HONG KONG, May 29, 2024 - (ACN Newswire) - KE Holdings Inc., also known as Beike (NYSE: BEKE; HKEX: 2423), the leading integrated online and offline platform for housing transactions and services in China, has reported first-quarter results for 2024. The company’s performance for home renovation and furnishing and rental services stood out as the most significant contributors to its revenue growth.
In the first quarter, the revenue from non-home transaction services increased by 112.9% year-on-year. As a result, the proportion of non-home transaction service revenue as part of total revenue increased to 35% for the year, compared to 13.3% the year prior, representing a year-on-year increase of 21.7 percentage points.
The home renovation and furnishing business continued to grow rapidly. Net revenues increased by 71.1% to RMB2.4 billion. Meanwhile, the gross transaction value (GTV) of home renovation and furnishing was RMB3.4 billion, achieving an increase of 26.1% year-over-year. The profit contribution margin of the home renovation and furnishing business reached 30.6%, driven by the synergies between real estate transaction services and non-real estate transaction services, as well as the rich and diversified offerings from the home renovation business. In the first quarter, the new retail contract amount, including customized furniture and soft furnishings, reached RMB940 million, contributing to approximately 27.8% of the total contract amount, resulting in an increase of 5.1 percentage points compared to the same period last year.
On the other hand, due to continuous growth in the scale and importance of housing rental services, the revenue from housing rental services reached RMB2.63 billion in the first quarter, achieving a year-on-year increase of 189.3% and accounting for 16% of the total revenue in the first quarter. This was primarily driven by the rapid increase in the scale of Beike’s managed properties. Furthermore, the dispersed rental property management service Carefree Rent accounted for more than 95% of housing rental services revenue. By the end of the first quarter, the scale of managed properties of The Carefree Rent service exceeded 240,000 units, achieving a year-on-year increase of 159.1%.
Addressing the ‘Big Three’ Challenges of Home Renovation and Furnishing
The impressive performance from these two segments definitively confirmed the success of Beike's strategic direction, as outlined in its “One Body, Three Wing” strategy. Beike has upgraded its strategy to “One Body, Three Wings” since last year, actively responding to changes in the market and gaining insights into the diversified and changing needs of consumers. From new homes to second-hand homes, and from buying to renting, the company is keenly aware of property market trends and has developed a true “one-stop” residential service platform, upgrading its strategy to embrace a larger market.
Beike’s expansion into the home renovation and furnishing industry was a strategic move designed to address customer pain points arising from a highly fragmented home services market. The company understood that after purchasing a property, homeowners often require renovation and decoration services from a reliable partner. By offering these services all in one place via a trusted centralized platform, Beike has created a seamless customer experience, boosting retention and revenue.
The home renovation and furnishing industry, both in China and globally, tends to be characterized by three key challenges: lack of standardization, low frequency, and high lump sum costs. Each renovation project is unique, with varying requirements based on the homeowner’s preferences and the property’s specifications. Housing transactions also tend to be infrequent due to the long-term nature of home ownership, but each transaction involves significant sums of money due to high material and labor costs.
Beike, however, has turned these challenges into opportunities, and carved out a niche for itself in the industry with a sophisticated product line made accessible through its platform. The company’s emphasis on quality and personalized design has resonated with younger consumers who value individuality and are willing to pay for high-quality products and services. On the other hand, Beike has been continuously improving its service level through technology. Leveraging its experience in the real estate brokerage business, Beike has been promoting standardization, normalization, and integration of the home renovation and furnishing industry.
Beike has added digital system construction to its home renovation and furnishing business, including core digital platform Home SaaS, AI Showrooms, and Smart Construction Sites. Home SaaS aggregates the supply chain system, the new retail system and other sub-modules. Furthermore, AI Showrooms provides homebuyers with decoration case studies, and Smart Construction Sites enable 24-hour online monitoring of construction, which greatly promotes the technological and standardization of services while promoting industry progress.
Rental Services and the Changing Landscape of the Rental Market
As societal norms evolve and new consumer markets emerge, there has been a demographic shift with respect to property buying and rental preferences in China. According to recent surveys, nearly 200 million people in China are currently renting, and this number is expected to rise to 300 million over the next decade. This presents both opportunities and challenges for the housing rental market.
Beike’s Carefree Rent service is well-positioned to cater to this growing market. The service offers a comprehensive solution for renters, including property management, maintenance, and online rental butler services. The Carefree Rent service manages over 240,000 rental properties, ensuring a wide range of options for renters. It also maintains a high occupancy rate of 96.5%, reducing vacancy risks and ensuring steady revenue.
In response to the changing market dynamics, Beike has continuously upgraded its Carefree Rent service. The company has improved its property listing standards, property maintenance and operation mechanisms, and service quality control. Unlike competing rental services, however, the Carefree Rent service offers a 24-hour butler service, allowing tenants to report any issues at any time. This feature alleviates property owners from the responsibility of interior maintenance during the lease, vastly improving the rental experience for both parties. By addressing many of tenants’ day-to-day living challenges, Beike’s Carefree Rent service is streamlining the renting process for China’s growing population of renters. The success of Carefree Rent was highlighted in the latest results announcement as a major contributor to the growth of the home rental business.
Investment Implications and Future Outlook
As Beike continues to navigate the evolving landscapes of the residential services, its innovative approach and strategic expansions are setting the stage for future growth.
In the home decoration market, Beike can further enhance its offerings by incorporating smart home technology and sustainable materials, catering to the growing demand for tech-enabled and eco-friendly homes. The company can also leverage data analytics to gain insights into consumer preferences and trends, enabling it to offer personalized designs and recommendations. In the rental market, Beike can expand its rental service to more cities and regions to access a larger customer base. Beike, as a “one-stop” living services platform, will be able to empower more industry players, such as furniture rental companies and co-living operators.
Looking ahead, Beike appears well-positioned to capitalize on the growth of all residential services. Analysts attribute Beike’s strong performance in these areas to its strategic focus, execution capabilities, and proven adaptability to fluctuating market conditions and consumer preferences.