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Startup Airbnb's Expansion Plan in China Needs Help from Private Equity Firms: Analysts

| Aug 20, 2015 10:15 PM EDT

Airbnb appears to be having a rough time in China.

Analysts said on Wednesday that Airbnb Inc, a U.S. online apartment-sharing startup, needs to join forces with private equity investment firms in its plan to expand its operations in China and push domestic competitors to grow.

The San Francisco-based firm revealed on Tuesday that it is partnering with Sequoia China and China Broadband Capital (CBC) to reach out to more Chinese consumers, Bloomberg reported.

These Chinese companies will help Airbnb by providing consultancy services on the country's home-retal sector.

"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," Analysys International analyst Ma Tianjiao said.

Ma furthered that among Airbnb's biggest rivals are local home-rental websites, including xiaozhu.com and tujia.com.

As cited in the report, CEO Brian Chesky said that his firm will take this expansion plan seriously after testing the waters in 2014 if Chinese users would avail Airbnb's services.

Airbnb has recently finished its largest private funding round so far, raising $1.5 billion in June and subsequently increasing the firm's market value to $25.5 billion, media reports shared.

Among the leading investors are private equity firm General Atlantic Inc., Chinese firm Hillhouse Capital Group and U.S.'s Tiger Global Management.

For Hou Changhai, an analyst at Internet intelligence firm Sootoo, "the idea of sharing vacant apartments comes from the U.S., and Chinese imitators are still at the entry level."

Airbnb's full expansion will also likely push local firms to boost their development, Hou said, adding that these Chinese companies may take inspiration from the U.S. startup's marketing and operation strategies.

The online apartment-sharing sector is predicted to have 10 billion yuan worth of revenue by the end of this year, a Sootoo report released in May stated. The figure will be a 163-percent increase from last year.

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