An Airbnb cofounder explained the strategy behind its success in China, a market where most US companies have failed
- American tech companies have historically struggled in China, but Airbnb has had success there.
- Airbnb hoped Chinese travelers' experiences as guests would lead them to become hosts, Blecharczyk said in a talk hosted by NYU on Tuesday.
- The strategy seems to be working: Blecharczyk said two-thirds of stays by Chinese travelers are now within the country, while Airbnb's listings there doubled in 2018.
American tech companies have historically struggled in China, due to factors such as a lack of understanding of the market, tough local competition, a government that heavily favors those local competitors, and occasionally, pure overconfidence.
Understandably, Airbnb was hesitant as it considered how it might expand into China.
"At the time, we weren't sure we should try China, because everyone said, 'you're not gonna succeed, you're going to spend a lot of years and a lot of money only to lose,'" Airbnb chief strategy officer Nathan Blecharczyk said Tuesday during a fireside chat hosted by New York University Stern School of Business.
The company ultimately decided it couldn't ignore China's 1.4 billion citizens. However, it also didn't want to repeat the failures of predecessors like Uber who tried, unsuccessfully, to compete with local competitors head on.
"We realized and quickly agreed that the competitors will always be able to move faster and be willing to spend more money than you," Blecharczyk said.
But Airbnb thought it had at least one advantage over its Chinese competitors: while they may have had larger presences within the country, Airbnb already had a stronger portfolio of listings elsewhere in the world.
"The local companies don't have a global network, the local companies can't offer Chinese travelers to go abroad," Blecharczyk said.
Airbnb decided that in China, it would focus solely on "outbound travel" - that is, Chinese residents looking to vacation abroad - where the company felt its size gave it the upper hand, according to Blecharczyk.
In 2015, Airbnb published a blog post saying that outbound travel from Chinese guests had grown more than 700% that year, making China its fastest growing market by that metric.
Focusing on improving the experience for travelers outside of China allowed Airbnb to invest in markets where it already was doing well, a more efficient use of its resources than trying to outspend its competitors inside the country, according to Blecharczyk.
Airbnb also predicted, based on its prior experience in other countries, that "Chinese travelers would go abroad, have good experiences, come home, and again, the guests would become hosts," he said.
The company reasoned that this would allow it to grow listings and bookings growth within China organically, without needing to make a substantial investment in recruiting hosts directly.
According to Blecharczyk, that seems to be true so far.
"Today, more than two-thirds of the nights booked by Chinese travelers are domestic, even though we spent a fraction of the money relative to our competitors," he said.
Airbnb reported that in 2018, 91% of total nights booked within China were booked by locals. That same year, the number of travelers coming to China and the number of Airbnb listings in the country both doubled.
Outbound travel isn't the only key to Airbnb's competitiveness in China, however. Another factor has been its willingness to play ball with Beijing - something that has made other tech companies uneasy at times.
Airbnb's Chinese subsidiary, which was rebranded in 2017 as "Aibiying" and operates largely independently of its parent, shares host data with the Chinese government and has canceled listings during politically sensitive events. Airbnb has said this is to comply with local laws and told Business Insider it wanted to be "good neighbors."
While Airbnb has made its platform more accessible to the Chinese government, it has also made it more accessible to Chinese users by taking steps like providing 24/7 customer support in Mandarin and accepting payments via mobile apps AliPay and WeChat, the two dominant methods of payment in China.
Watch the full conversation with Blecharczyk below:
Axel Springer, Insider Inc.'s parent company, is an investor in AirBnB.