Airbnb Said in Talks to Buy China Home-Rental Rival Xiaozhu

  • Companies said to hold multiple meetings on a combination
  • Airbnb planning to boost China workers, add more listings

Airbnb in Talks to Buy Chinese Rival Xiaozhu

Airbnb Inc. is in talks to acquire China’s Xiaozhu.com to expand in the nation’s home rental sharing market, according to a person familiar with the matter.

The companies have held multiple meetings and the discussions are advanced in nature, the person said, asking not to be identified as the talks are private. A deal is likely, the person said.

While Airbnb is the biggest platform for people to rent their homes to travelers globally, it’s grappling with more established local rivals Xiaozhu and Tujia.com in China. The San Francisco-based company already has about 75,000 properties listed in the world’s most populous nation and plans to increase staffing 10-fold to 300 full-time workers.

“It means Airbnb becomes a meaningful player in the domestic market in China,” if the deal goes through, Douglas Quinby, vice president of research at travel research firm Phocuswright. “It’s really about getting a foothold in a key market.”

Airbnb and Xiaozhu declined to comment on whether the companies were in talks about a deal.

China’s online holiday rental market could reach 10.3 billion yuan ($1.5 billion) in transaction volume by 2017, up from an estimated 6.78 billion yuan this year, according to IResearch. Before the deal surfaced, the U.S. startup had been anticipating 2 million “room nights” in China, the person said. The company had also recently inked a partnership agreement with Tencent Holdings Ltd., whose messaging service WeChat has more than 800 million active monthly users and provided 60 to 70 percent of Airbnb China’s logins.

Xiaozhu would give Airbnb an instant boost in the world’s second largest economy. The Chinese startup, which was founded in 2012, this month said it raised $65 million of new funding. The company says it has 10 million active users and more than 100,000 listings in 301 cities across the country. Chief Executive Officer Kelvin Chen Chi said at the time of the funding announcement that Xiaozhu expects to deliver 500 percent organic growth in 2016.

A deal for Xiaozhu would also help Airbnb reduce the risk of a costly battle for market share. Uber Technologies Inc. lost more than $1 billion in China in a battle with Didi Chuxing before selling its business in the country to its rival.

Still, Tujia is the market leader in China, with backers including Chinese travel giant CTrip.com International Ltd. and Expedia Inc.’s HomeAway vacation rental business. It was valued at more than $1 billion after a $300 million funding round last year from investors including All-Stars Investment Ltd. The company says it has listings for 450,000 homes in total, including 335 destinations in China and 1,018 overseas.

“You could kind of see a Didi-Uber scenario playing out between CTrip and Airbnb,” Quinby said.

CTrip fought a war of attrition over the last several years to consolidate the Chinese market and has emerged as the dominant player, becoming the world’s third-biggest online travel agent by gross bookings after Expedia and Priceline Group Inc.

In September, Airbnb said it raised $555.5 million in new funds as it expands around the world. The funding round, which valued the company at $30 billion, could eventually reach $850 million, a person familiar with the matter said at the time.

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