Airbnb Forms Separate China Unit as Local Business Grows

Berlin will from Sunday, May 1, 2016, restrict private property rentals through Airbnb and similar online platforms, threatening hefty fines in a controversial move meant to keep housing affordable for locals. / AFP / John MACDOUGALL (Photo credit should read JOHN MACDOUGALL/AFP/Getty Images)
Photograph by JOHN MACDOUGALL AFP/Getty Images

Airbnb says its popularity among Chinese travelers is booming.

Accordingly, the home-sharing company is making some notable changes to its Chinese operations, including the creation of a new business entity—Airbnb China—which will now handle storing data about China-based bookings and listings, it said in a new blog post. Listings based outside of China will not be affected.

The new policy seems to be for regulatory compliance purposes, as the company’s revised terms of services now state that any disputes will now be under the China International Economic and Trade Arbitration Commission’s jurisdiction. The new policies take effect on December 7.

This latest move in China is likely a direct result of recent growth in the country. To date, Chinese travelers have checked into more than 3.5 million Airbnb listings around the world, and in 2015 alone, these have grown 500%, according to the company. Moreover, there have been almost one million guest arrivals at Airbnb listings in China to date, though the company is seeing an increasing number of Chinese residents sign up to become hosts.

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With that said, the race is far from over for Airbnb in China. More than a year ago, the company opened up a CEO hunt for its Chinese business, but a spokesman told Fortune that is has no updates at this time on the search.

China is also a notoriously difficult market for foreign companies, both because of consumer habits and because the government tends to favor local companies. Ride-hailing giant Uber, for example, agreed in August to sell its Chinese business (also an entity separate from its main corporation) to local rival Didi Chuxing after spending $2 billion to compete. Other major tech companies, like Facebook (FB) and Google (GOOGL), have stayed out or pull out of China entirely.

One common approach companies have taken is to partner with local services that can help outsiders tap into the Chinese market. For example, Airbnb lets Chinese travelers pay via Alipay—a popular digital payments service spun out from e-commerce giant Alibaba (BABA)—when booking reservations for fewer than 28 nights.

Still, it faces stiff competition from homegrown companies. Tujia, the country’s leading home-sharing service, had 420,000 listings in China as of July, while Mayi, another major competitor, said it had 300,000, according to tech news site Tech in Asia.

Airbnb has also announced a few agreements with major cities in China, including Shenzhen (a hardware industry hub), Guangzhou, and Shanghai, which have agreed to support home-sharing and Airbnb.

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