Home market the focus for Xiaozhu, the Airbnb of China

PUBLISHED : Monday, 02 January, 2017, 12:58pm
UPDATED : Monday, 02 January, 2017, 10:50pm

Embracing the growth prospects offered by the increasing popularity of the sharing economy, Xiaozhu, dubbed China’s Airbnb, is investing to attract domestic users amid the rise of its US rival.

Kelvin Chen, a Chinese technology veteran who founded Xiaozhu in 2012, said his inspiration came from Airbnb, the US home-sharing start-up that has brought disruptive changes to travelling in the West.

“We have learned a lot from Airbnb. We have the same beliefs [about the sharing economy], but Xiaozhu focuses on domestic travellers instead of inbound tourists. The pool of local users alone is already big enough,” Chen told the South China Morning Post.

He declined to comment on an earlier report saying thatAAirbnb was in talks to buy Xiaozhu, but he added the company was open to cooperation with other platforms.

Xiaozhu last month raised additional funds in its series C round and completed a D round funding worth a total of US$65 million.

Using our platform, users can rent out their homes to strangers without coming back to open the door, or worrying about housekeeping and security
Kelvin Chen, founder, Xiaozhu

While home-sharing is still a grey area on the mainland as no clear regulation is in place, Chen is not too anxious considering the government’s support for the sharing economy. The company will keep a close eye on the regulatory framework in future and maintain communications with government officials, he said.

For overseas markets, Chen said some countries have already had rules supervising B&B, while Xiaozhu can also take Airbnb’ experience as reference. China’s Ministry of Housing and Urban-Rural Development, which oversees residential rental contracts, doesn’t have clear guidelines approving or banning sub-letting.

As China’s answer to Airbnb, Chen said Xiaozhu had outstripped its US rival to some extent on the back of its understanding about the local market, which is different from Europe, the US and other established marketplaces in many aspects.

For instance, Chen said the lack of a bed and breakfast (B&B) culture had made it tougher for Airbnb to penetrate the market as the services and foundation to support the business were barely available.

The funds raised last month will be used to create a “service chain” that will help ensure security and enhance convenience to encourage more homeowners to rent out their spaces and attract more local users.

“In China, even in first-tier cities like Beijing and Shanghai, the quality of some houses can be bad. Before listing them on our platform, there is a lot to do to standardise quality and ensure the home for rent is clean, secure and comfortable. Without deep knowledge about the local market, it’s very tough to do this,” Chen said, adding that it was one of the main difficulties in promoting B&B stays and home-sharing.

Xiaozhu has more than 100,000 listings of houses and about 10 million users on its platforms, compared with about 75,000 listings on Airbnb.

Chen said a large portion of its staff conducted hands-on checks of homes, helping owners improve conditions.

“Services such as smart locks and housekeeping have also been introduced to the platform to make renting more convenient,” he said.

“It’s common for Chinese people to live in one city and own properties in other cities. These homes are always left empty and renting them out is difficult while the owner is absent. Using our platform, users can rent out their homes to strangers without coming back to open the door or worrying about housekeeping and security.”

But for Min Zhe, who has listed his 30 sq metre flat in Beijing on both Xiaozhu and Airbnb since March, services are not his main concern.

“So far, all my bookings are from Airbnb users, mostly overseas tourists or students. I think they care about experience and appreciate my apartment. Clients from Xiaozhu’s platform are more demanding and look on my home as just a low-priced hotel,” Min said.

He has never rented his flat to a Xiaozhu user, although he said the customer service from the Chinese platform was very reliable and efficient.

Chen also considers users’ experience a crucial factor as the company plans to expand the business to more Chinese cities and overseas.

While Xiaozhu was available in Hong Kong, the city was a challenging market, he said.

“First of all, for mainland visitors, homes in Hong Kong are so tiny,” Chen said.

There were few hundred listings for Hong Kong on Xiaozhu, and most of them were owned by mainlanders, Chen said. “Users found it troublesome when having problems with the apartment and no one would be available to help. We also do not have much in the way of support services in Hong Kong yet,” he said.

Chen said that because Hong Kong hotel rates were so high, the city was still a potential market as it was a hot destination for mainland visitors.

“Compared with spending thousands [of Hong Kong dollars] to rent a hotel room, there is an attraction to spending less, maybe just a few hundred, renting a flat, particularly for families,” he said.

In Hong Kong, city tenancy regulations deem Airbnb illegal for tenants to sub-let their apartments to short-stay renters.

The company is also seeking to expand to Japan and South Korea, destinations that are highly favoured by mainland tourists.