Airbnb said in talks to buy home-rental rival Xiaozhu

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 travelers 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 (USD1.5 billion) 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 2 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 percent of Airbnb China’s logins.

Xiaozhu would give Airbnb an instant boost in the world’s second largest economy. The Chinese startup, which was founded in 2012, this month said it raised $65 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. Chief Executive Officer Kelvin Chen Chi said at the time of the funding announcement that Xiaozhu expects to deliver 500 percent organic growth in 2016.

A deal for Xiaozhu would also help Airbnb reduce the risk of a costly battle for market share. Uber Technologies Inc. lost more than $1 billion in China in a battle with Didi Chuxing before selling its business in the country to its rival.

In September, Airbnb said it raised $555.5 million in new funds as it expands around the world. The funding round, which valued the company at $30 billion, could eventually reach $850 million, a person familiar with the matter said at the time.

Tujia was valued at more than $1 billion after a $300 million funding round last year from investors including All-Stars Investment Ltd. The company is also backed by HomeAway Inc., Ctrip.com International Ltd., LightSpeed Venture Partners and GGV Capital. The company says it has listings for 450,000 homes in total, including 335 destinations in China and 1,018 overseas. Bloomberg