When Airbnb Plus launched in Shanghai in 2018, Nathan Blecharczyk, the company’s chief strategy officer and China chairman, said in a statement that “China is a critical part to Airbnb’s mission of creating a world where anyone can belong anywhere”. Shanghai was one of only 13 cities globally where Airbnb first launched its premium service.
Fast-forward to the spring of 2022, the US travel company Airbnb announced on May 23 that it will suspend its operations in China from July 30 onwards as the ‘Paris of the East’ slowly emerged from its city-wide lockdown.
Cost, complexities and Covid-19
A source familiar with the situation told fDi that Airbnb’s domestic business in China was “costly and complex to operate”, while Covid-19 “worsened these issues and heightened their impact”.
Since 2016, when the company first launched its business in China, Airbnb has counted 25 million guests in its Chinese listings. The source says that stays in China have accounted for approximately 1% of its overall revenue over the past few years, and that now Airbnb will focus its attention on its outbound Chinese travel business in the Asia Pacific region.
The number of outbound Chinese tourists reached 154.6 million in 2019, according to the UN World Tourism Organization — almost three times as many as in 2010, with an estimated expenditure of $254.6bn for the year.
Airbnb had been one of the biggest US internet companies still operating in China. Tech giant Microsoft closed its local China operations for networking platform LinkedIn last year, due to a “significantly more challenging operating environment and greater compliance requirements in China”. In November, Yahoo also left China similarly citing an “increasingly challenging business and legal environment”.
The company’s withdrawal from China’s domestic tourism sector is also in line with a significant dip in foreign direct investment (FDI) into the country’s hotels and tourism sector. fDi Markets only recorded two greenfield FDI projects into the hotels and tourism sector in China last year, down from 14 in 2020 and 20 in 2019.
Sam Huang, research professor in tourism and services marketing in the school of business and law at Edith Cowan University in Perth, believes that domestic competition, as well as China’s zero-Covid policy, has a role to play in Airbnb’s decision to leave China.
“The domestic market is still there but a foreign company like Airbnb can’t compete with similar domestic brands, such as Tujia, Xiaozhu and C-Trip,” he says, adding that local brands are “better positioned to cater to the domestic market”, especially as rural domestic tourism becomes more important.
Mr Huang also notes that it is not only the case that Airbnb is less popular with domestic tourists, but that would-be outbound tourists may not be leaving China at the same frequency as before the pandemic.
“There are reports indicating that Chinese authorities do not favour their citizens going abroad. If Chinese tourists are discouraged from travelling outside of China in the coming months or for the entire year, that may make a big difference to the [volumes of outbound Chinese tourists],” he says.
Airbnb declined to comment further.
This article first appeared in the June/July 2022 edition of fDi Intelligence. Read the online edition of the magazine here.