Tujia.com: Leader in China's Home-Sharing Market
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Case Code: BSTR575 Case Length: 18 Pages Period: 2011-2018 Pub Date: 2019 Teaching Note: Available |
Price: Rs.500 Organization: Tujia.com Industry: Home sharing Countries: China Themes: Innovation, International Business, Business Models |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
The Origins of Tujia
Melissa Yang (Yang) graduated from the Tsinghua University with a degree in automation in 1995. She completed her Master of Science degree from the University of Washington in 2000. Yang was born in China and she moved to the US in 2001 due to work commitments. Between 2001 and 2006, Yang worked in travel technology company Expedia.com as a development manager. She gained rich experience in the tourism, e-commerce, and search engine monetization arenas... ...
Business Model of Tujia
Tujia endeavored to connect travelers looking for a place to stay with homeowners wanting to let out their properties as vacation rentals and for home sharing. The company provided a range of options which could be used by prospective customers to avail of its services – a website (Tujia.com), a mobile app, an official WeChat page, and a 24/7 customer call center...
Understanding the Chinese Mindset
It was not all smooth sailing for Tujia while it was building its business in China. In the initial days, it had to work hard to get properties listed on its website. Yang and Lou paid multiple visits to homeowners to win their trust and convince them to give their properties for vacation rentals. Many of the properties they visited were exclusive villas or luxury apartments and the owners of those properties hesitated to hand over their management to a new start-up like Tujia. However, gradually and through its untiring efforts, the company managed to win over several homeowners...
How Tujia Built its Business in China
Not only was the sharing economy a little understood concept in China, but most of the properties that could be used as vacation rentals were also not up to the mark. Moreover, most homeowners who wanted to provide vacation rentals did not display any initiative in managing the property. They instead wanted some third party service provider to market their houses and do the housekeeping. Tujia set out to convert the challenges posed by the disposition of the homeowners into opportunities...
Growth of Tujia
Tujia started out by listing 10,000 units on its website in 2011. In May 2012, HomeAway, which had operations in China, bought a minority stake in Tujia. Nearly 2,000 international listings, a subset of HomeAway's claimed 720,000-home inventory, were translated into Mandarin and posted on the Tujia website...
Tujia vs. Airbnb
Most industry experts referred to Tujia as the 'Airbnb of China'. Both companies were in the Chinese vacation rental market and were growing fast. Experts believed that Airbnb was the only player capable of competing against Tujia in China; primarily because of its competitive fee structure. While Tujia charged property owners a 12% commission on their revenue, Airbnb charged 3% from owners and 6-12% from travelers. The experts thought that Airbnb’s fee structure was far more attractive to property owners...
Challenges
Tujia was facing tough competition from its rivals in the China homestay industry, who were also leveraging their knowledge of the local conditions. Moreover, all Chinese companies were recruiting hundreds of people in a bid to make inroads into the Chinese hinterland and other parts of Asia...
The Road Ahead
According to an industry report, China's home sharing market surged 70% year-on-year in 2017 to reach a transaction volume of RMB 14.5 billion (US$ 2.28 billion),. Revenue in the vacation rentals segment in China amounted to US$ 7,483 million in 2018. Revenue in China's vacation rentals industry was expected to show a CAGR of 10.8% during 2018-2022, reaching a market volume of US$ 11,262 million by 2022. User penetration of vacation rentals in China was 5.6% in 2018 and was expected to hit 6.9% by 2022. The average revenue per user (ARPU) of vacation rentals in China amounted to US$ 96.77...
Exhibits
Exhibit I: Home Sharing Service Transaction Value in China (2012-2018)
Exhibit II: Concerns and Motives for Renting Things to Strangers (Apartments/Rooms/Vehicles) in China
Exhibit III: Chinese preference of accommodation when travelling
Exhibit IV: Investment in Vacation Rental Start-ups by Company in China (2011-2013)
Exhibit V: Information about Tujia Investors
Exhibit VI: Tujia's Payment Flow
Exhibit VII: Compiled from different sources
Exhibit VIII: Listing of Major home-sharing Platforms and Number of Registered Users in China – 2017
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