Yet another fast-growing Chinese travel group eyes up partnerships

Travel is obviously where a canny investor has to be in China but where are they focusing their interest? Sally White reports

Yet another aggressive up-and-coming Chinese travel platform, Tongcheng now has a list of shareholders that is beginning to read like a Who’s Who of Chinese business.

Tongcheng Network Technology, to give its full name, has already secured industry travel giant Ctrip, media and IT major Tencent, the hot Chinese investment group Boyu Capital, Chinese seed corn investor Oriza Holdings and its venture capital arm Cowin Venture Capital for its shareholder register. A few days ago, founder Wu Zhixiang announced that he had persuaded mega Chinese property group Dalian Wanda Group to come on board, too.

Dalian Wanda invested the not insignificant sum of $560 million. (This puts a value of around $2 billion on Tongcheng.) The property giant already has a major presence in the tourism sector with a chain of Wanda travel agencies. It wants to expand by moving on line.

"The investment into Tongcheng will help us foster an ecosystem covering online platforms, offline channels and tourism destinations," Wang Jianlin, chairman of the Wanda Group, was quoted by China Daily as saying.

Numbers in China always seem to look huge, which is why Wu Zhixiang’s marketing talk last month of a $16 billion international promotion campaign did not at first raise western eyebrows. However, as web magazine YoungChinabiz.com points out, that seemed to be on the basis of 100 million users, which is probably a bit too many, even for Tongcheng.

Yet Wu Zhixiang is up with the travel industry majors like Ctrip with the sums he has raised, according to China Daily. So far he has collected over a total of around $1 billion. He started the online travel agency over ten years ago, becoming one of China’s first ecommerce entrepreneurs operating in the travel market.

The company is based in Suzhou, a major city located in the eastern part of China and an economic centre, less than a hundred miles from Shanghai. Its services include attraction tickets, hotel booking, domestic and international air tickets, car rentals and cruises.

What Wu Zhixiang has really been wanting to do is an IPO, making it easier for him to access capital in international financial markets as well as at home. According to China Money Network he planned a float on China’s domestic stock market over two years ago, but that attempt was foiled. The Chinese securities regulator temporarily closed down the country's IPO market.

However, he then approached China’s travel industry majors and venture groups for funds in return for equity stakes. He raised $85 million to expand the company’s domestic and international holiday package division, attraction ticket service and mobile offerings. He also established a partnership with travel agency eLong for attraction ticket sales. eLong agreed as it wanted to extend the range of its business.

Hitting hurdles

This year Wu Zhixiang seemed to be in danger of hitting hurdles again as China’s stock market rather badly overheated just as he was launching a local A-Share IPO. However, he managed to get his funding away.

According to China research group iResearch last year eLong and Tongcheng have a combined market share of about 25% of the OTA market. (Ctrip dominated with 50 percent.) When it comes to site traffic, Qunar, the travel search service topped iResarch’s chart, followed by Ctrip, Tongcheng and eLong.

With his business now a major Chinese travel market player, Wu Zhixiang does not seem interested in more industry partnerships in the highly competitive domestic market. However, he may look domestically for more fund raising - as long as China’s stock market remain buoyant prospects for Chinese issues seem better at home. Sourcing customers, however, may be another matter.

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