Airbnb's Business in China Keeps Growing. Are Its Users Who It Thinks They Are?

Everyone bends the Airbnb model to suit themselves, whether they want to make friends, find a good-value room, or build a business.

In an apartment building in Shanghai's North Bund area, a cleaner is tidying a room an Airbnb guest has just left. The building is close to the Bund, and people are always booking it. She has worked here for more than a year, cleaning more than 20 rooms on several floors. She has a simple way to tell which rooms have been let through Airbnb: the combination lock.

A combination lock spares the host and the guest the handover of a key. The host sends the guest a one-time code in advance, and the guest types it in on arrival, much as you would to get on the wifi at Starbucks.

Beijing and Shanghai are Airbnb's two most active cities in China. The website shows only 300-odd listings in each, but not every listing appears there. Airbnb's internal algorithm hides low-quality listings, so the real total is far higher. Between 2014 and the end of 2015, Airbnb's nightly bookings grew tenfold, and Shanghai alone has 10,000 to 20,000 hosts. The figures come from Cai Minghang, Airbnb's first Chinese engineer anywhere in the world, who has since left to start his own company.

Airbnb now has more than two million listings worldwide, but it will not say how many are in China; it announces only how fast its user numbers are rising. In August 2015, CEO Brian Chesky wrote on the company blog: "In the past year alone, the number of Chinese travelers using Airbnb abroad rose 700%, making China our fastest-growing outbound travel market." (Outbound travel here means Chinese people using Airbnb when they visit other countries.) Airbnb forecasts that by 2020, half of its business growth will come from Chinese users.

Vice President Varsha Rao's verdict: "Chinese people are very adventurous." She told QDaily that some Airbnb hosts abroad even say they have learned so much about China from their Chinese guests that they no longer need to visit.

There is no denying that over the past year Airbnb has grown fast in the Chinese market, both at home and abroad. Yet in sharp contrast, Airbnb's China office has stayed almost invisible.

In 2012, Airbnb opened its first office for China in Hong Kong, but the local government accused it of pushing up housing prices, so the company moved to Singapore. It did not truly enter mainland China until 2015. The Beijing team now has more than 20 people, but so far its work does not seem to have satisfied hosts.

Tian Qing became an Airbnb host in May 2014 and had expanded to five apartments within six months. She told QDaily that whenever she has a problem and needs Airbnb's help, she can never reach the company in time. Chinese hosts used to have to phone San Francisco about any problem. A 24-hour community hotline opened in China this year, but Tian Qing said she called it twice and got through neither time. Once, a guest had to cancel a night's booking because of a delayed flight; unable to reach Airbnb, Tian Qing refunded the guest from her own personal account.

Hosts like Tian Qing need more support and communication from Airbnb itself, but for now the only fairly grand annual gathering for hosts is the "Airbnb Open," a conference where hosts mainly share stories and experience. In 2015 it was held at the Parc de la Villette in northeast Paris; in 2014, in San Francisco. The format is simple: apart from the sharing, there is only a happy hour, and only "Superhosts," hosts who have earned many five-star reviews, may attend.

Dozens of hosts from China paid their own way to Paris for the conference, and Cai Mingshi was one of them. She was among the first people to host on Airbnb in Shanghai. Because she likes to share and lives out Airbnb's values, she was received in Paris as a "Superhost." This veteran host has even started a WeChat official account about her experience hosting on Airbnb.

But at the conference in France, Cai Mingshi noticed some subtle changes. The earliest hosts no longer seemed to like Airbnb as much as they once had, and the sense of closeness, of kindred spirits, was slowly fading. "Suddenly there are too many people, and the quality is uneven," she said. Airbnb used to feel like a boutique community, just as Airbnb told its hosts: we want 100 people who love us madly, not 1,000 people who like us a little. Now, she said, people have drifted apart.

At the same conference, Airbnb made a point of saying it would focus on three types of traveler in future, one of them Chinese people born in the 1980s and 1990s. "Those born in the 90s care more about experience when they travel. They don't want to be tourists; they want to live in a city like a local and get a more authentic experience." The conclusion came from research the company carried out specifically in China, including users' feedback on social networks and face-to-face conversations with hosts.

Airbnb holds gatherings in China too, and hosts help organize some of them. Last November, Cai Mingshi helped Airbnb put together a gathering in Shanghai attended by about 25 hosts. The hosts raised what worried them most: the law. In 2015, Shanghai police often arrested hosts, especially around Huangpu District, the Bund and People's Square. The police regard Airbnb rentals as illegal underground hotels.

Airbnb officials offered no explanation, saying only that they were in talks. Something similar has happened in New York, where the state's legal authorities accused Airbnb of running illegal hotels. Their filing said that 6% of Airbnb's commercial hosts earned 37% of the total profit, amounting to millions of dollars, and that they had taken hundreds of homes off the market, leaving ordinary residents without affordable housing.

This was in fact a central topic at the Airbnb Open as well. But in China, besides Airbnb, many companies with similar models are fighting over listings, such as Xiaozhu and Tujia. It is hard to say who has actually driven up rents, but one thing is certain: without government regulation, things may grow even more extreme.

Despite these risks, Airbnb's high returns still draw crowds into this new market. Ken, an Airbnb host in Beijing, said that if a flat costs 6,000 yuan a month in rent, people hosting on Airbnb in Beijing can earn roughly two-thirds of that. "If you have two Airbnb apartments in Beijing and do nothing else, you can still live quite well," Ken said. For one of Tian Qing's apartments in Shanghai's North Bund, every 5,000 yuan she puts in earns her 5,000 yuan.

Beyond the official gatherings, Shanghai hosts also have WeChat groups. Jeff, who spent more than ten years in the United States, still goes to the brunch meetups organized through his WeChat group, where hosts discuss what to do if they get caught, or how to handle guests.

Another host, Yao Tingting, finds her WeChat group much quieter. "Many people won't share their experience, some sub-landlords for example, because they're afraid you'll steal their business," she said. She has hosted on Airbnb since 2012 and now has 10 apartments. Her WeChat group also includes some property agents and even third-tier sub-landlords. Everyone is on guard, and few share anything.

Having started early, Yao Tingting has watched a large wave of sub-landlords and third-tier sub-landlords appear in Shanghai over the past year. They snap up apartments everywhere and renovate them. "It's just to make money, or simply a numbers game. They aren't sharing Airbnb's values." She believes a listing should cost no more than 6,000 yuan, yet some sub-landlords are now taking apartments at 7,000 or even 9,000 yuan. "Their costs are too high, so all they talk about in the WeChat group every day is whether the room will sit empty again tomorrow."

Yao Tingting said that a "listing" has nothing to do with how many bedrooms or living rooms a flat has; in most cases it means a single bedroom or a studio.

"In Shanghai's French Concession, sub-landlords' apartments follow very clear standards, such as certain renovation styles," Yao Tingting said. Several times an apartment she had viewed with an agent just two days earlier, "one I thought could never make money at that price," was taken by a sub-landlord and listed online two days later.

"French Concession" is a specific term for the former Luwan District (now part of Huangpu District) and Xuhui District. The area is full of fine old villas and small lanes, and its name alone suggests charm.

Jeff may be exactly the kind of "sub-landlord" Yao Tingting means. He works in real estate, began hosting on Airbnb part-time in August 2014, and now has 12 apartments and a professional management team. "The opening of Shanghai Disneyland will bring more visitors, and I plan to expand to 50 listings in 2016," Jeff told us confidently. He runs his Airbnb business more like a chain of branded hotels. In the interview he kept stressing "hotel" and "replicating the operation." He does not seem like a typical host in Airbnb's sharing-economy community.

Interestingly, all of the dozens of hosts we interviewed said they list their properties on several platforms at once. Roughly 80% of bookings come from Airbnb and the rest from other platforms. Those platforms lack Airbnb's pull, but they try to win market share by offering hosts higher commissions or perks such as free slippers. It is a bit like taxi drivers who sign up to several ride-hailing apps at once: to them the brand does not matter; what matters is who sends more orders and who gives bigger discounts.

None of this will ever appear in Airbnb's official statements, though the company cannot prevent it. Cai Minghang told QDaily that, in principle, Airbnb hosts are people who believe in the sharing economy, but "Chinese people think that if you have an apartment sitting empty, renting it to others counts as sharing. What Airbnb stresses is a very real experience, an authentic experience."

If Airbnb wants to grow its business in China, it may have to deal with this gap in understanding. And if hosts can still be guided and regulated, guests are even harder to predict.

Liu Cheng, who works in marketing in Shanghai, is a part-time Airbnb host. "The history of Airbnb is the history of us hosts suffering. Before Airbnb fully entered the Chinese market, the guests were fairly well-mannered." While we were interviewing him, his phone rang: a photography crew had rented his apartment and, without telling him, used it for a shoot, and the power had tripped. It was not the first time.

Some hosts told us that cleaners often complain that rooms foreigners have stayed in look as if they have already been cleaned when the guests check out, while Chinese guests demand a spotless room before moving in and want everything replaced, "but after they leave it looks like a bomb went off. The contrast is stark."

Chinese guests are also not used to how Airbnb works. "These guests don't understand how Airbnb really works, and don't know how to use the website," Yao Tingting said. An experienced Airbnb guest will put the number of guests, length of stay, reason for the trip and so on into a single message. Chinese guests more often treat Airbnb like Taobao, and the first line is usually "Dear, are you there?"

Because Airbnb has no instant messaging, hosts get an email with every message. "For one Chinese guest I might get 20-odd emails. He keeps chatting with you, and it adds a lot to my workload," Yao Tingting said. To make things easier, some hosts simply add inquiring guests on WeChat, "and sending photos over WeChat is easier too."

To meet Airbnb's performance standards, hosts must answer these inquiries patiently and promptly, including the Chinese guests who like to haggle in the chat window. Yao Tingting often would rather ignore such requests, but to earn good reviews she has no choice but to reply patiently.

Yao Tingting once thought of writing to Airbnb. She believes she is helping Airbnb educate this sudden flood of new users, and that Airbnb should pay her something for it.

"Chinese users think: I paid, I bought your service, so your service should be perfect and cover everything," Cai Minghang said. With that attitude, they are also unlikely to read the house rules carefully.

That said, no one distinguishes between Chinese Airbnb users who book listings in China and those who book listings abroad. QDaily has no way to tell them apart either.

On December 14, 2015, Airbnb's "Night At" campaign came to China. The campaign usually turns unusual places around the world into Airbnb listings, such as Korean singer G-Dragon's music studio, the Galeries Lafayette department store in France, and a retired KLM Royal Dutch Airlines plane. For China, the company chose the revolving tower of Shanghai's Oriental Pearl Tower, with supermodel Liu Wen as host.

At the launch, Airbnb Vice President Varsha Rao briefly introduced the campaign, then invited Liu Wen to talk about using Airbnb on her travels around the world. Besides media of every kind, the audience included staff from Airbnb China and Singapore, as well as employees who had flown in from San Francisco with Varsha. The San Francisco headquarters booked all their Airbnb stays in China centrally. Varsha said she was staying at an Airbnb on Wulumuqi Road.

Varsha's trip was rushed. The day after the "Night At" event, she went to Wuzhen for the World Internet Conference, then left China. We asked the hosts we had interviewed, and all of them knew about the event at the Oriental Pearl Tower, because, as they put it, "we saw it in Moments."