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Airbnb�Home Sharing in China

BUSN 102-11H – Maya Doan

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‘START UP’ ENTREPRENEUR STORY OF AIRBNB

SITUATION

CONCEPT

Airbnb's total assets for Q4 21 are $13.71b USD, up 0.93% from the previous quarter. Overall liabilities declined by 2.19% in Q4 21 to $8.93b USD. Airbnb's gross booking value in 2021 is $47b USD. Airbnb had 2 million listings by the end of 2015 and served over 40 million guests worldwide.

BUSINESS SCALE

FAILURES

OVERCOME OBSTACLES

SIMVENTURE

There is correlation between running SimVenture and the actual business activities of Airbnb startup. As a startup, we need at first to strengthen our sales and marketing department by focusing on branding and doing market research to progressively gain market share. Initially, it was impossible to generate a sales count and manage, let alone expand the quantity of capital. This was also the case for Airbnb when they were confronted with the difficulty of not receiving bookings and running out of cash. Then, like Airbnb, our SimVenture team had to look at the market and conduct company analysis to make decisions on how to overcome obstacles. When our products are not in comparative advantage status to competitors' products, we will invest in product technology to improve the score of our bikes. Airbnb also modified their website in order to generate more metrics, resulting in an increase from 2 to 80 bookings. Furthermore, they took advantage of possibilities to make money by seeking funds for another project in order to gain revenue and put it back into their company.

Generating revenues by taking a small percentage of the payment

The third most valuable privately-owned start-up in the world

Strategic partnership with two China-based venture capital firms

Renting out local homes to visitors looking for inexpensive and unique accommodations

Throughout 2008, airbedandbreakfast.com’s launches were unsuccessful. At March 2008 South by Southwest conference, one of the site's earliest debuts, the company only received 2 bookings, one of which was for Chesky, Airbnb's co-founder.

The team proceeded to improve the website, and later that year, during the Democratic National Convention in August 2008, they relaunched it. They were able to accommodate approximately 80 people.

The team needed to obtain funds after spending entire year improving the website to overcome the setback. They approached 7 possible investors in the hopes of raising $150,000 at a $1.5 million valuation. However, after multiple emails, 5 firms swiftly rejected the offer, and 2 did not respond.

The team took advantage of the US presidential election and sell customized cereal boxes to raise cash. It went viral quickly and the team was successful in attracting attention to the company and selling 800 boxes, making a $30,000 profit to reinvest back into the company.

Establish trust between hosts and guests

Founded in October 2007 in San Francisco

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AIRBNB SWOT ANALYSIS

STRENGTHS

  • Global presence enables its users to use the services anywhere they want with a wide range of lodging choices at a lower cost than hotels;
  • Introduction of Business Travel arm allows Airbnb to approach to the consumers in corporate world;
  • User-friendly and personalized website with language options (English, Mandarin) and payment methods (Alipay, Wechat);
  • Airbnb provides its users who are staying in a new location with security options such as insurance.

WEAKNESSES

  • Customer services problem with limited support in emergencies;
  • Company is vulnerable to fraudsters who scam customers through hacked account or fake listings/reviews;
  • Mainly available in major cities, and travelers who want to visit remote areas are unable to get the most use of the site.

OPPORTUNITIES

  • Major sporting events and the Olympics partnership deal;
  • China is the world’s largest sharing economy;
  • Established strategic partnership with China-based investors China Broadband Capital and Sequoia China;
  • Collaborating with hotel and tourism sectors to provide customers with a more comprehensive experience;
  • Expanding Airbnb services to new regions, including less-visited and rural areas.

THREATS

  • Travel demand decreased due to unexpected events like Covid-19 pandemic;
  • Varied tourism laws in different countries;
  • Risk of losing business essence by competing with the hotel industry and local competitors (price comparison);
  • Business model is dependent on stakeholders (hosts and guests).

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AIRBNB COMPETITORS

DIRECT

INDIRECT

HomeAway.com

Xiaozhu.com

Ctrip (Trip.com)

Hilton

  • One of the largest hotel chains worldwide;
  • Founded in 1919 with established reputation for more than a century;
  • Consistently high quality products;
  • Professional prepackaged deals;
  • Focusing on the demand for services and amenities of customers.
  • One of the most established players in the home sharing industry;
  • A portfolio company that expanded globally by operating through various rental platforms;
  • 1 million properties across 190 countries;
  • Expanded to Chinese market in 2012 with the partnership with Tujia;
  • Backing by the Expedia Group for $3.9b in 2015, it had the potential to grow further.
  • Local service similar to Airbnb;
  • Targeting segmentation is domestic and short-term stays;
  • Founded in 2012 with rentals network in over 200 cities across China;
  • Personalized website experience;
  • Offer much more support to enhance the trust of consumers in online rental listings;
  • Free insurance for both hosts and guests.
  • 400 million users worldwide;
  • The most popular online travel agency in China (November 2020);
  • 1.2 million hotels and vacation rentals in 200 countries and regions;
  • Strong user base in Asia, getting exposure to a large market of travelers, particularly Chinese.

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CULTURAL DIFFERENCES

in tourism industry

between China and the United States

01. Price, value, trust, and enjoyment were the most important motivators for Chinese customers to use home sharing platforms, while price, location, and a home-like setting were the top reasons why American leisure travelers choose Airbnb.

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02. Chinese consumers were more risk-averse and less comfortable with the uncertainty that come with home-sharing platforms, which lack office monitoring. They are struggled to trust non- traditional accommodations, and insecurity was the biggest factor preventing them from choosing a home-sharing platform for their trips. Besides, American travelers highly appreciated Airbnb for its local authenticity and novelty, experiencing real lifestyles on diversified locations and new products or services, respectively.

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03. Chinese travelers prefer to experience higher level of services such as airport pickup, cleaning services, or in-house butlers at more premium locations. On the other hand, social connections and homely feel was one of the main factors motiving American travelers towards considering Airbnb.

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RECOMMENDATIONS

      • Build a local team with regional board of directors and team members at Airbnb China branch
      • Assign operations workload to local partners that require regulatory compliance and reporting
      • Position Airbnb’s presence in China and boost promotion and advertising focusing on hidden spots in rural areas (niche segment in rental lodging platforms) as well as metropolitan cities (accelerating demand domestic and international)
      • Improve user experience by customizing websites for the Chinese market (Mandarin and English) and integrating social media platforms and payment methods to make it more user-friendly (Weibo, Alipay, Unionpay, etc.)
      • Create a marketing campaign that value the security and local authenticity while emphasizing the availability of a mixed pricing strategy offering services for both luxury seekers and those looking for affordable options

Collaborate with a Local Competitor

      • Partner with a local online travel agency in China to minimize the risks associated with specific tourism laws and regulatory issues in China, due to the difference between Western regulators and Chinese government
      • Collaborate with a developed local credit system (third party) to increase credibility and trust

Localize Strategy

      • Ensure regulatory compliance in order to expand successfully
      • Concentrate on outbound travel from China to reduce regulatory risks
      • In the long term, upgrading standards for safety and cleanliness for short term rentals, avoiding potential restrictions when the government implements hotel regulations to local sublet business model

Prioritize Regulations in Chinese Home Sharing Market

“Airbnb Has the Potential to be a Sensation in China.”

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BUSN 102-11H – Maya Doan

REFERENCES

“Airbnb: Home Sharing in China.” Ivey Publishing. Accessed 22 Feb, 2022.

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AIRBNB, INC. https://www.tradingview.com/symbols/NASDAQ-ABNB/financials-balance-sheet/. Accessed 26 Feb, 2022.

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“Airbnb Competitors: Top 14 Alternatives for Property Managers.” rentals united. https://rentalsunited.com/it/guide-industria-case-vacanza/siti-come-airbnb/. Accessed 26 Feb, 2022.

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Chen, Jessie. “User research: Airbnb for the Chinese market.” UX Collective, 21 July 2016. https://uxdesign.cc/user-research-airbnb-for-the-chinese-market-5ee21ce34bff#.8qir2xj9v. Accessed 27 Feb. 2022.

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Fergusson, Asher. “127,183 Airbnb Guest Complaints Expose Scams, Safety Concerns, Infestations & More.” Asher & Lyric, 11 Oct. 2021. https://www.asherfergusson.com/airbnb/. Accessed 26 Feb, 2022.

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Jang, Jichul, et.al. “Understanding U.S. travelers’ motives to choose Airbnb: a comparison of business and leisure travelers.” 13 Sept. 2019. https://doi.org/10.1080/15980634.2019.1664006. Accessed 26 Feb, 2022.

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Jiang, Wen. “The Relationship between Motivation to Use Airbnb and Guests’ Repurchase Intention: Moderating Effect of Consideration Set.” UNLV Theses, Dissertations, Professional Papers, and Capstones, August 2019. http://dx.doi.org/10.34917/16076269. Accessed 26 Feb, 2022.

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Richter, Felix. "Airbnb Recovers From Pandemic Dip." Statista, Statista Inc., 16 Feb 2022, https://www.statista.com/chart/23520/number-of-nights-and-experiences-booked-on-airbnb/. Accessed 26 Feb, 2022.

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Shamsul. “Airbnb in China: Academic Study.” Wiselancer, 16 Sept. 2022. https://wiselancer.net/airbnb-in-china-an-academic-study/. Accessed 24 Feb, 2022.