Partnership with private equity firms will help U.S. company grow
Joining forces with private equity investment firms will help U.S, online apartment-sharing start-up Airbnb Inc quickly expand in the Chinese mainland market and push local competitors to grow, analysts said on Wednesday.
San Francisco-based Airbnb announced on Tuesday U.S, time that it will team up with China Broadband Capital (CBC) and Sequoia China to expand its presence in China, Bloomberg reported on Wednesday.
The U.S, home-rental service is getting serious after having tested the waters over the past year to see if Chinese users want Airbnb's services, CEO Brian Chesky said in the report.
PR representatives from CBC and Sequoia declined to comment on any partnership with Airbnb, according to their e-mailed responses sent to the Global Times on Wednesday.
Airbnb recently wrapped up its largest round of private funding. The company raised $1.5 billion in June, which valued it at $25.5 billion, according to media reports.
The fundraising was led by private equity firm General Atlantic Inc, along with Chinese firm Hillhouse Capital Group and Tiger Global Management of the U.S,.
CBC and Sequoia China will help Airbnb better localize in the country by providing consulting services on China's home-rental market and identifying senior executives for the company's operations, Ma Tianjiao, an analyst at Beijing-based market research firm Analysys International, told the Global Times on Wednesday.
"Although Airbnb is well known in some cities overseas, it will take time for Chinese travelers to become familiar with its online services, especially when some Chinese companies also provide Airbnb-like services," Ma said.
Ma noted that domestic home-rental websites such as tujia.com and xiaozhu.com, which are becoming leading forces in the segment, will be Airbnb's biggest rivals.
Tujia.com announced on August 3 that it had raised $300 million from a group of investors to expand its business overseas, a transaction that valued the company at more than $1 billion, according to media reports.
The Chinese home-rental business has been a fast-growing market in recent years, but many companies in the sector are barely breaking even, Hou Changhai, an analyst at Beijing-based Internet intelligence agency Sootoo, told the Global Times on Wednesday.
"The idea of sharing vacant apartments comes from the U.S,, and Chinese imitators are still at the entry level," Hou said, noting that Airbnb's full expansion initiative is likely to inspire its Chinese competitors to learn from the U.S, company's marketing and operation strategies.
In 2015, the online apartment-sharing industry is expected to generate 10 billion yuan ($1.56 billion) in revenue, which would be an increase of 163 percent from 2014, according to a report published by Sootoo in May.
Shao Ying, a 27-year-old resident of Paris, told the Global Times on Wednesday that she had signed up as an Airbnb host.
"I've noticed some of my friends in Beijing are doing the same thing, as it's really convenient for people like us who travel a lot to rent our apartments to others and make some money while we're traveling," she said.
When it comes to the online home-rental business, flexibility and lower costs than traditional hotels are the main advantages, said Xing Xianghui, an analyst from Beijing-based market research firm iResearch.
"However, it's hard to say if there will be any further regulations for apartment-sharing companies in the near future," she noted.
Analysts don't think the competition between Airbnb and its Chinese rivals will be similar to that between car-hailing firms Uber Technologies Inc and Didi Kuaidi.
"Online apartment-sharing services are trying to build up customer groups and enhance customer loyalty while ride-hailing services were already popular in some Chinese cities when Uber arrived on the scene," said Hou from Sootoo.
