Uber is long gone. A long-rumored Zillow expansion into the region has never materialized. And WeWork was never able to dominate the market due mainly to competition from savvy local and regional co-working players. Meanwhile, Airbnb continues to chug along in Asia, operating in a gray area that doesn’t seem feasible in the long term.
It has not been smooth sailing for Airbnb in Asia over the years, to say the least. The short-term rental player rapidly scaled up operations across the region from 2016 to 2018 as it looked to replicate the success achieved in America and Europe.
Related: KŌZY seeks to elevate vacation home rentals in the Philippines
However, it found confusing regulations that varied significantly from country to country. Then there were the local populations who seemed okay with using the platform but not so enthralled with the idea of randos staying in the residential developments they call home.
During those early years, Airbnb delicately danced between lobbying governments to avoid outright bans, growing the number of hosts in an uncertain environment and not pissing off locals. Sometimes it worked. In other cases, it did not.
In 2018, there was a massive crackdown in Japan that saw approximately 80 percent of the platform’s listings removed. Elsewhere during this time, Singapore, Thailand and South Korea were among the countries to keep rules in place that effectively made Airbnb illegal, even if it wasn’t an outright ban.
Guests and property owners continued to use the platform, although the situation was less than ideal. Things continued in the gray area with little progress made in clarifying the company’s status. And then the pandemic stopped tourism in its tracks.
With no one using Airbnb, these issues vanished. That has recently changed. Tourism across Asia has gradually ramped up over the past two years and many countries are nearing or have surpassed pre-pandemic visitor levels.
Airbnb is now firmly in the crosshairs once again. In May, the island of Penang in Malaysia became the first major tourist destination in Southeast Asia to outright ban short-term rentals. The rules state private residential properties can no longer be used for short-term rentals unless 75 percent of unit owners approve the building to be operated on a commercial basis.
Why did the Penang government take such a drastic step against Airbnb and other short-term rental operators? Guests behaving badly. Unruly behavior and noise disturbances continue to be a blight which the platform seems unable to curb.
Of course, this is a case of a few bad apples spoiling the bunch. Most Airbnb guests are fine. Fine doesn’t work in Asia, especially in condominiums where space is limited. Most residents don’t want strangers making noise and using facilities, regardless of whether they are on their best behavior or not.
Business challenges are now compounding these issues. The company shut down its domestic business in China earlier this year with the platform now only supporting outbound travelers. Ultimately, Airbnb could not fend off challenges from domestic companies offering short-term rental bookings.
Additionally, a spate of local players focused on their home markets across Asia is giving Airbnb a run for its money. In Japan, Space Market has gone from startup to IPO over the past few years thanks to a platform and offerings better suited to the Japanese market.
Indonesia’s Travelio appears to have sidestepped many of the issues plaguing Airbnb by working directly with homebuilders who better understand local real estate regulations. This has sometimes involved reserving entire floors or sections of a condominium for use as short-term rentals. These are then sold specifically to investors wanting to rent out their properties.
A few developers in Southeast Asia have taken it upon themselves to do that while still using Airbnb to market properties in hopes of reaching overseas guests. This solution, while better for residents, also doesn’t require Airbnb at all. Asia-focused competitors, such as Agoda, have aggressively targeted this segment with some success.
Also Interesting: This hotel operator is planning an aggressive Asian expansion
Will Airbnb survive in Asia?
Airbnb has a branding problem in Asia. It can use flowery terms like hosts, stays and experiences. In reality, it supports an operation that books unlicensed hotel rooms in private residential buildings. That is far less romantic and potentially problematic for both property owners and guests.
This has reared its ugly head on several occasions. In Ipoh, Malaysia, a condo building began refusing entry to anyone staying there with an Airbnb reservation. More and more condominium developments in Bangkok have a sign in the lobby stating Airbnb is not allowed and those using the service can be removed.
Most Asian countries have rules in place that prevent short-term rentals. Additionally, most residential buildings reserve the right to ban the service outright. These have rarely been enforced but the threat remains.
These legal challenges aren’t going anywhere. More importantly, they impact Airbnb’s core Asia business of an individual renting out a single unit in a high-density residential development. This is where all bad guest problems stem from.
At any time, a country can elect to halt or restrict the platform’s operations. Previously, there had been no appetite to do this. However, with Penang’s recent move against Airbnb, in addition to a number of major cities across the globe putting measures in place to restrict the service, more regional destinations may be willing to take action.
Even if that’s not the case, building management companies may feel more empowered to take it upon themselves to stop Airbnb bookings at the behest of its residents. They are well within their right to do so.
Will Airbnb survive in Asia? Well, to answer that question you must first understand what Airbnb provides in Asia. Right now, that’s not a helluva lot. The company loves championing the fact it can assist countries dealing with hotel room shortages caused by staffing issues. That is a misrepresentation of reality.
Airbnb is simply passing the buck. Most guests in Asia will never meet their host. In some cases, the person listing the property will merely give the key to building management to pass on to the person making a reservation, usually under the guise that this individual is a friend. Other times, it will just be in a mailbox for the guest to collect themselves. Several countries even have companies that will do all this work for unit owners.
In turn, residential buildings in Asia unable to support an influx of short-term renters are forced to sort through issues they were never responsible for creating. Sure, a single unit owner as well as the company may profit from the service. They also don’t have to deal with the aftermath of their actions and any inconveniences caused.
That falls on the tens, if not hundreds, of residents along with building management staff. It is safe to say that Airbnb isn’t providing much in this scenario.
Without radically changing its core business, Airbnb looks to be doomed in Asia. Local players are far better suited to their respective markets, and some have even begun working with developers to find solutions that don’t disturb residents.
On the other hand, Airbnb has stubbornly trudged along the same path while doing nothing but telling people about the value it provides or offering ominous warnings about what will happen should it not be allowed to operate.
Look, Airbnb could survive in Asia if instead of talking, it focused on a new strategy better suited to the markets in this region. History shows us that is unlikely to happen, though. That means the company most likely goes the way of Uber and retreats.
Keep Reading: Robust cross-border tourism in Asia sees Klook adapt its approach to keep up
