After Airbnb decided to exit the local Chinese market, local players are rushing in: Tujia, Meituan, Muniao, Fliggy and Xiaozhu are large local Chinese online travel and short-term rental players that are reaching out to the local Airbnb hosts to migrate them to their respective platforms, according to this report.
Tujia has set up a special business services team to work with the hosts and will soon launch “one-click launch” migration services, the story says. Similarly, Meituan has also set up a team to provide hosts with services such as quick audits of housing occupancy and quick responses within five minutes.
“Airbnb is closing its domestic business in China, according to two sources familiar with the matter,” reported CNBC’s Deirdre Bosa on Monday. According to the report, the pullout from China would shut both Airbnb’s travel lodging rentals and its tours and activities offerings.
China has become the first geographic market for short-term rentals that Airbnb has lost to rivals. Its biggest rival in domestic mainland China has been Tujia.
Airbnb may regret giving up the fight. Consider what happened to Uber after selling its local business to Didi Chuxing, a homegrown rival. Didi is now expanding and looking to compete with Uber throughout the Asia Pacific region once the pandemic eases.
Airbnb could face a similar problem with Tujia. In January 2017, Airbnb came close to merging its China business with Tujia but then walked away from the deal. Tujia is backed by online travel giant Trip.com Group and has raised more than $755 million in funding. It could grow to become a global challenger.
Struggling Sales After Six Years
Airbnb’s internal China business was small. Here is what we published in the Skift Research report on Airbnb when the company went public:
“In 2019 Asia Pacific represented 13% of Airbnb’s bookings and 12% of its revenue. So where does the much-vaunted China business fit into this? Skift Research estimates that Airbnb generated $1.4 billion of gross bookings from China in 2019 and $143 million of revenue. This would represent 25% of Asia Pacific sales and 3% of global company revenue.”
Skift Research
“As a sense check to put this in context, out of Airbnb’s top ten revenue generating cities, Tokyo is the only one in the Asia Pacific region,” Skift Research said in December 2020. “We believe that Tokyo itself generates just shy of 1% of the global Airbnb revenue, likely around 90 basis points. With Beijing, Shanghai, and Shenzhen each pulling in even less per city, it’s hard to see how the China business could be more than 3% of global sales.”
Defeated by Local Rivals
Airbnb faced other rivals in China. One was Xiaozhu, which has raised more than a half-billion dollars in venture capital since 2012. This downmarket rival, backed by e-commerce giant Alibaba, helps Chinese travelers find short-term rental accommodation in China and other countries. Unlike Airbnb, it often provides property owners with services, such as housekeeping and door locks powered by facial recognition. It also offers add-on services like airport transfer and luggage delivery for guests.
Tencent-backed Meituan Dianping has also gotten into short-term rentals and homesharing.
Airbnb shelved its huge $800 millions marketing budget when the pandemic hit. Now as a company not just recovered but thriving, it has brought all its marketing, advertising and creative in-house, and the team is now numbering in hundreds, according to Airbnb’s global head of marketing Hiroki Asai, in an interview with Digiday.
Is the in-house team still responsible for the creative? What about media?
It’s all done in-house. All of our creative, all of our marketing, all of our design, it’s all done in-house. In total it’s a few hundred people. We work with an agency to buy the media. Strategy and execution is all done internally. Creative is done internally, production is done internally.
We’ve heard that some companies have been taking more of a hybrid approach to in-housing media recently, working on strategy in-house and an agency to execute. That seems to be the approach you’re taking.
It makes a lot more sense. With something as specialized as media buying when it’s all about scale, [and] connections, it doesn’t make sense to build that. The strategic part of it, absolutely. The planning, absolutely. For us, on the creative side, everything is internal. That’s something I’m deeply passionate about. The best way to create great work is to create it in-house. [Over the last two years,] we have built out an advertising team on top of the creative team we do have. We’ve also deeply integrated it a lot more tightly. We have our advertising team working tightly with our marketing team working tightly with our design team, product team, the whole thing is much more integrated. By integrating deeply, that allows you to create some of the stuff we launched.
Airbnb announced the formation of a Trust & Safety Advisory Coalition to counsel the company on human trafficking, child safety, fire safety, privacy and online safety, community safety, women’s safety, extremism and dangerous organizations, and mental health.
The advisory group members include 22 organizations ranging from Tech Against Terrorism and the National Network to End Domestic Violence to the Canadian Centre to End Human Trafficking.
“We know we are not the experts on important issues like fire safety, or suicide prevention, or human trafficking – bringing experts to the table makes our community and platform better,” Airbnb stated.
The advisory group’s recommendations will not be binding.
Airbnb is winning market share because of increased conversion rates, according to SimilarWeb estimates.
Conversion rates are when visitors to Airbnb platforms book a stay.
Website and mobile traffic analytics firm SimilarWeb found that in the first quarter of 2022, Airbnb’s conversion rate in the U.S. increased 22 percent compared with the first quarter of 2021, and the conversion of lookers to bookers increased 22 percent sequentially from the fourth quarter of 2021.
These conversion numbers in the U.S. were higher than Vrbo’s, a competitor, SimilarWeb found.
“This indicates market share growth and strong revenues for 1Q,” according to SimilarWeb.
In the first quarter, Airbnb’s revenue increased 80 percent to $1.5 billion when measured against the pre-pandemic first quarter of 2019. The increase was 70 percent year over year.
“Conversions grew 30 percent, 93 percent, 24 percent and 37 percent in France, Germany, Spain and the UK, respectively,” SimilarWeb found.
Expedia Group Vice Chairman and CEO Peter Kern’s 2021 total compensation was $296 million.
That includes $157 million in stock awards and $137 million in option awards. His salary was around $850,000. The stock and option awards represent the fair value at the grant date, and won’t necessarily be the actual value when the awards vest.
Kern’s total compensation in 2021 compared with $53.9 million for Booking Holdings’ Glenn Fogel, $7.67 million for Tripadvisor’s Steve Kaufer, and $132,000 for Airbnb’s Brian Chesky.
Chesky had a nice pay day — on paper like Kern’s — for 2020, namely $120 million, and Kaufer’s total compensation announced in 2013 was $39 million.
Kern became Expedia Group CEO during the early days of the pandemic in April 2020. He has been vice chairman since 2018, and a board member since 2005.
When it comes to the ratio of the CEO’s salary to median employee compensation, excluding the CEO’s compensation, at each company, Expedia’s was 2,897 to 1; Booking’s was 931 to 1; Tripadvisor’s was 76 to 1; and Airbnb’s was .65 to 1.
The total compensation amounts were included in proxy statements last month.
Airbnb’s flexible search — its “I’m Flexible” feature for those not decided on dates, duration or destinations — is a big hit, according to the company and in its Q1 2022 earnings it provided some additional evidence and numbers. It said that the feature was used 2 billion times in the quarter, up from 800 million in the previous quarter. This has lessons for the company including its potential revamp of search coming and learnings for other online travel companies to lean into.
In the earnings call, here is what CEO Brian Chesky had to say about it: “The reason we launched it is we saw more people were flexible. And the challenge is this for 25 years, travel search has basically been the same. There’s a search box. And the search box ask you where you’re going and it presumes that you know where you’re going.
In fact, you have to come to these websites for intent. And then it ask you, when are you going? And so most the OTAs aren’t really in the business inspiration. They’re in business of converting traffic into bookings. And this is good, but we always thought this — the Holy Grail of like online travel was to inspire people about where to go.
Now the results of I’m Flexible has exceeded our expectations. It’s been used 2 billion times and for a travel product to be used 2 billion times and people only use the trial product typically a couple of times a year is pretty unusual. So what are we seeing the results? I think the primary thing we’re seeing with I’m Flexible is we’re seeing a very strong amount of engagement with I’m Flexible people see a lot more properties in a lot more markets. We’re seeing people book properties outside of a lot of the popular tourist destinations, and we’re seeing an ability to redistribute travel demand beyond the top popular hotspots like Rome, Paris, Las Vegas, New York, Los Angeles.
So that’s really the most important thing that I’m Flexible can do. I’m Flexible can be in the inspiration game and point demands where you already have supply. And so our measures of success are how often do people come back to the website, how many properties do they wish list, how frequently they are engaged in the product on the inspiration side and on the demand side, how well are you pointing demand to where we have available supply rather than just kind of being at the mercy of wherever they think they want to go and when they want to go when they come to Airbnb. And so I think that what you’re seeing in the Q1 results is that clearly, the product is working, because I think that I’m Flexible as a feature has helped drive a fair amount of that growth.”
