The home-sharing app Airbnb has taken a stronger foothold in China, establishing a new subsidiary - Airbnb China - just two months ago. But the recent unhappy experience of an Airbnb host has put the company and the rest of the industry under the spotlight in the country. Analysts said a more effective credit system for both hosts and guests is needed before the industry can expand around the country. Airbnb also faces strong competition from domestic rivals, and it could possibly repeat the defeat of Uber in China, an analyst said.
As home-sharing app Airbnb inches its way into China, one host's recent unhappy encounter has put the company and the home-sharing industry under a spotlight.
On December 21, Airbnb host Wang Moyan complained in an angry microblog post that a college student from Shanghai had ruined her apartment after a stay, during which the student had used the property as a set to shoot videos. Wang said she confronted the student, who then disappeared.
The post got a fair amount of attention online. Some microbloggers said they had similar experiences as Airbnb hosts. As of 6 pm on Wednesday, the post had received 35,774 comments and had been reposted 60,797 times. It also got major play in domestic media.
In a statement sent to the Global Times on Tuesday, Airbnb China said that it is currently investigating the matter and promised that it will protect the host's interests based on the same standards everywhere. It noted that it has an initiative that entitles hosts on the Chinese mainland to 5 million yuan ($719,455) in compensation for such problems.
Although the student apologized on December 22, the issue has stayed a hot topic on social media. The debate focused on a single question: how can home-sharing hosts protect their interests?
Airbnb said it provides a rating system for both hosts and guests and it also requires both to submit personal identification information to use its service. The problem is, analysts said, that China doesn't have a robust credit system like more developed countries, which can cause problems for home-sharing platforms.
A well-designed rating system and insurance guarantees could help reduce such unhappy incidents, said Chen Chi, CEO of the domestic home-sharing website xiaozhu.com. But those measures aside, "a society-wide credit system would be more helpful," Chen told the Global Times on Monday.
Here to stay
China's sharing economy has grown rapidly over the past few years. For instance, car-hailing app Didi Chuxing, founded in 2012, has grown into a unicorn valued around $33.8 billion, according to US market consultancy CB Insights.
At present, there is also a boom in bike-sharing start-ups. Venture capital firms have sniffed out the opportunity. For example, bike-sharing app Mobike just announced $100 million of round C financing in September. In October, its competitor ofo announced $130 million of round C financing.
Home sharing, which offers travelers an alternative to hotels, is also developing rapidly amid a tourism boom. The size of the market is expected to top 30 billion yuan ($4.3 billion) in 2016, up from 10 billion yuan in 2015, according to a research report in July by Internet consultancy Sootoo.
It's no wonder that Airbnb wants to cement its position in the growing market. On October 27, the company announced the establishment of Airbnb China. On December 7, it began to store Chinese user data on domestic servers to comply with government regulations.
It has also teamed up with China's two major Internet firms, Alibaba Group Holding's Alipay and Tencent Inc's WeChat, to make its service more convenient for its Chinese users.
To cultivate an Airbnb community, the company has also partnered with the local governments of cities like Shanghai, Southwest China's Chong-
qing and Hangzhou, capital of East China's Zhejiang Province.
Beyond China's undeveloped credit system, Airbnb also faces other challenges, such as strong domestic rivals.
Among home-sharing apps, Airbnb ranked third in China with 3.28 million downloads as of the end of June, according to the latest data available. Domestic leader Tujia had 18.84 million downloads, followed by zhuna.cn with 3.38 million downloads.
"China's Internet industry is already mature and they know the market well," said Liu Dingding, a Beijing-based independent industry analyst.
Many of the best-known Internet companies in the world have struggled in China. Google, MSN, and Amazon did not do well in China.
In the most recent case, Uber, another banner holder for the sharing economy, withdrew from the Chinese market in November after merging with domestic rival Didi Chuxing in August.
"It's like a curse [for foreign Internet firms]," Liu told the Global Times Monday.
And it's not one he believes Airbnb will be able to break. Foreign Internet companies don't have that advantage and simply reproduce the same services they have overseas in China, Liu said. It clearly will not work.
Taking it slow
At present, Airbnb has around 40 employees and some 70,000 listings on the mainland, according to the statement it sent to the Global Times Tuesday.
In comparison, Tujia boasts around 5,000 employees and some 420,000 listings, according to media reports.
Compared with the battle between Uber and Didi, the rivalry in the home-sharing market has been more restrained. Although Airbnb and other home-sharing firms have handed out discounts to win users, it has not come anywhere close to the ferocious subsidy battle between Uber and Didi.
"Subsidies don't work well in home sharing, which is used less frequently than car-hailing," xiaozhu.com's Chen told the Global Times Monday.
Chen noted that what happened in the car-hailing sector - using high subsidies to build a user base - probably can't be repeated. "It takes a long time to form a new consumption habit," he said.
He predicted that the home-sharing industry will grow even more rapidly over the next two years.
Recent media reports have said that Airbnb is in talks to acquire xiaozhu.com, which now has around 100,000 listings in more than 300 cities, to gain a stronger presence on the mainland.
However, both companies told the Global Times that the acquisition is just a rumor.