When Tujia announced it had a record number of bookings in one day this month — 56,000 room nights in total for Aug. 5 — it was the first time that the “Airbnb of China” as it’s often referred to, had disclosed data of this type.
And while 56,000 room nights seems relatively small in comparison to Airbnb (more than 101,370 room-nights in a single day on average) it’s a significant sign that the world’s largest travel market is warming up to the idea of alternative accommodations and the sharing economy.
Tujia, which means “journey home,” got its start three years after Airbnb in 2011, and while it may not be worth much as Airbnb is today ($30 billion), it is worth more than $1 billion. And the company continues to grow. It acquired rival Mayi.com in June and now offers 430,000 listings in 312 cities in mainland China, as well as overseas in destinations throughout Southeast Asia, Japan, and South Korea.
To get a better sense of where Tujia is headed, and what the environment for alternative accommodations is like for the Chinese travel market, Skift spoke to Tujia co-founder and chief technology officer Melissa Yang.
For one, she isn’t concerned about other alternative accommodations providers like Airbnb, Wyndham Vacation Rentals, or HomeAway (one of Tujia’s investors) from trying to do more business on Tujia’s home turf. Tujia also has partnerships with Ctrip and HomeAway (parent company Expedia owns nearly 10 percent of the company).
Homegrown Chinese tech startups often occupy a stronghold in the Chinese market. For example, earlier this month. Uber sold its China business to its main competitor, Didi Chuxing, a move that reflects the challenges for Western companies to do business in what already is the largest consumer market in the world, let alone the biggest travel market.
Home-field advantage tends to be a given in China, as in many other places. Where Amazon has struggled, Alibaba has flourished. Instead of Facebook, there’s WeChat. Instead of Google, you have Weibo. Will the same happen to Airbnb?
When asked if she thinks a similar situation could play out between Airbnb and Tujia, as it did with Didi Chuxing, China’s homegrown on-demand car service and Uber China, Yang said, flatly, “I don’t have any comments on this.”
Note: This interview has been edited for length and clarity.
Tujia Isn’t Airbnb
Skift: Whenever we hear Tujia, it’s always followed by, “Oh, that’s the Airbnb of China.” How do you feel about that comparison? Is it really justified? How is Tujia similar to Airbnb or different from it?
Yang: I think home sharing is still a new business worldwide. It’s new. It’s a new business sector developing very fast recently. I think that’s probably why sometimes people just default to Airbnb as the presenter of the business. To some extent, because both Airbnb and Tujia are working on the sharing economy, we are sharing homes for accommodation, so that’s the similarity part.
We are different from Airbnb in a few perspectives. Tujia actually focuses on China market, meaning we are focusing on Chinese travelers whether they travel domestically or overseas so Airbnb actually is a broader focus. Our focus is different and as you know, China is becoming the largest consumer market right now.
We’ve built our business model to optimize it for both sides, so for Chinese travelers and home owners, one thing is trust. We provide not only the online platform but also provide some helpful services for them. So basically we curate our business model for Chinese consumers and home owners. I think that’s the fundamental difference between us and Airbnb.
Skift: About the trust issue, can you elaborate?
Yang: The trust issue is more serious in China than in the Western world. However, it has been improving. Every home is different, is unique, and that’s also challenging. Chinese travelers, what they will worry about is, for instance, pictures of the place — do they reflect the real situation? If I paid online would I be guaranteed? How clean is the house? Do they actually change the sheets before I come?
There are lots of questions because this is not a standard product. That’s for the consumer side and for the homeowner side. A lot of the Chinese homeowners actually don’t manage the listings by themselves so they actually ask some third party to manage it for them. They will wonder if the manager is trustworthy. There are concerns on both sides, just as there are in the Western world.
Skift: Do you think there will ever get a point where Chinese hosts and guests will start to have more trust in each other and so you’ll have to rely less on the third-party property management services, or do you think that that’s just sort of something that comes with the market in China?
Yang: I think the trust is getting better. First of all, because of in China, the Internet actually is very fast, very advanced. On our platform, the users can trust that the reviews are authentic. Because of the transparency of the Internet, of the platform, it’s already building the trust in this case. Now, with the world becoming more and more flat, all the information is changing, and so I think the younger generation, people who are born in the 80s or 90s, they get more access to outside information so they actually are already, by nature, more trusting of people in the outside world.
Skift: Who would you say is your average or most typical Tujia guest? Who’s using the service?
Yang: We actually did some intensive user surveys and found that our typical user will be from age 25 to 39. We also have a lot of young families.
Skift: Tujia is known for offering a lot of services for both the hosts and guests, so can you describe what those services are?
Yang: In China, vacation homes are usually in tourist destinations and a lot of the home owners actually are living in tier one cities. Physically, it’s very hard for those owners to run it by themselves so that’s the situation.
The other thing is in China, the house prices are very expensive so then those owners usually are rich people because they own a house which is usually worth a lot. A lot of them don’t want to or don’t have time to manage by themselves so in that case, a lot of people want third-party managers to help manage them. Basically they want somebody locally to market it, to do the housekeeping for the property, then they pay some portion of the fee for the owners so that’s a big portion of the properties in China.
So we help them find the third-party service providers or we do it for them. When we started in 2011, the market had just started so a lot of home owners didn’t trust, to basically leave the keys of their beautiful houses to strangers. We actually built our offline team, original team, in some specific destinations so we would pick out the best properties to do the housekeeping ourselves so we are the property managers in that sense.
We also educate property managers and tell them how to optimize the online content, how to do pricing, how to address bad reviews on their property from the guest or if there is some complaint from the guest, we’ll work with them to say how to improve their service.
In certain areas, not all the areas, we actually provide certain housekeeping services. When a guest checks in, we do the cleaning. We hire cleaners for the party. We work with third-party companies to do the cleaning.
Home Sharing Is Still New in China
Skift: How did Tujia’s acquisition of Mayi.com in June contribute to your business strategy?
Yang: Mayi actually is a nice addition to Tujia’s business because it’s focused on peer-to-peer home sharing. It has a focus on the metropolitan properties in big cities so I feel like it’s a nice addition to Tujia. By working together, we have been more efficient and reach better scale.
Skift: What do you think of all the mergers taking place among startups, especially sharing economy startups, in China, lately?
Yang: All of these companies have been engaging in a pricing war for a while. It costs a lot. Why deal with a pricing war? With the money they put to the consumers and also the marketing expense, there’s just a lot of redundancy so I think that’s probably why you have more and more companies consolidating together. They have to stay away from the pricing war and really focus to provide real value to the consumers. In Tujia’s case, we are not doing the pricing wars.
Skift: Is there any push back from the housing industry in China? Are there concerns that Tujia is maybe monopolizing residences that would normally be owned or are not necessarily owned or rented by residents instead of by tourists?
Yang: I think the problems that you’re seeing, I think they’re very similar to the U.S. If this area is primarily made up of primary residents, sometimes they don’t want their neighbors to be in short-term rentals. Then strangers will come in and out that often. This is not a common thing for us here. I think it happens, but this is not a common case because the property managers are getting smarter as well so if they feel like it’s not a good neighborhood to offer a short-term rental, they won’t go there. It’s not a big issue as far as I know right now.
Skift: Is the regulatory landscape in China pretty accepting or welcoming of home sharing or vacation rental business or is it very difficult?
Yang: Right now, there’s no clear law saying what the restrictions or requirements are so this is actually still actually a new business sector right now so there’s no clear regulation yet. In July last year, top government officials started to talk about it. Car sharing has been officially regulated in China right now which is great news so for home sharing, the government has some proposals in mind. There’s no clear legal regulation on the short-term rental industry. More people are working on this.
Skift: If regulations get passed that are maybe stricter, will Tujia’s strategy be to comply with them?
Yang: We actually have been trying and have been working with the government since the beginning. As a matter of fact, some of the products actually are introduced by the local government so the reason you know, in China, real estate has been booming and basically selling houses has been a main income source for the local government.
The government wants to sell and make second homes easier to acquire, and get more homes sold. In that case, they actually wanted to work with Tujia. With Tujia’s help, we can say, “Okay, once you purchase the house not only can you get more money as the house appreciates in value, but you can actually get more money if the house gets rented.” It attracts more consumers, which will help the employment and also the income for the local government so that’s why they want to. We actually are trying to work with the government to get this regulation formed and passed.
Skift: As the chief technology officer, how do you try to continually innovate the platform to meet the needs of the users? What’s your biggest challenge from a tech or design perspective?
Yang: One interesting thing we’ll be seeing is right now, Tujia has over 400,000 properties, domestic and overseas, and each property is very different from each other. So one challenge for the consumer is how to find the property they want.
We also want to help a small property managers or home owners actually do smart pricing on their homes. We also want to help property managers better optimize their content online through their descriptions, photos, etc.
Skift: Do you think you ever want to evolve the business to a point where you start offering tours or guides or anything like that?
Yang: We don’t know right now. We provide some content like points of interest.
Skift: How do you feel about other home sharing platforms like Airbnb, Wyndham Vacation Rentals, and Home Away trying to establish their businesses in China? Do you see these Western companies as competition or do you think you can coexist with them in China?
Yang: Home sharing is a big market and it’s still in its early stage in China right now. I think if there are more players, it’s good. The more players that come to the place, then we can work together to educate the market. Tujia is not the only company to educate the market. I think that’s a positive thing for us.
People still need a lot of help [understanding how it works]. The home owners need help. The consumer needs education so a lot of things need to not just online, offline, they need to work together so, in that case, I think Tujia being a local company, it has clear advantage because we know the market very well. This is the market, these are consumers. We spend all our effort on China. Airbnb is focused on the general market. We know our consumers and our home owners better and we know the market better, so we have some clear advantages.
Skift: Do you see a situation happening like it did with Didi Chunxing and with Uber in China, whereby in order for Uber to succeed in China, it basically had to let itself be acquired by Didi Chunxing?
Yang: I don’t have any comments on this.
Skift: Do you think other companies are missing out on the value of the Chinese traveler market in some ways?
Yang: Airbnb is doing something in China already but I think they are focusing on the inbound traveler. The inbound traveler coming to China and also outbound, Chinese traveler going abroad. I think that’s their focus right now.
Skift: Now that Tujia is worth an estimated $1 billion, how do you plan to continue to grow or what’s next for the company?
Yang: I think one goal is still we think the business, it’s still early stage so we want to basically to serve our customer better, how to serve better, once our customers to consumers so we want to get more properties. For instance, more and more users want to go abroad so we are expanding our business properties to supply overseas.
They want more properties so we are expanding that so we actually want to provide more properties, better coverage for our consumers and also for the home owner, we want to help them optimize their business better.
We really want to build an ecosystem for the vacation rental so for everybody involved here, including the real estate developers, the property manager, home owners, we want to provide, make the whole thing many more efficient.
Skift: Do you see Tujia as more of a tech company or a hospitality company or a combination of both?
Yang: I don’t know the definition of tech company versus a hospitality company. Tujia itself is a platform so we actually want to build a platform which can benefit both consumers and home owners. We want to build the tools that offer you better data mining and smarter recommendations. It also involves how we can work with home owners or property managers online and offline to optimize their business. That involves offline work as well. I would think Tujia, if you have to label it, I would like to label it as a platform company.
Skift: Where exactly do you want to expand to? Do you want to be able to host guests here in the U.S. or in Europe? Where else do you see Tujia expanding?
Yang: That’s easy because we basically look at the customer need. Right now, the majority of the Chinese travelers, when they go abroad, the most popular destinations are still in Asia. Asia is our priority for now overseas.
Skift: Do you see the company becoming as ubiquitous as Airbnb, or being the global home sharing provider for Chinese travelers wherever they go in the world?
Yang: I certainly hope so.
Skift: Do you think at some point the company will go public or do you want to continue operating it privately?
Yang: Right now, we don’t have plans for going public yet.