Reports say Talks to Buy China Home-Rental Rival Xiaozhu Initiated by Airbnb

With the aim to expand in China’s home rental sharing market, Airbnb Inc. is in talks to acquire China’s, reported the media quoting people familiar with the matter.

The source, who was not named in the media reports as the talks are private, reportedly informed that the companies have held multiple meetings and the discussions are advanced in nature.

Airbnb is grappling with more established local rivals Xiaozhu and in China even while it is the biggest platform for people to rent their homes to travelers globally. The San Francisco-based company plans to increase staffing 10-fold to 300 full-time workers and it already has about 75,000 properties listed in the world’s most populous nation – China.

Followng the media reports, there were no comments made from Airbnb and Xiaozhu on whether the companies were in talks about a deal.

According to IResearch, expected to be up from an estimated 6.78 billion yuan this year, China’s online holiday rental market could reach 10.3 billion yuan ($1.5 billion) in transaction volume by 2017.

The person reportedly told the media that the U.S. startup had been anticipating 2 million “room nights” in China even before the deal had surfaced. Tencent Holdings Ltd., whose messaging service WeChat has more than 800 million active monthly users and provided 60 to 70 percent of Airbnb China’s logins, is the company with which Aribnb had also recently inked a partnership agreement.

Airbnb would be able to gain instant access in the world’s second largest economy with the Xiaozhu deal if it goes through. It raised $65 million of new funding, the Chinese startup, which was founded in 2012, this month said. In 301 cities across the country, it has 10 million active users and more than 100,000 listings, the company says. Xiaozhu expects to deliver 500 percent organic growth in 2016, the company’s Chief Executive Officer Kelvin Chen Chi had said at the time of the funding announcement.

The risk of a costly battle for market share would get reduced for Airbnb if the deal for Xiaozhu goes trough. Before selling its business in the country to its rival, Uber Technologies Inc. lost more than $1 billion in China in a battle with Didi Chuxing.

Primarily for purposes of expansion throughout the world, in September, Airbnb said it raised $555.5 million in new funds. A person familiar with the matter said at the time that the funding round could eventually value the company at $850 million even as it reached value of $30 billion during the funding round.

After a $300 million funding round last year from investors including All-Stars Investment Ltd., Tujia was valued at more than $1 billion. LightSpeed Venture Partners, GGV Capital, HomeAway Inc. and International Ltd. are among those that back the company. The company says it has listings for 450,000 homes in total, including 335 destinations in China and 1,018 overseas.

(Adapted from Bloomberg)


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