There is a major East vs. West showdown shaping up for the home-sharing customer in China. Tujia is the home-grown combatant that, in just five years of operation, has grown into a billion-dollar megaforce with a steady presence throughout China and Southeast Asia. But just recently, the U.S. based Goliath Airbnb announced it’s stepping up its efforts in China in an attempt to secure a chunk of that massive business, begging the question, who will reign supreme?
Chinese Tourism Boom
The time has never been better to get into the Chinese tourism business. According to a United Nations World Tourism Organization report in April of this year, “With a 12% increase in spending, China continued to lead international outbound tourism, followed by the United States, Germany, the United Kingdom and France as top five spenders.”
This trend is a big reason why Airbnb is trying to become a major player in the region. To this end, they’ve changed their name in China to “Aibiying” which translates as “Welcome each other with love.”
“There’s a whole new generation of Chinese travelers who want to see the world in a different way,” CEO Brian Chesky said in a Bloomberg news report this past March. “We hope that Aibiying and our Trips product inspires them to want to travel in a way that opens doors to new people, communities, and neighborhoods across the world.”
Airbnb is a formidable force and the worldwide leader in the home-sharing industry, but they may find the going a little rougher in China than in other parts of the world. Generally speaking, Chinese consumers tend to feel more comfortable dealing with Chinese businesses. This could explain why in just a few short years, Tujia now boasts more than 400,000 properties both in China and around the world.
For every move Aibiying makes, Tujia makes a move of its own. In April, Bloomberg news reported Tujia is in talks to raise more than $300 million. And they plan on splitting the business “with 1,000 employees remaining on the home-sharing side of the business, while 2,000 workers will be part of Sweetome, its professionally-managed property unit,” Bloomberg reported.
Their recent acquisition of Mavi gives them another 300,000 listings to go with the ones they already have. Together that number dwarfs the 80,000 Chinese listings Aibiying currently offers.
The Tujia Advantage
According to Tujia co-founder and Chief Technology Officer Melissa Yang, a significant part of their early success can be attributed to the fact Tujia was designed with the Chinese customer in mind. She believes there are two fundamental differences between Chinese and Western travelers, and they offer a service that appeals to the Chinese culture.
“One is the trust issue,” Yang said in a 2015 interview. “Unlike hotels, vacation rentals are not standard. The second is the expectation on level of services. When [Chinese] people [go] on vacation, they like to be served. [When] my husband and I vacation in the US,… it’s easy for us to take out the trash. But in India or China, they don’t like to do that.”
To address these issues, Tujia provides extra services to put their client base at ease. They will send in third party inspectors to make sure the place is as advertised and there will be no unpleasant surprises when the customer arrives. As well they will provide check in and check out. Service. Other services depend on the location but could include butler service or daily clean-up.
“We’ve built our business model to optimize it for both sides,” Yang said in a 2016 interview. “So basically we curate our business model for Chinese consumers and home owners. I think that’s the fundamental difference between us and Airbnb.”
The Cautionary Tale of Uber’s Chinese Failure
If recent history is any indicator, Aibiying may not have an easy time rolling in and dominating the Chinese market. Uber thought they would do the same thing when they went head to head with their Chinese counterpart Didi. After a year of all out corporate war and more than a Billion dollars spent in the market, Uber ended up selling their Chinese operations to their competitors midway through 2016.
If there is a lesson here for Aibiying, it might be found in the words of Zennon Kapron, managing director of Shanghai-based consulting firm Kapronasia summing up the Uber experience in China.
“The road to China has been littered by corpses of foreign technology companies that have tried to operate here unsuccessfully.”
Time will tell if Aibiying is up to the challenge.