Airbnb founders forge ahead in China alone while rival Tujia waits in the wings
China’s home-sharing market is red hot but fiercely contested and domestic players are leveraging their knowledge of local conditions to pressure Airbnb
Airbnb Inc.’s founders were moments away from merging their China business with local competitor Tujia in January 2017. Executives and investors spent hours hashing out a deal. Preliminary term sheets were drawn up. Then in the final hour of negotiations, Airbnb pulled out.
Investors had hoped a truce would stop the companies from haemorrhaging money in the fight for control of China’s blazing home-sharing industry. But rather than take a page from Uber, which agreed to cede China to rival Didi in exchange for an equity stake, Airbnb Chief Executive Officer Brian Chesky had a change of heart and decided to forge ahead in China alone.
Sixteen months later, the decision still rankles investors and has further emboldened Chinese rivals, according to people close to both companies. Tujia remains keen to cut a deal – although both sides deny formal talks – and says it’s simply waiting for Airbnb executives to accept reality. “We would love to issue shares in Tujia in exchange for Airbnb’s China operations,” says Tujia Chief Financial Officer Warren Wang. Until Airbnb is ready, “we will prove ourselves and show our muscle,” he said. “If Airbnb needs more time to understand that they or any other foreign tech companies just can’t do that well in China without a local partner, once we show them they’ll sit down and talk about a deal.”
Airbnb says it’s making strides in China, more than doubling the number of Chinese guests staying at Airbnb properties and boosting listings in China by 125 per cent to 200,000 from a year before. The company declined to disclose sales growth but pledged to continue making aggressive investments in China.
But the market is fiercely contested, and domestic players like Tujia, which is backed by China’s largest travel operator Ctrip.com International Ltd., are leveraging their knowledge of local conditions. Airbnb, meanwhile, doesn’t have a China chief: The previous one stepped down last year after dating a subordinate, people familiar with the matter said. Airbnb is struggling to find a replacement with international experience who also knows the local market. People with such attributes tend to want to run their own businesses and balk at being a hired gun beholden to bosses in far-off San Francisco.