Airbnb is always a hot topic when it comes to discussions of the business of apps. Its creators managed to do what most digital entrepreneurs dream of: turn a simple idea into a corporation with a global presence.
However, the news that they left China is particularly interesting, and definitely holds some lessons for those looking to create apps with a global appeal.
In the east and west, market conditions and consumer demands can be quite different. However, what ultimately makes an app successful is the same.
So, let’s take a look at why Airbnb closed up shop in China.
The Pandemic Response In China
Barron’s conducted a number of interviews, and according to a source close to the company, Airbnb’s domestic business is costly and complicated to operate on its own.
It seems these challenges were only highlighted by the landscape in China.
China was in the midst of a seemingly endless series of lockdowns since the pandemic began. This put a strain on almost all businesses.
However, it is even more pronounced for a company like Airbnb, which depends on travel.
More Challenging Market Conditions In General
In the US, as of now, Airbnb has no real competitors. It was the first of its kind and remains more or less untouchable, despite its many issues.
Over the years, Airbnb has been criticized for contributing to overtourism and the housing crisis. Airbnb is considered a sort of harbinger of gentrification and a force that ruins neighborhoods for residents and homebuyers.
In the US, they also have faced a lot of criticism for their excessive guest fees. Last year, a Tweet went viral showing that a 2-Night rental costs about $200 before fees, and over $400 after fees.
Since Airbnb initially branded itself as a cheaper alternative to hotels, and in many cases, it isn’t anymore, people want other options.
While in the US there are no other massive direct competitors to Airbnb currently, in China, there is a large number.
Super Apps Win The Day
Something that is very unique to the Chinese and in general Asian app market is the Super App.
Super Apps are destination apps where users can search for services or things and acquire them without leaving the app. Users browse, buy, book, and pay as part of one streamlined experience.
Also, Super Apps do not go it alone. They often partner with other businesses to provide a range of services. The nature of this is that they want to enable their partners to succeed.
After all, partners succeeding within the Super App ecosystem benefits all of the companies, employees, and users involved.
So, what does this look like exactly? A great example is the Hong Kong-based super app Meituan.
It has 700 million active users and its main service is food delivery. However, through Meituan, users can also hail cars, buy tickets for movies, trains, and planes, and find accommodation.
Super Apps like Meituan already have name recognition in the Chinese market and offer better prices than Airbnb. This has made it very difficult for Airbnb to compete.
In fact, according to a Statista Global Consumer Survey, the vast majority of Chinese consumers have not used Airbnb in 2022.
Only 19% said that they had. By comparison, 75% said they had used Trip.com and 50% said they had used Meituan for accommodations.
Outside of these, there are countless other options for accommodation in China that do not exist in the US. This includes apps like Tujia, Xiaozhu, and Feizhu.
In China, Lodging is Fragmented and Diverse
According to Euromonitor:
“Lodging in China is highly fragmented, with the top five players accounting for one-quarter share of the lodging industry in 2021.”
In many other countries, short-term lodging has always been embraced, even long before the invention of the internet.
For example, in many European countries, you can easily find already furnished apartments meant for students and tourists. The same goes for many countries throughout Latin America.
While this was a huge gap in the US market, which Airbnb filled, it simply did not exist in other countries.
In many other places, the market has reflected that tourists, seasonal workers, students, people in transition, and many others need temporary lodging for generations.
For example, long before Airbnb, many Chinese cities were full of dedicated short-term rental facilities. These mini-hotels offer both shared and private rooms.
To this day, many of them are visible from the streets with signs advertising their availability. Many of these cannot be found on any app.
Airbnb Nightmares
Almost every frequent Airbnb user has a horror story or two about an unhinged host or a listing that stretched the truth. Many complain of being forced to pay intensive cleaning fees for accommodation that is dirty when they arrive.
Airbnb is also known for making it almost impossible to get a refund when things go wrong.
Barron’s reporter Tanner Brown tried to find accommodation in Beijing without using apps.
He found a bunch of phone numbers scribbled on the walls of the elevator in his apartment complex under the word “Homestay,” and called one of them.
The owner of a local apartment for rent answered. He offered to rent out a fully-furnished and competitively priced unit with a lot of flexibility. Brown reported that he could pay by the day, week, or month.
Airbnb’s Big Problem in China
Ultimately, it appears that Airbnb really failed to understand the Chinese Market before they jumped in.
They did not really understand where most of China’s population actually lives and their unique needs. They did not recognize the complexity and thriving competition in that market.
In fact, as of 2023, many hosts in major US cities are starting to find their Airbnbs empty more and more. And, many cities around the world are taking steps to limit Airbnb because of the damage it does to local communities.
Even though there is not real competition for exactly what Airbnb offers in the US, many are going back to hotels, now that many Airbnbs cost what hotels do.
In China, where there have always been short-term housing options in major cities, Airbnb couldn’t compete.
According to Mark Tanner, managing director of marketing research firm China Skinny:
“Local rivals Tujia and Xiaozhu managed to get many more listings across many more locations within China than Airbnb, illustrating the importance of having a strong presence on the ground which can connect with Chinese in far-flung locations, which cumulatively account for a much larger share of the population than the higher-tier cities.”
It appears that Airbnb did not tailor their strategy enough when trying to enter China. So, they did not account for the many major differences there. That is an absolutely critical error to make.
Final Thoughts
On an earnings call on May 3, the only mention of China came from chairman and CEO Brian Chesky.
He showed that the company still does not really understand the market conditions in China and where they have misstepped. He said:
“China is primarily an outbound business. People go to China, but primarily they travel and leave China and they go to other communities.”
Whether you want to create an app that thrives just in your city or is an international smash hit, taking a realistic look at the market conditions is key.
Know your competition. Know your consumer. And make smart choices. Remember, success in one place or time does not mean guaranteed success everywhere or always going forward.
What do you think of Airbnb leaving China? Comment below!
What do you think? Comment below.
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