By Dominique Vidalon and Pascale Denis

PARIS (Reuters) - Vacation rental marketplace Airbnb said guest arrivals in its biggest market Paris rose this summer despite an overall decline in foreign visitors due to security fears, and it now aims to expand into lesser known corners of France.

The online business recorded an annual rise in guest arrivals of 20 percent in the French capital and of 80 percent elsewhere in France between June 1 and Sept. 1 2016, in sharp contrast to the hotel sector, with which it competes.

Hoteliers suffered a marked decline in business that they blame on fears of more Islamist militant attacks, like those that claimed the lives of over 230 people since early 2015.

Foreign tourist arrivals to France could fall 4-5 percent this year and research firm KPMG warned that French hotels could suffer a revenue fall of 10 percent in 2016.

Airbnb country manager for France and Belgium Emmanuel Marill told Reuters in an interview Airbnb had also been hit by the tourism downturn as it had expected growth above 20 percent.

"But we resist because we are at the heart of a new phenomenon backed by strong brand recognition," he said.

The 35-year-old former Facebook executive who took over last month said the site's resilience in Paris was also down to the fact hosts and travelers can exchange information and hosts can reassure visitors of the safety of their neighborhood.

Founded in 2008 in San-Francisco, Airbnb matches people wishing to rent out all or part of their homes to temporary guests. It appeals to young, web-focused consumers looking for a cheaper price, but also the experience of living like a local.

As Airbnb has rapidly expanded across the globe, it has often come into conflict with local rules and traditional hoteliers, who see it as unfair competition.

With 350,000 listings, France is Airbnb's second-largest market after the United States, and Paris, the most visited city in the world, is its biggest single market, with 65,000 homes.

Foreign tourists have avoided France since Islamic State gunmen killed 130 people in an attack in Paris last November. In July, a gunman drove a truck into crowds celebrating Bastille Day on July 14 in the Riviera city of Nice, killing 86.

Repeated robberies against foreign tourists, notably Asian tourists, and an armed robbery against reality TV star Kim Kardashian earlier this month, have added to safety worries.

Despite this, in July, Airbnb said the number of guests lodged in France since it launched there in 2012 had passed 10 million. It had five million guests in 2015 alone, twice 2014's number. Marill declined to make a prediction for 2016.

EXPANSION PLANS

While 70 percent of Airbnb's listings were in Paris in 2012, 80 percent are now outside Paris, a trend set to continue.

"The rest of the country will drive growth, notably the mountains and the seaside. Cities like Marseille, Bordeaux or Lyon will drive volumes but the fastest growth will come from lesser known, isolated places which often lack any hotels."

Once a startup selling cereal, Airbnb is today valued at around $30 billion and has more than 2 million rental listings worldwide. By comparison, hotel group InterContinental <IHG.L> has a market value of $7.9 billion.

Europe's largest hotel group AccorHotels <ACCP.PA> has long warned revenues were under threat from the so-called sharing economy and it has fought back with a flurry of acquisitions and a push into the luxury sector.

As a result of pressure from hoteliers and officials Airbnb agreed to charge visitors the traditional French "tourist tax".

It began collecting this from guests in Paris in 2015 and now collects it from visitors to 19 towns. Marill said Airbnb aimed to collect it everywhere in France by mid-2017.

He also played down criticism that Airbnb was driving up property prices or contributing to a housing shortage in some cities such as Prague and Berlin.

"We do not want to be a source of housing problems in the big European capitals. But it's sometimes very hard to identify the professionals using the platform to speculate".

"We are complementary of hotels," he said, adding Airbnb was often present in areas without hotels.

"For the cake to grow, we must all work together."

(Corrects translation in quote to "brand recognition")

(Reporting by Dominique Vidalon; Editing by Andrew Callus and Alexandra Hudson)