14 Feb Short-term Rentals: Airbnb versus Tujia
Airbnb vs. Tujia
If you have ever looked to rent out/book an empty room, house or apartment, chances are you will have come across the two giants in the industry, San Francisco’s Airbnb and China’s Tujia.
The services offered by the two companies puts them in direct competition with each other, with each short-term rental business striving to capture as much of the market as they can. There is a nuance in the history and style of operation of the two companies which is leading them in different directions in China’s market – the article will explain this.
The rise of Airbnb started in 2008, after which it expanded dramatically, reaching over a million listings in 34 thousand cities in 190 countries. Airbnb then entered China in 2010 with 21 listings in Shanghai and 12 in Beijing. Having started in Beijing and Shanghai, Airbnb first moved into other first tier cities in China such as Guangzhou, and now has a significant presence across China, expanding into many second-tier cities such as Chengdu, Wuhan and beyond.
Airbnb is a useful tool for people in China who value the flexibility of a short term stay, or longer stays but without having to go through the trouble of leasing an apartment. Often the host knows their way around the city and can tell you all about the local spots. There is an amazing variety of properties you can rent on Airbnb, from small apartments to holidays homes and even villas. Opting for Airbnb provides you with the ‘home’ experience if you should prefer this over a hotel.
Click on the image above to view our Airbnb listings
Recently however, the global giant has experienced slower growth rates in China compared to its local competitor Tujia, where Airbnb can only boast 80,000 listings compared to Tujia’s staggering 400,000.
What’s the story behind this?
A lack of cultural understanding of China’s society has resulted in a few blunders and inefficient strategic moves:
– After entering China, Airbnb discovered that host properties had no basic cleaning standards in place – this put Airbnb at a disadvantage as they did not have the local ground team to put this in place.
– The name Airbnb is derived from airbag + bed-and-breakfast but unfortunately this culture does exist in China as much as it does in the west, much to the disappointment of tenants.
– The theme of sharing your ‘home’ does not work in China. While many Chinese are very hospitable in public spheres, in comparison their household is a very private domain where whole families often live together. Inviting strangers to share in this ‘home’ doesn’t seem like a comfortable idea anymore.
– To appeal to the Chinese market, a name re-brand to Aibiying （爱彼迎）, meaning to “welcome others with love”, quickly backfired on the company as people felt sexual innuendos were tied to the experience.
In January 2017, Airbnb walked away from a deal to merge with competitor Tujia where they would have owned close to 80% of the company. Whether this indicates determination or senselessness, we will let you decide.
It is important however not to forget Airbnb’s sharpest tool, a significant global footprint of over 5 million listings, which can be leveraged to keep competition fierce within China. Furthermore, competitive statements have been made such as a doubling in Chinese guests renting Airbnb properties, and a 125% increase in listings made by property owners. For now, we know that Airbnb will not give up.
Home-grown Tujia, founded in 2011, just three years after Airbnb, had already reached a market valuation of $1 billion USD by 2015. By 2018, the company had property listings spread across 400 destinations within China, as well as a significant number of listings in the rest of the world. Tujia claims it has been throwing almost thrice the speed as Airbnb’s growth, claiming one million listings with 70% of them being based in China. Investment into the company is consistent and being backed by one of the largest destination companies in the world, Ctrip.com International Ltd., Tujia shows no signs of slowing down.
We know that Airbnb has made some mistakes in its entry into China, but with businesses entering new waters – this is not a rare occurrence. So how has Tujia managed to be so successful in the face of the global behemoth that is Airbnb, especially after entering the market a year later?
Tujia did things right, straight from the beginning. A lot of this came down to a more local and fluent understanding of the market.
One main reason for success is that Tujia insists on managing its listings itself – from cleaning to housekeeping and maintenance. They had assembled a local ground team to set a standard in place for all properties – building relationships with local utility service providers.
Another reason is Tujia’s understanding of China’s changing economic landscape. Thanks to the way China drives its GDP growth through housing development, many Chinese are second or even third homeowners. These homeowners often leave their properties unoccupied for long-periods of time looking for long-term tenants. Tujia has focused on changing these long-term rentals into short term ones, providing property owners an easy and headache free source of income.
Additionally, doing things this way improves relationships with local governments. Local governments need to source most of its budget as taxes are funneled to the central government in Beijing. The most common way local government does this is through the development of land and sale of property. By providing an income source for property owners and thus encouraging purchases, Tujia grows closer to local governments, who in turn can help alleviate the pressure of regulations in the industry.
Some of Tujia’s other local insights has also helped fuel its success:
– The Importance of building and maintaining customer trust – which is through offline checks to ensure lodging quality is up to standard.
– Going beyond first-tier cities to build roots in China and better relationships with local governments in different areas.
– Understanding that Chinese families are less open to renting out rooms in their private households – thus focusing on empty apartments.
– Implementing procedures from the start to comply with ID regulations
Currently, Tujia claims that their total property rejection rate is 3%, a testimony to their service excellence. Last year in 2018, Tujia raised an additional $300 million USD to bring valuation up to $1.5 billion USD.
Time will tell who comes out on top – what do you think?
In addition to Airbnb, Maxxelli has taken up Tujia as part of its marketing strategy. The flexibility provided by both apps is extremely valuable in the short-term rental market.
Maxxelli provides luxurious and western style houses for short and long term stays in the Hi-Tech Zone and the Poly Center in Chengdu, as well as an expansive villa in the Qingcheng mountains. Contact firstname.lastname@example.org for your accommodation queries or visit our accounts by clicking Airbnb and Tujia.