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Airbnb exits China as Beijing's tough Covid-19 containment measures add to woes of ill-suited business model, fierce local competition

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US home rentals firm Airbnb is pulling out of mainland China, home to one of its least profitable markets, citing challenges brought about by the Covid-19 pandemic, it said in a note posted on its website on Tuesday.

The company, which has faced fierce local competition, said it will concentrate on serving the Chinese market by providing options for accommodation when Chinese people travel out of the country.

"In the face of the challenges of the epidemic, we reconsidered and made this difficult decision: Airbnb China will strengthen its base and focus on the outbound travel business, that is, from July 30, 2022, it will suspend support for domestic travel listings and experiences and related reservations," Nathan Blecharczyk, Airbnb co-founder and chief strategy officer, said in the note.

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"We cherish the Chinese market very much, and always believe that Chinese users, who account for one-fifth of the world's total population, are an indispensable part of our global network and even the realisation of the company's vision, creating cultural exchanges and emotional connections between people," he added.

The move is being viewed as the culmination of an ill-suited business model, local competition and Beijing's insistence on its zero-Covid policy, which has kept the country's borders shut to international tourists and hampered local tourism with routine lockdowns.

Airbnb has had to contend with intense competition from home-grown home-sharing platforms in China, such as Xiaozhou and Meituan Homestay. Xiaozhu launched Lanzu Gongzhe, which loosely translates as rental business community, in 2018.

Lanzu Gongzhe delivers a one-stop solution for homeowners running Airbnb-like businesses on the mainland. It offers a range of services that cover everything from decor design and security, such as the installation of so-called smart locks, to cleaning and day-to-day property management.

Other competitors such as Trip.com offer services such as transport ticketing and packaged tours as well.

"As for tourism in the Chinese mainland, the demand from domestic travellers remains strong," the company told the Post on Tuesday. "For instance, some users began to prepare for trips during the Dragon Boat Festival holiday right after the Labour Day [holiday]."

Airbnb's business model, on the other hand, was hardly suited to the local market. "I received barely one order via the Airbnb platform last year, and the guests complained about a lack of services, as they expect owners to provide daily essentials like towels and toothpaste," said Wang Jingjing, who listed her house in Shanghai's Chongming Island on Airbnb.

"In China, individually-owned homes cannot compete against the resorts operated by professionals in attracting tourists," she said. Wang quit Airbnb and now markets her home rental business through a WeChat programme, where many of her clients have got to know about her business.

UK insurer CIA Landlords said last week that Beijing was one of the least profitable cities for Airbnb landlords, who would need a paying customer for 3,771 nights, or more than 10 years, to recoup their investment.

China's strict coronavirus containment policies have also added to the US firm's woes. Mainland China is currently just among a handful of countries that still require international arrivals to quarantine in a hotel regardless of their vaccination status. Local tourism, meanwhile, is subject to regular lockdown measures.

Shanghai, for example, has been under lockdown since early April and is likely to see stringent movement controls staying in place until next month, despite zero community infections for a fourth straight day on Tuesday.

Under its restructured business, Airbnb said that from Tuesday guests would no longer be allowed to book homes and experiences beyond July 29 and 30 in China. Airbnb hosts, meanwhile, are no longer allowed to accept bookings from July 25.

For bookings that were made on or before May 23, for stays or experience after July 29 and 30, Airbnb will cancel the bookings and refund guests.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2022. South China Morning Post Publishers Ltd. All rights reserved.