Airbnb said in talks to buy China home-rental rival Xiaozhu

A man walks past a logo of Airbnb in Tokyo, Japan.
A man walks past a logo of Airbnb in Tokyo, Japan. PHOTO: REUTERS

SAN FRANCISCO (BLOOMBERG) - Airbnb is in talks to acquire China's to expand in the nation's home rental sharing market, according to a person familiar with the matter.

The companies have held multiple meetings and the discussions are advanced in nature, the person said, asking not to be identified as the talks are private. A deal is likely, the person said.

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

Airbnb and Xiaozhu declined to comment on whether the companies were in talks about a deal.

China's online holiday rental market could reach 10.3 billion yuan (S$2.13 billion) in transaction volume by 2017, up from an estimated 6.78 billion yuan this year, according to IResearch. Before the deal surfaced, the US startup had been anticipating 2 million "room nights" in China, the person said.

The company had also recently inked a partnership agreement with Tencent Holdings, whose messaging service WeChat has more than 800 million active monthly users and provided 60 to 70 per cent of Airbnb China's logins. Xiaozhu would give Airbnb an instant boost in the world's second largest economy.

The Chinese startup, which was founded in 2012, this month said it raised US$65 million (S$92.5 million) of new funding. The company says it has 10 million active users and more than 100,000 listings in 301 cities across the country. Chief Executive Officer Kelvin Chen Chi said at the time of the funding announcement that Xiaozhu expects to deliver 500 percent organic growth in 2016.

A deal for Xiaozhu would also help Airbnb reduce the risk of a costly battle for market share. Uber Technologies Inc. lost more than US$1 billion in China in a battle with Didi Chuxing before selling its business in the country to its rival.

In September, Airbnb said it raised US$555.5 million in new funds as it expands around the world. The funding round, which valued the company at US$30 billion, could eventually reach US$850 million, a person familiar with the matter said at the time.

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