Why Airbnb is struggling in China

Airbnb’s global rise has been near-unstoppable. In the decade since the founders hosted the company’s first guest in their own apartment, Airbnb has grown to a point that very few tech companies ever reach: its name has become a verb. The company’s worth more than US$24 billion and it’s still growing.

But there’s one place where “unstoppable” Western tech companies come to get stopped: China.

Airbnb has 2 million listings worldwide, but less than 2 percent of them are in China.

China has always been a different sort of beast, a tough market to crack. It’s a country where a then-unknown local company called Alibaba embarrassed eBay. It’s a country where Uber has struggled to get on the front foot. It’s a country where countless powerful Western startups like Groupon have come, attempted to conquer, and ultimately lost.

Airbnb hasn’t yet lost, but it’s definitely behind, and things don’t seem to be going as planned. The company has more than 2 million listings worldwide, but very few of them – probably only around 30,000, or about 1.5 percent – are in China. And its coverage outside of first-tier cities is terrible. For example, in Harbin – a city approximately the size of Los Angeles – Airbnb has less than 300 listings.

This is in stark contrast to some of its big domestic competitors. Tujia, which is China’s leading “Airbnb-style” rental platform, has 420,000 listings in China. Mayi, another major competitor, claims 300,000.

Xiaozhu, one of Airbnb’s local competitors in China.

What’s going wrong?

One problem is cultural. Airbnb hasn’t fully adapted itself to the needs and desires of China’s internet users. For example, trust remains a problem for anyone trying to sell something over the web in China. And in China, where instant messaging has always been more popular than email, people are used to getting fast responses to questions. If you have a question about a listing on Airbnb, you can message the landlord, but you have to do it through the site. You don’t get to talk to a real person directly (which builds trust) and you might not get a quick response.

On Tujia, in contrast, phone numbers are listed so that you can call the person who’s listed a property directly.

Another issue is speed. Airbnb didn’t get seriously involved in China until last year. But competitors like Tujia, which was founded in 2011, have been working on expanding throughout the Chinese market for years. That means that in every city, Airbnb faces entrenched competition and has to fight to get customers onto a platform that’s virtually guaranteed to have fewer listings and fewer reviews when compared with local competitors.

This being China, Airbnb also faces regulatory issues. The short-term online rental industry is still new in China, and exactly what the rules are with regard to things like safety systems and taxes isn’t yet clear. Because the industry hasn’t exploded as fast as other “sharing economy” services like car booking, it hasn’t received the same level of regulatory attention. As a foreign company, Airbnb has to be especially careful to ensure it is operating legally, but that can be a challenge when the rules still aren’t clear.

Airbnb also has to be diligent about confirming, verifying, and reporting real identities, as a failure to do so would risk violating China’s anti-terrorism laws (which require hotels and other short-term rental places to register the identities of anyone who stays with them).