Hospitality company, Airbnb is set to close its operations in China. According to CNBC news, the company intends to officially announce this to its employees on Tuesday the 24th of May.
The company has faced serious competition since its launch in China in 2016. AirBnB co-founder, Nathan Blecharczyk stated that despite efforts made in local branding, China has accounted for approximately 1% of revenue on the platform in the last few years.
Outbound travel from Chinese travels seems like a bigger opportunity for the hospitality giant and CNBC reports that the company would refocus on providing listings for Chinese travellers going abroad.
There are however speculations that strongly state that Airbnb will maintain an office in Beijing with its hundreds of employees.
How Airbnb shares are doing
In the light of its proposed closure of operations in China, the shares of the company have fallen more than 30% this year amid a broader selloff in tech stocks. Despite this, however, it is still trading well above its 2020 IPO price of $68.
- Airbnb struggled like most hospitality companies in the early days of the covid pandemic, laying off about 25% of its staff in May 2020, and then going public in November of the same year.
- In its IPO prospectus, the company mentioned that hosts in China used a separate cleaning program to prevent covid transmission than the uniform five-step cleaning process it implemented in the rest of the world.
- After the pandemic however, business recovered as people began to travel and move around again but the platform in China has had the hardest time recovering as the country has locked down periodically to fight the waves of infection that hit it.
What you should know
- Observing the way the Chinese government handles foreign investments there is sure to be strong competition for AirBnB in China.
- This in addition to the periodic lockdowns imposed by the government is sure to greatly affect a business like AirBnB, lead to very low financial returns and very likely trigger the need to shut down operations.