Airbnb’s announcement that it will suspend support for domestic tour listings, experiences and related bookings in mainland China has written a new footnote to the difficult survival status of the B&B and travel industry under the new crown epidemic. As an industry with high investment and long return cycles, how to survive is a challenge for the entire B&B industry.
On May 24, Airbnb, a shared accommodation platform, released a letter to Chinese users announcing that it would suspend all listings in mainland China after July 29, and all experiences in mainland China after July 30. Airbnb’s nearly 150,000 listings and experiences in mainland China will go offline at the end of July. The current service fees for Airbnb China hosts and experience owners will be waived.
An article posted on Airbnb’s official website states, “The continued recurrence of the new crown epidemic has disrupted the original pace of tourism development and weakened the synergies between our domestic and outbound travel businesses, with the domestic travel business facing operational challenges such as high costs accordingly.” According to a recent Airbnb announcement, the slowdown in business in the region was exacerbated by the emergence of new cases of crown infection in China and the imposition of a strict embargo in the first quarter of 2022.
Founded in 2008, Airbnb now has more than 6 million listings in more than 191 countries and territories. Previously, China, a separate business unit of Airbnb, had a local customer service team as well as its own product and technology development team to develop localized products, such as the Longji Terraces sustainable tourism program in Guilin, which Airbnb launched in China in 2018.Airbnb had its first attempt to establish an Airbnb Host Academy in China to help Airbnb has established the first Airbnb Host Academy in China to help hosts improve their services, enhance the quality of their listings and increase revenue through online and offline training.
In 2018, China has become one of the fastest growing markets for Airbnb. in the second half of 2018, Airbnb’s domestic tour market grew by more than 50% of its total business. A survey released that year showed that approximately 3.3 million hosts worldwide had stayed in Airbnb properties within China in the past 12 months. Airbnb was also optimistic that by 2030 China would not only be the world’s largest outbound country, but would also surpass France as the world’s largest destination country.
In an exclusive interview with the Economic Observer, Peng Tao, then president of Airbnb China, also said, “We have a very optimistic mindset about the future consumer market in China, as we predict that China will be the largest source country for Airbnb in 2020.” However, some sources indicate that revenue from China’s local listings and experience services business is less than 1% of Airbnb’s global revenue. Peng Tao stepped down as president of Airbnb China on Sept. 30, 2021, a position that remains vacant.
During the outbreak, in order to alleviate significant cash flow pressure due to the plummeting business, Airbnb accepted a proposal from private equity firms Silver Lake and Sixth Street Partners in April 2020 to raise $2 billion in the form of bonds plus equity, a deal that gave the two firms access to an equity round that could be raised at $30 per share (an overall valuation of $18 approximately 1.25% of the certified equity that can be exercised at $30 per share (an overall valuation of $18 billion), at an interest rate of up to 11%.
In May 2020, Airbnb announced a global layoff plan and various means to significantly reduce costs within the company. In addition, Airbnb scaled back its traditional hotel and luxury property businesses and suspended expansion into new areas such as transportation and media.
The epidemic has left many industries in a “dark place”. How to survive is a challenge for most industries. But as an industry with high investment and long payback cycles, the B&B industry will be even more difficult to survive in 2022 than it was in 2020, when the epidemic spread globally.
In China, due to the recurring epidemic, most cities are not recommended for cross-province travel during the epidemic prevention and control period, and data recently released by domestic B&B platform Tujia shows that the average price of B&B reservations in major popular cities has been adjusted downward by 30%-50% since April compared to the Spring Festival period in 2022. On the morning of May 24, Tujia announced the opening of a “green review channel” to help Airbnb (Airbnb ) hosts in mainland China to go live on the Tujia platform as soon as possible.
In response to the suspension of both listings and experiences in China, Airbnb’s co-founder and Chairman of China, Siqi Bai, also posted on the Airbnb host community that “Airbnb China will solidify its roots and focus on its outbound travel business.” In contrast to the “exit from China” interpretation, Airbnb is still expecting a recovery in the lucrative Chinese outbound travel business.
In an article published on its website, Airbnb said, “We believe that over the next five years, the Asia-Pacific region will grow into one of Airbnb’s most important blue ocean markets globally, and that China will be a strong cornerstone for the recovery and prosperity of cross-border travel in the Asia-Pacific region.”
And according to Airbnb’s Q1 2022 earnings release, stays and experiences in the North American market grew nearly 55 percent in the first quarter compared to the same period in 2019; and stays and experiences booked in EMEA surpassed the same period in Q1 2019 for the first time since the outbreak began, growing approximately 20 percent. Airbnb’s business recovery in Asia is currently lagging behind North America and Europe. However, Airbnb believes that this demand will be fully unleashed as immigration policies are gradually liberalized and the global outbreak is effectively contained.
Before the epidemic, China had become the world’s largest source country for travelers. Official figures from the United Nations World Tourism Organization show that the number of Chinese outbound travelers has reached 155 million in 2019, tripling the number in the same period in 2010. 63% of Chinese respondents said they would plan a trip abroad if they could.
The next step is for Airbnb China to build up new capacity, focus on its core business of outbound travel, and wait for demand to recover. And it remains to be seen when the B&B and travel industry will return to the value plateau.