M&A

Home and away

Ctrip grabs global business; Airbnb aims to boost its China presence

ctrip

On a buying spree in the UK

More than 120 million Chinese vacationed overseas in 2015, according to the National Tourism Administration. Ctrip – China’s leading online travel player – wants to go global in selling them more air tickets and more hotel rooms.

NASDAQ-listed Ctrip, which is partly owned by search company Baidu, generated more than Rmb350 billion ($51 billion) of online sales last year. Most of that comes from business inside China, although it has been steadily advancing into neighbouring markets, focusing first on Taiwan and Hong Kong, where it has invested in local travel firms.

In October there was evidence that it is looking further afield, when Ctrip made “strategic investments” in three tourism operators in the US. Executives described the deals as helping to improve service standards for Chinese travellers visiting America.

According to China Daily, there were 2.59 million Chinese visits to the US in 2015, an increase of 18% on the year before, with total spending nearly reaching $27 billion.

The company has also announced that it will purchase Skyscanner, a UK-based travel price comparison site, for £1.4 billion ($1.79 billion) in cash and shares.

Ctrip’s new chief executive Jane Sun told Skift, a travel industry research group, that the takeover would help Skyscanner develop from price-comparisons into a booking site. Combining Skyscanner’s front-end search technology with Ctrip’s backend fulfillment will also open up additional revenue streams in China, where its ticket sales sites have come under attack from the state-owned airlines, which want to make more of their sales from their own platforms.

Last summer the three largest airlines effectively boycotted Qunar (now a subsidiary of Ctrip, see WiC302) by offering the site no commissions.

As an adjunct to strengthening its reach overseas, Ctrip has streamlined some of its non-core operations at home, such as its home rental business. In October it swapped its rental venture for shares in Tujia, which provides an Airbnb-like service in China.

Airbnb is also reporting a dramatic uptick of Chinese tourists utilising its services overseas, with bookings up 500% last year. Inside China, Airbnb has struggled to recreate the same enthusiasm (see WiC294). That’s a disappointment as the potential is huge: the Economist says that local travellers made four billion trips within China last year.

Airbnb has already partnered with Alipay to make it easier for Chinese users to pay for rentals, and a deal with Tencent earlier this year integrated Airbnb into WeChat, China’s dominant ­messaging app.

Now it is doubling down in the local market by launching a new legal entity called Airbnb China. Starting this week, the division will store all of its user data in China – a concession required by the country’s cyber security laws.

There are also reports that Airbnb is in talks to purchase Tujia’s closest rival, Xiaozhu. Taking on the 100,000 rentals listed on Xiaozhu would more than double Airbnb’s offering, although it would leave it with less than half of Tujia’s 440,000 choices.

Airbnb is also behind in establishing relationships with local authorities, which is important because local officials want to track house-sharing customers in the same way that hotels send them the identity card details of their guests.

The requirements for special licences, police checks and identity verification vary widely by region, the Economist says. All the same, the leading operators are anticipating more regulation as the sector grows. Hence the Financial Times was reporting this week that Xiaozhu is encouraging its hosts to scan the identity cards of their guests into its mobile app. Although the information isn’t automatically sent to the authorities, it is available at their request. Xiaozhu is also preparing to offer “smart locks” that can read identity cards without the host being present, the newspaper says.


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