International Trade and Global Business

 

The Shared Economy: Accommodation Companies Race to Get a Foot in the Door

The shared economy, powered by amazing software and marketing acumen, continues its march around the world. In trade terms, revenue generated by the service provider counts as an export for the headquarters’ company if derived from a cross-border sale.
 
Airbnb, the U.S. based lodging aggregator, is likely to add more to the US service export surplus by expanding in Asia, a region with excellent growth opportunities. Asia is attractive because as a market with a high per capital savings rate, consumers are starting to spend more in their home markets. Three years ago, Chinese travelers comprised 66% of Airbnb’s guests in China. Last year, the figure was 91%. In India, 78 % of guests last year were Indian travelers, up from 53% in 2015.
                                                                                                                                                                                           
No total rentals were available, but Airbnb says China is now the company’s top destination market in the Asia-Pacific region. This boom is largely due to peripatetic millennials who number about 410 million and seem to like paying money for experiences. Roughly 60 percent of all guests who booked on Airbnb’s were millennials. More than 40 percent in India were under 30 years old.
 
As consumers become familiar with a brand and its value proposition, they tend to remain loyal when they travel to other markets with 80% of Chinese remaining loyal and 65% of Indians. As a result, listings in the entire region are growing to around one million properties. Competitors are adding to this inventory with China’s Tujia and others trying to get a foot in the door. Vancouver-based Cozystay is serving China mainland travelers worldwide, recently purchasing 300 properties that are non-hotels but feature cleaning and butler services.
 
Oyo living has raised $1 billion with help from the ride hailing company Didi Chuxing, which drove Uber out of China. Airbnb is undeterred. It has integrated Chinese payment apps on its website and launched a trading academy for property hosts. Having learned from the struggles of other international brands in Asia, Airbnb is counting on a different outcome.
 
India and China are challenging markets, but many non-indigenous companies have been successful there.  Each with populations of more than one billion, these countries will be for the foreseeable future high-growth consumer and government procurement markets.  But these are not markets to cut your teeth on if you’re new to exporting. Better to first partner with a more experienced company. If you have something that Airbnb might need for its expansion, contact them. Perhaps there’s a bodywash or bath soap that you could custom brand for sale to the 15,000 property hosts that will be trained in India.
 
In China, foreign suppliers of consumer products are having success using e-commerce platforms such as JD.com and Alibaba.  If there’s a trade deal between the US and China, the latter might further open its markets to foreign goods. If you know people in these markets, ask them about possible distributors.  The foreign-born population in your country represents important insights about the operations of the markets they came from.  What do consumers there value?  What do they need? What are the typical distribution channels?
 
New opportunities are opening up all the time.  Remain curious, and visit WebPort Global for ideas and insights.
 
 

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