Analysis of Competitive Landscape in Chinese House-sharing Market
COVID-19 and China
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Tujia (途家) is a leading homestay booking platform operating in China. Founded in 2011, it is headquartered in Beijing with over 5,000 employees globally. So far, it has closed more than six funding rounds, collecting more than USD 800 million. With over 1.4 million listings around the world, the firm plans to go public soon.

It will arguably use the second-mover advantage as Airbnb is hastening its step to be an IPO-trailblazer among the major house-sharing companies. Tujia has recently been growing both internally and abroad while the US company is turning down any possible merger-related talks in China. Probably, the rationale behind such behavior is the fear of being gobbled up: Uber's scenario is illustrious.

The hospitality industry is blossoming in China

Two major macro trends are contributing to the growing demand for short-term rentals: the booming tourism industry and push-pull migration in the burgeoning urban clusters. While the flourishing solvent middle class is igniting the first in vacation time and the second on a regular basis, the lodging markets thrive. 

As the National Bureau of Statistics of China reported, 139.5 million foreign tourists visited the country in 2017. The number grew 0.75% compared to the last year, with a five-year CAGR of 1%. Chinese citizens nowadays are also prone to travel abroad actively: the five-year CAGR for this category is more than 11%.

Rocketing domestic tourism sector is stirring up the demand for short-term dwelling rentals: the number of people holding PRC citizenship who travel around the country has almost doubled since 2012 when the number of 2.96 billion person-times was documented. Historically, inbound/outbound tourism-related indicators have become a bellwether for emerging countries' development overall.

The rapid expansion of agglomerations and internal migration are other drivers forcing people to search for housing. Although this set of forces mostly boosts the long-term rental market, migrant workers, students and other categories in need might occasionally use sharing platforms as a more flexible option.

According to the China Tourism Association's report, the number of homestay listings in China grew fourfold within one year: from 50,000 at the end of 2016 to 200,000 at the end of 2017. The number of employees within the house-sharing segment has reached nearly 2 million, and the total income of companies representing the sector has reached CNY 36.28 million (USD 5.25 million). National Information Center and Research Institute of Business and Industry (中商产业研究院) reported: the share of the access economy segment in lodging industry climbed to 6.1% in 2018, raising 1.4% over the previous year. Growth is noticeable, but the numbers are still comparatively low: for instance, in the United States, that figure is now higher than 25%.

Attractive market = fierce competition?

Nine different kinds of competition could be observed within the industries where digital disruptors have lately been causing dramatic changes. Incumbent companies in the hospitality sector are, indeed, 'scared' by newcomers. As numerous studies have shown, industry mammoths are always doomed to lose at least some of their market share for the benefit of disruptors.

As the matrix below shows, in this article, we concentrate on types VII (e.g., Tujia versus Xiaozhu) and VIII (e.g., Tujia versus Airbnb). These two types are historically new and, thus, haven't been entirely shaped by practice yet.

Besides, future rules of the game are hardly predictable due to several reasons:

  1. The market borders aren't determined. This segment of the lodging industry is still in the green-field state nowadays. Notwithstanding that, house-sharing marketplaces (like any other disruptors) are scavengers that use existing consumer base formed mostly by mature hotel chains and real estate agencies;
  2. P2P sharing economy models that are built around digital platforms must compete for both lenders and borrowers. The fact that some users can and are willing to act on the supply and demand sides simultaneously makes the competitive landscape look even vaguer;
  3. No exclusivity. A higher level of flexibility appears, given the fact that marketplaces provide potential users with fast and reliable ways to list and book property. Resulting from that, a particular user might simultaneously leverage several platforms. If a hypothetical supply-side house-provider has the same logic to boost the chances of getting paid, the platform with the lowest commission rate will eventually win the user.

The last feature creates much room for price competition. And the commission is an important indicator, as platform businesses must be transparent per se. As for the non-price competition, market segmentation and multifaceted ancillary services are what will help to distinguish companies' products. Hotel-like differentiation (even down to various star-rated groups) seems to be a feasible route for the segment, where some of the platforms may pick the 'luxury track' and compete against huge hotel chains, while others can successfully implement dumping against local hostels and motels.

Social stratification in emerging China turns the latter into an attractive zone for business units that are ready to take advantage of serving affluent classes.

Although the general trend of minor improvement in wealth distribution could be observed, Gini Index is still at a quite high level (significantly larger than 0.4) that indicates the existence of obstacles in the middle-class formation process.

Consumer behavior is considered a framing force here and Chinese buyers are set to contribute almost two-thirds of global growth in luxury spending. We believe that the high-end zone of the house-sharing segment within the lodging industry in China has a vast potential to become the pivotal factor in the development of the rental market as a whole.

Airbnb's crescendo?

Glocalization (the practice of conducting business according to both local and global considerations) is a core element of the geographic expansion process, and it is even more vital in the sharing economy sector. Especially in China, which is well-known as "Big, but hard". The ride-hailing industry that now is nearly monopolized by Didi Chuxing has produced an epitome of glocalization failure: Uber's "short Chinese trip" became a proper case study for business books.

Lodging industry, another major field where the sharing models are utilized excessively, seems to be a little bit more hospitable as Airbnb feels comfortable to compete for bigger pieces of pie. The San Francisco-based company entered China's market in 2015 and started moving with confidence lately.  The firm's co-founder Nathan Blecharczyk just announced that Airbnb will go deeper here due to the tremendous potential of the world's second economy. The global leader started planning to play first fiddle regionally long before. It was spotted near the gates of the local labor market a year ago. As of May 2019, the company shows even more intention to hire local professionals having more than 50 positions published with three offices across Mainland China: Beijing, Shanghai and Guangzhou.

With its projected IPO this year, Airbnb is going to become the first publicly traded behemoth of the global home-sharing segment. Paving the road for industry followers, it keeps up a tough strategic demeanor of experimental nature.

Meet the contestants

Evidently, the access economy is susceptible to large-scale investing motions. So, the number of active big-sized market participants is small and likely to lower over time. At the moment, four immense players are on the court in China. Below is a brief glance at the competitive advantages and disadvantages of these platforms.


+ World-leading provider of travel services Ctrip is among the firm's main investors;

+ Possessing nicely-designed and extremely competitive channels such as Qunar (去哪儿);

+ Having a strong distribution capacity and high conversion rate;

+ Data is clear and relatively transparent;

- Not friendly enough to the landlords;

- Segmentation is too broad: guests of all types and social status use the platform;

- Unbalanced promotional campaigns.


+ Focusing on entire place booking;

+ Having users of "international" profile with higher purchasing power;

+ Epitome of a highly transparent platform with complete database (AirDNA data service);

+ Decent recommendation algorithms;

- Booking mechanism in China isn't polished well;

- Customer service mechanism is yet locally underdeveloped;

- Foreign enterprise, therefore exposed to regulatory restrictions.

Xiaozhu (小猪)

+ Backed by Alibaba Group;

+ High popularity among millennials;

+ Airbnb-like model of promotion and distribution;

+ Vast and reliable customer service mechanism;

- Umpteen customer service staff cuts efficiency;

- Scarcity of orders, low conversion rate.

Zhenguo Homestay (榛果民宿)

+ Being backed by Meituan-Dianping (美团点评), holds access to enormous userbase;

+ Adopting Meituan's experience in promoting services (e.g. actively employs coupons and discounts);

+ Integrated cleaning services;

+ Offering the housekeeping service, innovative spirit is one of the main advantages of Zhenguo;

- Communication (from hotline customer service to the feedback mechanisms) is badly organized;

- Data is neither handy nor transparent;

- The searching mechanisms are comparatively weak.

To successfully compete under such complicated conditions, Tujia should clarify its product differentiation strategy. Enhancing overall service quality and balancing the degree of requirements on both (supply and demand) sides can be a rational first move to achieve the long-term goals. One-year benchmark of widening coverage from 105 to 140 cities across China is realistic, though the domestic market is where quality-related goals should by stated at first.

Another salient fact: Tujia's going abroad aggressively. The motto "go where Chinese tourist goes" may sound opportunistically, but it reflects the state of affairs, perfectly fitting modern circumstances. Further steps of Tujia will presumably have a lot in common with this slogan. Geographic expansion can always lead to dimensional shift – target-consumer scope expansion. When and where to start to grow wide is a challenge for Tujia and the like. Thereby, the next battlefield might take place in the developed world, following the reverse innovation trends.

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