Airizu – the Airbnb of China

San-Francisco based Airbnb matches people seeking vacation rentals and other short-term accommodation with those with rooms to rent. Its services become very popular, since the company founded in 2009.  In last July, we reported about Airbnb’s series B fund raising of US$212 million and a local company, Airizu, which had just started short term rentals in China.

Last week, I talked to Airizu‘s co-founder Adrian Li, to see how they are doing.  “Since we launched the service in June, we have had over 100,000 room nights booked,” said Adrian, “Through our service, people can book over different 40,000 apartments in 70 cities in China.”

Currently the company has 150 staff – about 100 work in its Beijing headquarters, with the rest placed in key hub cities all over China.

The China Difference

But, just as we mentioned before: “In China, Airbnb faces a very unique market that does not work in the same way as the rest of the world. One of the biggest issues is trust. Many Chinese don’t even trust each other, so it’s a stretch for them to even trust strangers staying at their place.” How Airizu solve the “trust” problem?

“Unlike the U.S. or Europe market, where most property owner rent out the rooms in their own apartments, Chinese property owners usually do not live in their second apartments.  They convert the whole empty apartment for rental purpose,” said Adrian.

Although it might seem unbelievable, given most people in China are living in crowded condition, there were over 65 million empty apartments in China in 2010, according to the local media. “These apartments are for investment purposes.  People buy them for seeking a rise in property prices, so they are not living in them,” said Adrian.

Many of these apartments are under the control of property management companies, which seek to make a return through renting the properties. “Of course, they hope to get long-term lease, but if they cannot, short-term rental is still better than leaving the apartment completely empty,” said Adrian.

By partnering with these kinds of property management companies, Airizu rapidly has expanded its network. Currently, it has over 40,000 apartments in 70 cities in China.  Most of Airizu’s apartments are located in the first tier cities, i.e. Beijing, Shanghai, Guangzhou and Shenzhen.

“70% of our customers choose to stay in the top cities, where business and tourism are most demanding,” said Adrian.  He hopes to expand the network to over 100,000 apartments this year.

Who are the customers?

“Most of them are of 20-30 year-old, traveling in groups of 2-3 people. Some of them are business travelers and some of them are just tourists,” said Adrian.  He expected, when school holidays come, there will be groups of parents traveling with their kids to attend various training schools.

And when school year finishes, there will be colleague graduates traveling to major cities, seeking jobs.  Since these are residential apartments, they are generally bigger and cheaper than hotels. 80% of the rooms are under Rmb 250 per room night.  There are kitchens and washing machines, too. Therefore, it is more convenient for people who are going to be staying for a while.

Next phase – Service Quality

In the next phase, Airizu is going to setup a call center to support its service and increase service quality.  “Service quality will be key to our success,” said Adrian. Right now, Airizu calls  its customer to review about their experience, 1-2 days after their stay. “We have to ensure the standard of quality,” said Adrian.  He hopes to setup some standard for the property owners, so that customers will have more or less the same experience in different places in its network.  “Just like Home Inn, customers know what they are expecting wherever they stay,” said Adrian.

Revenue and Funding

Airizu charges a commission for each room-night booked via their website.  In the future, Adrian also hopes to get advertising fee from property owners who want to list their apartments in top places.  “We can also try to arrange other services for property owners, such as cleaning, supplying towels and bed sheets, etc.  We could also offer car rental services to customers in near future, too.”

Airizu is funded by a German startup incubator, Rocket Internet, which has invested over 2 million Euros so far. Most recently Airizu has received a lot of interest from top tier funds and is actively in discussions for another round of funding.

The Management Team

Adrian, CEO of Airizu, is a serial entrepreneur.  Before founding Airizu, the Cambridge & Stanford graduate founded idapted.com, an online English learning service, which was sold in 2011.  His partner, CMO Alex Zhang, a Stanford graduate, is also a serial entrepreneur, who has launched his own wine brand before.  Another partner, COO Ben Zhang, a Chicago MBA graduate was one of the founding team members of Gaopeng, Groupon’s Joint-venture in China.