Airbnb became the latest foreign company to exit Chinese market due to its stringent covid policies

Airbnb officially announced the end of its business operations in China on May 17. It is the latest foreign company to close its operations in China. LinkedIn, eBay, and Yahoo are among the other foreign companies that have ceased operations in China. The Airbnb closure was implemented on July 30, giving local users two months to remove their listings.

Nathan Blecharczyk, Airbnb co-founder and chief strategy officer, wrote in the note: “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.”

The move is seen as the culmination of an unsuitable business model, local competition, and Beijing’s zero-Covid policy that has kept the country’s borders closed to international tourists while stifling local tourism with routine lockdowns.

Airbnb entered the Chinese market in 2016. Outbound travel by Chinese customers — primarily to other destinations in the Asia Pacific region — was a significant opportunity for the company, as it was for the rest of the industry.

This is because, according to the World Tourism Organization, China has historically been the world’s largest market for outbound tourism, accounting for the highest visitor spend globally.

However, since the pandemic, China has seen a significant drop in traffic and has been closed to most international travelers.

With China’s policy of completely eliminating coronavirus from the population, there have been numerous lockdowns, particularly in economically significant cities such as Shanghai and Beijing. These two cities have experienced both localized and city-wide lockdowns, as well as significant travel restrictions between areas and provinces.

These restrictions and lockdowns have harmed Airbnb and other short-term rental companies significantly.

Although Airbnb has not stated the reason for its closure in China, there has been much speculation surrounding the move. According to several reported sources, another reason was to cut costs because operating a domestic business in China was “too complex and expensive.” In China, Airbnb competes with a variety of short-term vacation-rental services, including Tujia and Metuan.

Metuan, for instance, a super app in China that delivers food and provides other services such as travel, dominates the market and can acquire new customers for a fraction of the cost that Airbnb does.

On the other hand, Airbnb’s business model was hardly suited to the local market, which further added stress to its operation in China.

After it announced its closure, the news quickly spread and became a trending topic on Weibo, one of China’s largest social media platforms, with many people commenting on Airbnb’s lack of market influence in China even before the coronavirus pandemic.

Many homeowners complained that individually-owned homes in China were not able to compete against resorts operated by professionals to attract tourists, and consumers hold similar and even higher expectations for Airbnb homes than hotel rooms.