Homes away from Home

by Zi Mo

At the turn of 2013， Mayi.com and Xiaozhu.com， both shortterm property rental websites， nearly simultaneously announced they had attracted venture capital totaling at least US$100 million each. With many industries still stuck in the global economic winter， it was exceptionally remarkable for them to secure so much venture capital. For this reason， some are expecting spring for the short-term private rental market.

A New Choice of Accommodation

Beijing resident Li Xiang planned to travel to Chengdu， capital of southwestern Chinas Sichuan Province， with her husband， child， and parents during 2013 Spring Festival holiday. Accommodations for the family trip were a major source of worry. Fortunately， before leaving， she booked a two-bedroom flat for 378 yuan a day in urban Chengdu through Tujia.com， also a short-term rental website. “I saw in photos on the website that the flat was clean，” she grins. “Its cheaper than hotel， and it has a kitchen， so we can cook ourselves if we want.”

An internet-based business mode originating in the United States， online shortterm rentals cater to tourists and business travelers by renting private property by the day. Unlike B2C （Business to Consumer） hotels， its O2O （Online to Offline） pattern allows users to search， make reservations， and pay for private property rentals online， then use them as short-term accommodations offline. During the process， the website charges the renter a broker fee.

With the rapid growth of Chinas tourism market， hotels havent been able to satisfy tourist demand for diverse， customized lodging. Especially for families， convenience and affordable prices are the primary reasons travelers seek residential houses over hotels for temporary accommodation. A considerable number of city dwellers now own more than one house and many like to capitalize on their vacant properties. Short-term renting usually enables owners to earn more than renting the property on a long-term basis. Short-term rental websites simply connect the travelers and owners.

Short-term rentals have also gained popularity with families because they feel more like home.

A Promising Business

Chinas online short-term rental services only emerged in 2011， but have already formed a considerable market. Statistics released by EnfoDesk， a business database of Chinese media economics， show that due to the fast-growing tourism market， the countrys online short-term rentals also witnessed explosive growth in 2012 with an estimated transaction volume totaling 490 million yuan. The market is expected to increase rapidly in next few years， and the transaction volume is expected to balloon to 2.887 billion yuan by 2014.

In September 2012， Airbnb， an American company widely recognized as a forefather of online short-term rental services， acquired $100 million of financing， and its market value was appraised at $300 million. This greatly encouraged other players in the industry. Yang Haoyong， founder of Ganji.com， one of Chinas largest classified information sites， predicts that the industry will create a Chinese company valued at over $1 billion.

Zhai Guanglong， CEO of Mayi.com， revealed that his website saw a month-onmonth increase of 15-25 percent to nearly 300，000 rooms over the past three months， from which it earned nearly 3 million yuan. Chen Chi， co-founder of Xiaozhu.com， a rising player in the short-term rental market， claims that his websites transaction volume is closing in on Mayi.com.

“Short-term residential renting is a promising industry，” opines Chen. “Due to our experience in the market and efficient decision-making as an independent startup， were confident about our companys future.”

A Way to Go

Along with Mayi.com and Xiaozhu.com， many other short-term rental service websites have emerged， including Airizu.com， Youtx.com， and Ziroom.com.

Almost all market players are showing great confidence in the future of shortterm private rentals， but many industry analysts have pointed out problems it still faces， such as “bottlenecks” in the Chinese market， of which the biggest is a lack of trust between renters and landlords.“Short-term rental services have prospered in the United States largely due to a social credibility mechanism，” remarks one market observer. “In the West， travelers are already comfortable spending vacations in other peoples homes， but not in China. Chinas short-term private rental industry has tremendous potential， but it wont be as easy for companies to prosper as much as in the United States.”

Unlike the hotel industry， private property rental lacks uniform standards in safety， sanitation， and other aspects. One internet user commented： “Cheap temporary accommodations are available on websites， but I wouldnt trust their safety. Also， it isnt convenient to communicate with landlords personally， so Ill spend more to stay in a hotel.” This commonly held attitude hints at the long road ahead before this rental mode will be widely accepted in China.

To relieve potential renters worries， short-term rental websites are attempting to more effectively manage landlords. According to an executive of Mayi.com， before a private house is listed， a professional photographer is sent to take photos to ensure authenticity. In addition， the website will regularly inspect the house. If certain complaints are found to be true， the property will be suspended from the rental list and its owner fined.

Whether a particular short-term rental website will stand out in the competitive market depends on its attractiveness to both owners and renters， capacity to manage safety concerns and disputes， and ability to maintain occupancy rates. Despite the many challenges， Chen Chi remains confident about the future of the market. According to him， online short-term rental market is just lifting off in China， and it will take four to five years for the market to mature and for industry insiders to work out the optimum operational pattern for China. Perhaps when that day comes， Chinas online short-term rental market will really boom.