Written by Brenda Nakalema

Airbnb Closing Doors in China. Rival Apps Remain Popular.

China’s highly competitive housing market might be difficult for Americans to grasp fully, which is why it would come as …

China’s highly competitive housing market might be difficult for Americans to grasp fully, which is why it would come as a surprise that American companies like Airbnb haven’t had the easy walk in the park they’re known for.

Airbnb (ticker: ABNB) announced it would close its doors to the Chinese market due to the highly competitive landscape that drove out similar foreign brands in different sectors, and that makes survival challenging even for domestic players. Airbnb’s domestic business has proven to be both costly and complex to operate due to China’s tough lockdowns, technology company crack-down and a host of other issues.

According to sources, the ostensible reason for the business failure boiled down to a few key factors: the presence of cheaper accommodation elsewhere and the prevalence of many competing apps that users are already familiar with.

The huge app Meituan (ticker:3690.Hong Kong) offers the best example of how users can become attached to one platform because it features many different on-demand services. Meituan’s 700 million active users mainly utilize its food delivery business, for which it is the market leader, but the company also competes strongly in bike-sharing, car-hailing, ticket sales for movies, planes and trains, and lastly, accommodation.

“From which of these online accomodation providers have you booked an accommodation-hotel or private accommodation- in the past 12 months (website or app)?” asked a recent survey that further proved how difficult it is to gauge the homestay market since most surveys focus on hotels, hostels and private rooms.

Airbnb was in fifth position, with 19% of respondents saying they had used the app in the last year. On the other hand, Trip.com and Meituan stood at 75% and 50%, respectively. Other players in the market include Booking.com (ticker: BKNG) and Chinese platforms Tujia, Xiaozhu, and Feizhu.

“Lodging in China is still highly fragmented, with the top five players accounting for one-quarter share of the lodging industry in 2021,” wrote Euromonitor international recently.

China is loaded with fully dedicated short-term rental facilities, acting as mini-hotels, offering shared and private rooms. Unlike Airbnb rental, which can only be accessed through an app- many of these buildings are easily recognizable from the street with signs advertising their available units.

Airbnb’s failure also comes from the eccentricities that have edged out many American firms eager to tackle China’s enormous market.

“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,” commented Mark Tanner, managing director of marketing research firm, China Skinny.

“Local players also recognized the unique traits and drivers of Chinese consumers, which may not connect with travellers elsewhere,” he added.

In a 2020 SEC filing, the company said, “We will continue incurring significant expenses to operate our business in China, and we may never achieve profitability or sizeable supply penetration in that market.”

The company’s recent filing didn’t mention China at all. In an accompanying letter to its shareholders, it only mentioned the country once to say that it had noticed a rebound in the Asia pacific market except for China. Airbnb initially opened its doors to mainland China business in 2016, and the business accounted for roughly 1% of the company’s overall revenue for the last couple of years.

During an earnings call on May 3, the only mention of China came from chairman and CEO Brian Chesky, who said, “China is primarily an outbound business. People go to China, but primarily they travel and leave China, and they go to other communities.”

The company said it would still permit Chinese travelling abroad to book accommodation using its app.