Airbnb (ABNB) Ducks out of Chinese Business, What Does It Mean?

After years of trying to infiltrate the tough outer shell of the Chinese tourism market, Airbnb (NASDAQ: ABNB) has finally closed its doors to its newly formed China business. The seemingly endless battle for the tourism industry against pandemic restrictions has taken its toll on the stay-away company, with Beijing’s zero-tolerance Covid policy tying down holidaymakers and travelers. The company’s chair of China business has stated its domestic travel and experience listings will be shut down by the end of July. 

Airbnb China will still operate as an outbound tourism service, it simply won't offer domestic listings. Investors shouldn’t be too concerned about the move, the strategy to infiltrate China was only just starting to gain traction; registering around 25M stays in the country since launching in China in 2016. The stays only amount to around 1% of Airbnb’s total revenue, so we shouldn’t expect any dent of noticeable size moving towards the company’s next earnings date. 

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The addition of Chinese tourists would have helped scale the Airbnb platform towards a rapidly expanding economy, but problematic macro headwinds mean the move simply isn’t currently feasible. Even after serious spending, Airbnb only has around 150,000 properties on offer in China, compared to market leader Tuija, who boasted 1.2M properties. 

The decision is a product of unfortunate timing. The last few months have seen a slow but passionate resurgence in travel bookings as pandemic restrictions become a thing of the past…in most places anyway. Just as the world seemed a bit brighter, a bounce in Covid-19 cases in China threw parts of the country back into lockdown, curbing foreing and domestic travel, with foregin tourists banned from entering. Albeit, the decision shouldn’t wildly affect future revenue and earnings predictions, especially as the wider travel sector appears strong.