Why China is Crucial for Airbnb's Global Ambitions

By Polina Marinova http://fortune.com/

Many Western companies have found China to be a difficult market to crack, and home-sharing giant Airbnb is no exception.

“Frankly, we weren’t sure [Airbnb’s model] was going to work here,” said Airbnb co-founder and chief strategy officer Nathan Blecharczyk at Fortune’s Brainstorm Tech International Conference in Guangzhou, China on Tuesday. “We had heard the stories about other tech companies and how hard it is to succeed in China, and so we weren’t sure whether to make it a priority or focus on other things that were more straightforward.”

Chinese tourists are the biggest spenders on international tourism with more than 135 million people traveling outside of China last year. The country has been the largest outbound travel market since 2012 and its tourist spending has had double-digit growth each year since 2004. “That alone is reason to prioritize it,” Blecharczyk said.

After a year of contemplation, Airbnb decided to make the leap and give it a go in China. But since launching its Chinese arm three years ago, Airbnb has faced fierce competition from local rivals and encountered discoverability issues related to government censorship of websites like Google, Facebook, and Twitter.

“So much of our site was dependent on those technologies, so we really had to localize the product,” Blecharczyk said.

Airbnb began building relationships with the government and built a 60-person product team in Beijing. Once the company began “localizing” the product, it saw an almost immediate lift in bookings.

For example, Airbnb unveiled a new brand name to be used in the country: ‘Aibiying’ (爱彼迎), which means “welcome each other with love.” The re-naming was part of a larger effort by the company to expand its visibility and presence in China. Airbnb also announced the launch of Trips, a feature that offers suggestions for local experiences, in China.

It also integrated Alipay, Alibaba’s online payment platform, into the Airbnb platform. Today, more than half of Airbnb China’s bookings are paid via Alipay.

These additions have led to some pretty impressive growth. To date, approximately 8.6 million Chinese guests use Airbnb when traveling abroad. Inside of China, there are about 120,000 homes listed on the Airbnb platform. Three years ago, that number was only 10,000.

Airbnb will continue investing heavily in the market to ensure that growth continues. Blecharczyk said the company is currently building a local customer service center and plans to triple its 60-person product team in the new year. Airbnb also recently announced it will invest $2 million through 2020 to support “innovative tourism projects” throughout the region. Airbnb has previously said that China is projected to be its largest origin market by 2020.

“That’s definitely the way it should be long-term,” Blecharczyk said. “China is the largest travel market both outbound and domestically, so it’s really big. And if you look at our trajectory, that is very possible.”