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Can we say we told you so again? In July, we noted that as Airbnb pursues its eventual IPO, China and the wider Asia-Pacific region will be absolutely critical, but the competition is tough and plenty of challenges remain.

Airbnb is doing all it can to demonstrate not only its commitment to growing its business in China, but to the Asia-Pacific region overall.

Newly appointed Airbnb China chairman Nathan Blecharczyk, who is the company’s co-founder and serves as chief strategy officer, said Airbnb will take take several steps, including including improving customer service for both guests and hosts, as well as increasing the quantity and quality of its properties, to build its business in China.

Blecharczyk likewise stated that the company plans to invest $2 million through 2020 to fund tourism projects throughout the Asia-Pacific region. He made the announcement while attending the Asia-Pacific Economic Partnership CEO Summit being in Da Nang, Vietnam.

Airbnb’s Future Plans for China and Asia-Pacific

For Airbnb to succeed in China, it must overcome a number of challenges, both from homegrown competitors but also from the country’s notoriously difficult government regulations. Added to that are factors such as the heavy reliance on social platforms and payment systems, including WeChat, Weibo, and Alipay.

One need only look at how Amazon, Google, and Uber have fared in China for a telling look at what Airbnb might face as it tries to become the No. 1 alternative accommodations platform, or travel company, in the country.

Blecharczyk, speaking to CNBC from the APEC Summit, said China is the company’s “fastest-growing country” of the more than 192 countries where it does business, and its “second-fastest growing for the outbound segment.” Airbnb predicts China will be its largest origin market by 2020.

But China is also a very crowded market when it comes to alternative accommodations and Airbnb isn’t the only player in town. It faces stiff competition from Expedia- and Ctrip-backed Tujia, as well as Xiaozhu, another homesharing startup whose investors include Alibaba founder Jack Ma.

A year ago, rumors circulated that Airbnb was in talks to acquire Xiaozhu, but a deal never materialized. Xiaozhu, valued at $1 billion, recently raised $120 million. Ctrip led a $300 million round in funding for Tujia, which now has a valuation of $1.5 billion.

But in its efforts to fend off the competition and grow in China, Airbnb is making a commitment to “quality,” said Blecharczyk. That means better customer service for both hosts and guests, and hiring 150 additional staffers over the next year to communicate with customers across multiple platforms, including WeChat and Weibo. The company also intends to open operations in Shanghai, Sichuan, and Guangdong, in addition to Beijing, where it currently has operations.

It also means “aggressively increasing the quantity and quality of homes in China,” as Blecharczyk noted in an online statement. Exactly how Airbnb intends to do that remains unclear, but we’d assume this may suggest a more hands-on approach to vetting and ensuring the quality of its home listings in the region. Airbnb competitors, such as Tujia and Xiaozhu, do this, but hasn’t in any other regions where it operates.

Tujia, for example, hires employees who act like traditional vacation rental property managers, to inspect and maintain its listings. Perhaps Airbnb may consider doing the same.

In 2013, when Airbnb was growing — but also struggling to keep up with that spurt — Airbnb brought in veteran hotelier Chip Conley to serve as its global head of hospitality and strategy, a role he held until earlier this year. Conley, who remains a strategic advisor for Airbnb, played a pivotal role in steering the company toward a focus on hospitality and enhancing the Airbnb guest experience.

In November 2016, Conley told Skift: “I think I joined the company at exactly that time that they were smart enough to know [the importance of] hospitality. They were a design company with a technology background. The three founders were the designer/technology people. The third leg of the stool is hospitality, which spoke to quality measures and quality aspirations. It became a quantity and quality company for a little while. Over time, on the home side, we have gotten more and more focused on quality.”

No doubt, the company will want to repeat what Conley demonstrated during his tenure there, especially as it focuses on the quality of its product in China.

Airbnb will focus on launching its Airbnb Trips, also referred to as Experiences, a tours and activities product, in China, as well as working with local governments to create tourism programs that help local communities.

Airbnb expects to work hard on marketing itself to Chinese travelers, especially the country’s more than 400 million millennials, to ensure the brand is top of mind not only when they travel domestically, but also when they travel outside of China. The company says 80 percent of its users in China are under 35. In 2019, 62 percent of all outbound Chinese tourists will be aged 15-34, the company noted.

Airbnb is also focused on the greater region outside China, especially Japan, which is another one of its top global markets. In the last 12 months, the company said it saw 55 million guest arrivals in the Asia-Pacific region.

Airbnb isn’t the only U.S.-based travel company focused on China and Asia. Earlier this year, Marriott International, the only publicly traded hotel company with a market cap that surpasses Airbnb’s valuation at $44.5 billion, announced a partnership with Alibaba to court Chinese travelers. Asia was a bright spot in Marriott’s solid third quarter earnings announced this week. In Asia-Pacific, not including China, Marriott’s third quarter revenue per available room grew 8 percent, and in the Greater China region, that growth was 11 percent.

In other words, nearly every major travel company wants to grow its business in China and elsewhere in Asia-Pacific. But to do so often requires new ways of doing business, and adapting to local regulations and rules, something Airbnb and others seem eager to pursue.

A Long Road in China — and that Eventual IPO

Over the course of this year, the $31 billion Airbnb has made a concerted effort to refine its strategy in what is, arguably, the most coveted travel market in the world: China.

It began with the creation of a subsidiary business, Airbnb China, in 2016. A name change took place this March, rebranding that unit as Aibiying. In June, the company appointed Hong Ge as its vice president of Airbnb China.

And when Blecharczyk took to the stage at the Skift Global Forum in September, it was clear that China was on his mind. He said that despite the company’s earlier missteps in China, Airbnb still hoped for success in a country where few Western businesses have succeeded.

Less than a month later, Blecharczyk became chairman of Airbnb China, and just a few days later, Airbnb China vice president Ge was let go. He was asked to leave after his relationship with a subordinate came to light.

Ge’s departure was the latest in a string of executive departures at Airbnb. They include chief marketing officer Jonathan Mildenhall; director of experience Katie Dill, who left for Lyft, and managing director of international business development Ronnie Gurion, who departed for HomeAway.

As Airbnb grapples with these leadership changes, it must also contend with a number of other challenges, too, as it pursues growth in China and that eventual IPO. They include regulatory battles in various cities around the world; growing the company’s new branded-apartment building business; expanding on its acquisition of Luxury Retreats;  increasing its Airbnb Trips business, and potentially branching into other travel sectors.

When asked by CNBC about the importance of China to Airbnb’s IPO plans, Blecharczyk said: “I think it’s a very exciting story to follow. Long term it’s going to be very important. [China is] already No. 1 in terms of travel spend. Yes, we’re eager to demonstrate our success there [China].”


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Tags: airbnb, airbnb china, china

Photo credit: Airbnb sees Chinese millennials as key to growing the company's business domestically and throughout the Asia-Pacific region. Airbnb

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