Has the Travel Market Upgraded? We Started by Talking to 20 People About the So-Called “Homestay”

Arty young people play the prophet, infecting ordinary young people; in the end, more and more newly prosperous Chinese will come around to this new way of living.

As “homestay” turned into a fashionable word, more and more people started looking for ways to make money out of this market.

The boom should surprise no one: nobody can spend every holiday on a long trip abroad, so among the trips people take in ordinary life there will always be short and medium hauls whose point is to relax and rest. Sleeping until you wake on your own in a quiet place not far from the city, then passing an afternoon drinking tea and staring into space — that is exactly the right choice.

Whether it was the “Golden Week” holidays of a dozen years ago or the tour groups still visible outside big-city attractions today, what people consumed was buildings, installations, culture, commerce, or the crowd of tourists itself. The homestays now taking off work on a different logic: looking at scenery is not, at bottom, limited by spending power or by ideas about taste. Most people's notion of “beauty” converges. What is left to compete over is who saw a beautiful place first and fenced it off, and can then sell you the thrill of “enjoying it before everyone else.”

In China, the people who see that beauty earliest and fastest are, of course, the middle class we all know so well: they love themselves, they love a different way of living, they are willing to pay for a life of quality… They are the most wanted group in China today. Wherever they turn up is where purchasing power, lifestyle, consumer trends and the future will turn up too.

The future here is not only the goods and experiences they buy now, but their reach across the whole of consumer society: arty young people play the prophet, infecting ordinary young people; in the end, more and more newly prosperous Chinese will come around to this new way of living.

At Guoyun Shanju, in southern Zhejiang, the woman who had come up from Guangzhou looked like a textbook consumer-prophet. She seemed entirely at ease: she borrowed a lighter at the front desk, sat in a bamboo chair in front of the building, and smoked a cigarette while the mist steamed slowly up the mountain after the rain.

“Now that I've actually moved in, it's even better than I imagined. The view, the service, the hardware — I'm very happy with all of it.”

For this chance to sit and stare at a mountain, she had watched the booking system for the better part of a year before catching a room someone cancelled at the last minute, at a time that more or less worked; she even pushed back the day she was due back at work. Paying for the room and buying the round-trip flights, though, she barely thought twice about.

Like many houses given tasteful four-character names, Guoyun Shanju is a homestay — but a famous one. Across WeChat official accounts you can find more than 1,000 stories about it in total, and nearly all of them have something to do with clouds: “you can see the sea of clouds through the glass wall,” “clouds by day, stars by night,” “good for watching clouds, staring into space and drinking tea”…

Counting from the guesthouses of Lijiang's formative years, the idea of the homestay has been thriving in China for at least a decade. In 2015, a “Homestay Conference” held in Huangshan — a place with no homestay culture of its own to speak of — set the tone for the Chinese industry officially for the first time: 42,000 of them in all, the great majority in the countryside.

That is a very vague concept, so people began adding qualifiers to “homestay” — “beautiful,” for one. At the Beautiful Homestay Style Awards in late April 2016, the organizers offered a new definition of the “Chinese-style homestay”: a small hotel with idealism in it, with a host, with design, with warmth, just like home.

This sort of sentimental definition is what Xu Jianjun, founder of KaiStart, is good at producing. But he has also made a sober case that the homestay business is becoming more and more solid.

“This format has already hit hotels, because when people go to these places they aren't using a lodging product the way they use a hotel room — they go to enjoy it, to experience it. In lodging and travel, that is consumption upgrading.”

At the Beautiful Homestay conference, Guoyun Shanju was one of the model homestays that went up on stage to collect a prize. Strip away the sentimental words and it turns back into a small hotel: a little out of the way (30 minutes by car from the nearest county town), decently designed, with very few rooms and fairly high-end fittings, but inconvenient for meals.

That is the interesting double nature of the word “homestay.” So, besides this guest from Guangzhou, over the past month we talked to more than 20 homestay-loving consumers, and to the designers, operators, observers and promoters behind the homestays, about the word and about the industry booming behind it.

Is It Airbnb?

“Does the homestay you're talking about include Airbnb?” We asked every homestay consumer we interviewed the same question.

At the start, Airbnb was a sharing economy in the purest sense: a spare air mattress at home, plus a breakfast the host cooked in the local style, offered to a traveler sick of identical hotel breakfasts, or a broke student who wanted to see the world.

With that simple idea Airbnb built a business that threw the hotel industry into disarray — on Airbnb there is only personalization, and the standardization hotels are good at becomes a liability instead. The platform model also let Airbnb take the business worldwide fast, its room count and valuation soon passing those of the traditional hotels.

Competition between one personalized listing and the next can be fierce too. Hosts who want more income have to chase a better reputation, so they decorate their rooms carefully, write thoughtful messages first, or take a few better photographs — which is exactly what Airbnb's own “Superhost” label is for.

Zheng Chenyu, who now works at Uber, enjoys this “spirit of sharing” when she travels, and the stories that come with the hosts. So she set herself a crazy plan: after a trip to Yangshuo in September 2015, she decided that for work or for holidays she would never again rent an apartment or book a hotel, but would hunt for interesting homestays until she had spent 365 nights in them.

The label she now prefers to mention is #365DaysOfHomestays#. More than 280 days in, having tried more than 70 homestays in the United States, China, Spain, Cuba and elsewhere, she has collected more stories — and found that most of the homestays she cares about, the ones with strong design, interesting hosts, spread around the world and priced within reason, come from Airbnb.

But clearly not every Airbnb is automatically upgraded into a homestay. “Xiaopai Tongxue,” a user in Chongqing, is wary of putting an equals sign between Airbnb and homestays: “The ones with character can be called homestays. The ones without it are rentals at best.”

That line shows another side of Airbnb as a business — Zheng Chenyu admits that being able to search for a place by its photographs and judge the owner's character matters a great deal. And inside Airbnb's system, the share of “Superhosts” who score high on both design and service is not that big.

Once that kind of thoughtfulness becomes a pattern, it turns into the quality nobody on the platform wants to stress too much but that is in fact indispensable: professionalism.

It is hard for us to judge how many of the “Superhosts” Airbnb recommends fit its own strict original definition of the model. But here is another number from the United States: 16.8% of Airbnb hosts are running two or more listings at once.

Which is already fairly close to a homestay owner who has to keep track of several rooms at the same time.

But What Is This “Character” They Say Every Homestay Needs?

We met “Xiaopai Tongxue” at an online event run by Haohaozhu, a media platform for sharing home interiors. Users there uploaded nearly a thousand photographs of homestays they had stayed in, many of them Airbnb rooms from trips around the world.

That is more or less spontaneous behavior. Or you could read it this way: a user choosing to upload attractive photographs and share an experience they can't forget is itself already an expression of “character.”

Take the stories Zheng Chenyu posts under her “#365DaysOfHomestays#” tag: her conversations with hosts who are photographers, airline captains, painters, producers and architects, and the interesting design she found in bedrooms, living rooms, terraces, camper vans, even bathrooms.

If a homestay can't keep supplying details like these to chew over, how is it going to show personalization, difference, that sense of “we are not like the others”?

It is much like the traditional hotel industry stressing standardization: hot water, room temperature, several pillows of different firmness, the housekeeping schedule, how fast staff respond.

In the homestay business, the new standardization may be exactly this shareable “character.”

Watch Out That It Doesn't Turn Into a “Rural Farmstay”

A homestay is not a rural farmstay, even if sometimes it really does look like one.

Design Harvest, which grew out of a research project and a design team at Tongji University, has built in Xianqiao Village on Chongming Island a combined project of homestay, farm and rural creativity classroom. The three farmhouses the team renovated also became the area's first homestay in any real sense.

“Before this, the farmers had no awareness of it; they didn't think a project like this was any different from a ‘rural farmstay.'” Ding Chan, who runs the project, said the team signed a 15-year lease with the owners and spent more than 600,000 yuan on the renovation. Once the layout was finished — 10 guest rooms in all — local people finally saw some difference.

A survey of the “standard features” of homestays that the QDaily Research Lab ran this March shows where the difference lies: they open in the middle of nowhere and have to be converted from old houses; everything from the name to the furniture is new-Chinese in style, yet the courtyard needs a Japanese dry rock garden; the fewer the rooms the more upmarket the place, and the amenities run to five-star hotel standard…

But since “the middle of nowhere” can't be avoided, some things that resemble a rural farmstay survive inside the homestay's own services — eating and talking with the local farmers, for instance. Nattier, who once brought all six members of her family to try Design Harvest, said what stayed with her most was the older woman who helped with the cooking at the homestay. “She lived right next door, and she cooked on the big wood-fired stove you only get in the countryside. After the meal she took us out to see the fields, walked us down to the river, and brought us to her house to play with her grandson for a while.”

Still, seen from what consumers want out of service, the gap between a rural farmstay and a homestay is clearer.

At Guoyun Shanju, the place we mentioned at the top of this article, the stay was less pleasant for “Pengpengzhu,” a Haohaozhu user who used to work at Alibaba. Her mild fussiness was set off by the local woman who cleaned her room:

“The cleaning in the corners was far too slapdash — one look and you could tell they hadn't swept the whole floor. A lot of the new homestays lately seem to be like this: the decoration is very smart, European or new-Chinese in layout, but once you've been received or served like that by local villagers, it feels like a rural farmstay.”

This is the daily headache for homestays that are short of hands, or that deliberately set out to “do something for the village they're in”: don't let the guest's experience slide back at these crucial points.

But When Service Is Hard to Do, a Homestay Can Always Stress “Host Spirit”

“Host spirit” has to be the most important element in the idea of the “homestay,” whatever the thing is underneath — a rural farmstay, a guesthouse, a homestay or a small hotel. It is also the one view every person we interviewed agreed on.

Part of what it means is the “service that isn't quite polished” described above: not professional, but human. The other part connects to the “proprietress culture” of Lijiang in the early years.

In Lijiang, where China's first cluster of homestays appeared, “proprietress culture” is a fairly important idea: the old town is relatively closed, and the guesthouse owners who had lived there a long time held all kinds of local information. If they were glad to point tourists toward authentic snacks, or the quick route to a nearby sight, things got much easier. As Lijiang's homestay business saturated, the culture spread slowly to Dali, Shuanglang and other places nearby.

On a trip to Dali, “Pengpengzhu” came to some new understanding of “host spirit” over three consecutive nights in three different homestays:

“At the first one the owner handled the service himself, dropping by often to help out and chat; staying there was comfortable and relaxed, without the formality of hotel service. The second had a distinctive Buddhist design and was run by local Bai people the owner had hired; the service was well trained, but one night felt like enough. The last one had a slightly Japanese design and the best fittings of the three — a good experience overall. That owner comes back to look in on the place now and then, and normally trusts a friend to run it as manager. The two of them have similar personalities, values and standards for the work, so although the manager isn't the owner, he's only a little short of the owner.”

Moganshan is another sizeable homestay cluster in China, and there this “host spirit” is a little thinner. Before he took over day-to-day operations at Qingjing Yuanshe, one of the local benchmarks, Cui Sheng was a professional hotel manager. It did not take long before, on top of site selection, design, fittings and linens, he had become a hands-on steward who takes guests up the mountain for walks, fishing and camping, and sits by the campfire joking with them on summer nights.

A Word on Homestays Abroad, and Why They Manage More Professional Service

It took Huang Ying five years to go from getting her Hong Kong and Macau travel permit to being the travel expert among her colleagues and friends. She likes “places with a lot of color,” so almost everywhere she has been is a niche destination: the Netherlands, Bolivia, Brazil, Peru, India, Cuba.

The homestays she has come across have something in common with what Airbnb sells: hotels stacked out of rock salt, rooms built on straw and floating down the water, manors, houseboats…

But Huang Ying says she does almost all her booking on Booking.com, and the homestays that can be listed for sale there in fact belong to the older BnB (bed and breakfast) business. “It's a family-run inn that has a front desk where you can check in and leave your bags, but that also has some room to adjust to what you want.”

Because they hold hotel licenses, BnB-style homestays don't have to fight a guerrilla war with regulators the way Airbnb does, yet they are far more flexible than hotels. That is why the homestay business feels more developed and better regulated in places like Europe, Japan and Taiwan.

The same goes for Cuba.

Homestays were for a time one of the country's main industries for drawing foreign tourists and earning foreign currency. Airbnb got into the Cuban market in April 2015, a step ahead of many other companies. But most of the people who could list on the platform were Cubans already used to running “casa” businesses — good at talking to foreigners, able to handle several properties at once, with an internet connection, and with ways to change foreign currency.

Design Matters More, Because That Is What Consumers Are Paying For

Besides solid fittings and service, and room rates above 1,000 yuan a night in line with the rest of the area, what Qingjing Yuanshe, the place Cui Sheng runs, is best known for is its designer, Zhu Shengxuan.

In design circles his signature work is the overall plan for Expo Park at the 2010 Shanghai World Expo. He got into the homestay business more or less by accident:

“I was doing tourism planning on Moganshan at the time, and I liked the place, so I got hold of a piece of land and put up a few small houses, meaning to retire there later. Because it was for myself, I didn't fuss about comfort in the design — the bathroom, for instance, had no partitions at all. To my surprise, my friends liked that feeling of being merged into nature, and demand for the rooms outran supply, so I had no choice but to set it aside and turn it into a business.”

This “natural” feeling, as if the building had grown out of the ground, plus some modern design elements, has become the guiding idea for nearly every boutique homestay today, and it leaves designers a great deal of room.

Homestays like Yunlu and the youth hostel Grandpa's Home, both covered by QDaily before, were made against this background. Liu Yuyang, who designed Yunlu, is an architect used to public projects — but in homestay design, having exactly the right professional background does not seem to matter much.

On Zhihu we also found Zhang Liming, a designer in Chengdu. Halo Design, the studio she founded, mainly takes planning work for scenic areas and hotels, with some interior design on the side.

Six months ago a young man in his early twenties came to them wanting an old house he had taken a liking to in Guizhou turned into a small homestay. “He was quite sweet about it — he said he had no money, so it absolutely had to be cheap.”

During the work the team found that the house, built into the hillside, was very hard to alter structurally, and they designed several reinforcement schemes one after another. Then, at the interior design stage, the owner asked whether the 6 room layouts could be changed to 10. That request sent the designers back to rework for quite a while.

Between the rework and other factors, the total cost of this homestay rose from the 500,000 to 800,000 yuan the owner had expected to 1 million. But she says that, contrary to what most people imagine, hiring a big-name designer for a homestay project like this, or changing the requirements back and forth, doesn't make the design part more expensive — and design isn't only about looking good.

“There's a state guide price for design fees, about 5% of construction cost. A star designer may charge a bit more, but they can often solve complicated problems a mediocre designer can't: how to build the structure better, how to lay out the rooms more sensibly, and bring the cost of the whole project down at the same time.”

Whose Business Will This Be in the Future?

From all these cases you can see that a homestay, like any other branch of the service industry, has a side that is demanding, complicated, fiddly and thankless —

• Competitiveness takes a degree of professionalism, but it can't be standardized the way a hotel is;
• From design to conversion (and rework), the cost is a serious test of an individual operator's finances;
• Service has to keep improving and equipment has to be replaced on time — this is a high-wear industry;
• And if you get fussy guests telling you how to do your service, there's no good answer to that either…

On top of that, since a large part of what a homestay sells is scenery, new problems follow —

• Not everyone's hometown is a picture, and a place too remote is no good for a homestay either;
• Scenery isn't enough without a house: finding the old place with the best view and getting the right to convert it is harder than you think;
• You also need some ability to sell — an old mountain house worth nothing has to be packaged into a good story before anyone will buy it…

(We'll come back to these new problems in a later story about Songyang County in Zhejiang: how this mountain county caught fire on the idea of the “homestay,” and what problems it faces now.)

None of this is something an ordinary person can do well alone; a small company, or operating team, is becoming the standard. But once most of the early work is done, money, people, connections and customers may all come looking for you instead.

Some figures from KaiStart show it:

So far, 33 homestay projects have finished crowdfunding on the platform, each raising more than 2.5 million yuan on average, at an average subscription rate of 548% — more than four times oversubscribed.

Crowdfunding isn't the only way homestay projects raise money, either.

Wanruo Guli, a homestay brand out of Lijiang, took 10 million yuan in angel funding in March 2015, led by Qingcong Capital. “Founder Jin Du plans to build 12 homestays in 12 regions of China, so Wanruo Guli is not one homestay but a homestay brand. The brand is the key to breaking out of an uneven market, and it's one of the things we as investors value most for scaling up,” Chen Minjuan, an investment director at Qingcong Capital, told QDaily.

In Lijiang, a brand that made its name earlier than Wanruo Guli is Huajiantang, which grew from a single guesthouse into a whole chain. The hotel brand now has 16 locations around the country, 8 of them in Lijiang and the rest in well-known scenic spots: Shangri-La, Zhouzhuang, Suzhou, Xixi, Langzhong, Wuxi and Tongli.

After taking a strategic investment from Guotai Junan, Huajiantang chairman Liu Su said publicly that the company intends to list on the NEEQ, the “New Third Board,” and hopes to reach the main board later; the business may run on idealism, but it has to be managed to the standard of a listed company.

Next to the traditional hotel groups, this really is an easier market to get moving. Luo Bingqing, an associate director at Horwath HTL, told us a homestay can pay back its cost in 5 to 8 years and usually needs only a few million yuan up front — “whereas a hotel is hard to pay back without several hundred million yuan and around 20 years.”

“But the homestay market also has a large group of idealists who come in on a hot head, and once the early enthusiasm passes, cash flow can become a problem later. So beyond the star projects there are in fact many more homestays that get abandoned halfway, or that simply fade out.”

This market has never lacked big operators liable to get carried away and turn into idealists themselves.

The clearest case may be Wu Guoping, who announced not long ago that he was throwing himself into the industry. Grandma's Home, the Hangzhou-cuisine brand he founded, once changed how the Chinese restaurant business was run; after 17 years of it, he put more than 100 million yuan into three homestay-village projects.

And there are more hotel and travel companies that noticed money in homestays and charged into the market: Home Inn, which opened Yunshang Siji; the Yinju Group, which made Xiangsu; BTG Hotels, which bought the Shanli Hanshe brand… They probably won't die of cash-flow trouble, but they may give up halfway because of cost — the overheads a big company carries by nature, the way a homestay too far out slips beyond the reach of management, and hotel-management experience that stops working in this small market…

Competing with them may be higher-order players like Zhu Shengxuan, who has the design background, the years in the industry, and a well-capitalized listed company underwriting his idealism. In early April this year, Zhu's Xiangban brand announced it had signed conversion plans for 10 “hollow villages” around the country, ready to replicate the Yuanshe brand quickly in a new round.

Xu Jianjun is also worth a word — next to Wu Guoping he is even more of an outsider to the homestay industry. But in six months he turned his website into a channel almost no boutique homestay project dares to ignore. After a Series B round, KaiStart, the company he founded, is valued at $100 million.

In a coming story we'll also describe how he started by packaging and selling a way of life, and turned the idea of “consumption upgrading” into a bigger and bigger business.