to-peer rentals when traveling abroad. Outbound tourism from China has more than doubled in the past five years and is expected to be a $264 billion market by 2019.

The country’s inbound tourism, meanwhile, is only beginning to recover after faltering from 2011 to 2014. Last year, 134 million people visited China, according to data from the China National Tourism Administration, and 42% of them stayed overnight.

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