Airbnb could buy Chinese rental rival

Airbnb Inc. is in talks to acquire China’s Xiaozhu.com 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 travellers globally, it’s grappling with more established local rivals Xiaozhu and Tujia.com in China. The San Francisco-based 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 ($2 billion Canadian) in transaction volume by 2017, up from an estimated 6.78 billion yuan this year, according to IResearch. Before the deal surfaced, the U.S. startup had been anticipating two million “room nights” in China, the person said.

The company had also recently inked a partnership agreement with Tencent Holdings Ltd., 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 secondlargest economy. The Chinese startup, which was founded in 2012, this month said it raised $87.6 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. CEO Kelvin Chen Chi said at the time of the funding announcement that Xiaozhu expects to deliver 500 per cent organic growth in 2016.

A deal for Xiaozhu would also help Airbnb reduce the risk of a costly battle for market share.