China’s top three internet giants Baidu, Inc., Alibaba Group and Tencent Holdings have been making big investments to take advantage of China’s historic travel boom. More than $2 billion (RMB 13.7 billion) in accumulated investment has been deployed to the tourism industry as of the end of 2015 by just these three companies, according to Xinhua News Agency.
All three internet giants are targeting the online travel sector, which is a natural extension from their existing internet services. In 2017, China’s online travel market was worth $130 billion, according to 21st Century Business Herald, a leading Chinese business newspaper. As China grows to become the world’s largest domestic and international travel market, the online travel industry has attracted more than $10 billion in investments since 2010.
Baidu is the biggest shareholder of Qunar.com (Chinese name means “where to go”), which is ranked as one of China’s top three mobile travel service providers, after Ctrip and Ali Mobile Travel. According to Qunar.com, more than one million hotel checkouts are made through its website every day.
Baidu invested $306 million in Qunar.com before transferring its shares in the company to Ctrip
The relationship between Qunar and Baidu dates back to 2011 when Baidu first started to pursue its ambition in the Chinese tourism business. At that time, Baidu reached a deep strategic agreement to invest $306 million in Qunar.com, becoming its largest institutional investor. That marked the largest single investment in a Chinese online travel agent.
In 2015, through a share swap, Baidu transferred its shares in Qunar.com to Ctrip.com and instead became Ctrip’s largest shareholder. With that, Baidu successfully became the major backer behind two of the top three Chinese online travel agencies.
Alibaba started to invest in the travel industry in 2013. Among its first investments was Qyer.com (Chinese name means “budget travel”), which provides a robust travel tips forum along with a travel advisory and booking services. It was purchased for an undisclosed amount. Qyer.com specifically targets budget travelers. Then in 2014, Alibaba teamed up with another company to invest $20 million in Baicheng.com, which specializes in outbound travel services.
Alibaba set up an internal travel business unit, Alitrip.com, in 2014. As of the end of 2016, this company has become the third largest online travel agency in China. Alibaba subsequently changed the business unit’s name to Fliggy (Chinese name means “flying pig”).
As for Tencent, it first invested a reported $10 million in Ly.com (Chinese name is Tongcheng travel, meaning “travel together”), in 2011. Ly.com is an online travel booking agency mostly compared to Qunar.com with a focus in tourist attraction ticket sales.
Tencent’s first investment in the travel sector was in Tongcheng in 2011
Woqu.com and Breadtrip.com are some of the other travel companies that Tencent has invested in.
The heated competition and rapid development of the Chinese travel industry has successfully pushed the industry to a new level. As of this year, the country’s online travel industry is believed to have reached a relatively balanced stage. The next question is: how will they continue to coexist and remain profitable?
Analysis shows that the online travel industry accounts for 60 percent of airline ticket sales and 30 percent of hotel reservations. According to Yijia Zheng of Beijing News, the last remaining segment for growth and competition seems to be vacation packages, for which online travel agencies account for less than 20 percent of sales.