Shenzhen, China, Nov. 27, 2014 /PRNewswire/ -- Over the past decade, China's online travel industry has developed at an astonishing pace. After reaching maturity, major OTA players have ventured into foreign capital markets. In recent years, however, the country's online travel market has taken on a new look. The previously perceived less imaginative B2B model in online travel has gradually started winning favor among investors. Just one month ago, business travel giant Tuniu International (stock code: 300178), together with Tuniu Wutong Fund, spent 195 million RMB to acquire a 65% stake in Xinxin Travel. This news not only caused a huge stir in the industry but also marked the official emergence of the B2B group from silence, stepping onto the stage to compete with major OTAs. How will this transformation unfold? Where does the value of B2B lie? Let...Everyone...Find out through this merger between Tuniu International and Xinxin Travel.
“The value of one B... end customer is equivalent to that of 1,000...C... end customers.”This is how Tuniu International described its own model.
According to predictions by the China Tourism Academy, the total number of tourist receptions in 2014 reached 3.76 billion, a year-on-year increase of 10.8%, with total tourism revenue amounting to 3.3 trillion RMB, up 14.8%. Within the rapidly developing overall landscape of China's tourism industry, the market remains highly fragmented. Well-known online travel agencies account for just 5% of the market share, while customer resources are scattered among thousands of small and medium-sized travel agencies. Currently, there are 26,400 enterprises in China with travel agency licenses, and about 80,000 operating entities. With increasingly personalized demands, product production and distribution functions have become more and more divided. The dilution of traditional sales channels by the internet has led to an increasingly diverse and scattered flow of traffic entry points. Dr. Yang Yanfeng of the China Tourism Academy believes that under such trends, the vast majority of small and medium-sized travel agencies will rely on B2B platforms to obtain product resources, and then survive through their own dispersed distribution capabilities. Xinxin Travel has pinpointed the current market situation and focused on bolstering the Xinxin Lvtong supply and sales platform, connecting upstream and downstream links between suppliers, distributors, and consumers, building a B2b2C ecosystem platform for the travel industry, and has already gathered six million registered users from small and medium-sized travel agencies. Within China’s massive tourism industry pie, the important segment of ticket distribution is also facing a similar situation, where a large number of ticket agents survive in the cracks among OTAs by relying on fragmented resources. Tuniu International is undoubtedly a leader in the ticket B2B market. With its self-developed super distribution tool, the GSS system, along with Chengdu Bāqiānyì, a neutral trading platform acquired this year, the two platforms together have amassed 80,000 ticket agent clients, making Tuniu International unrivaled in the ticket B2B field. Clearly, Tuniu International and Xinxin Travel share similar platform strategies, yet possess completely complementary products and customer resources. By connecting with each other, both sides have achieved multiplied resource growth, forming a powerful alliance in the broader tourism circle that stands apart from the price wars of OTAs. The acquisition of Xinxin Travel is enough to demonstrate Tuniu International’s ambition to expand its territory. With this deal, Tuniu International has officially entered the larger tourism ecosystem.
“Making business easier — that’s our shared philosophy.”Said Lai Runxing, Executive President of Xinxin Travel, when explaining the synergy between Xinxin Travel and Tuniu International, emphasizing that the main clientele they serve are ticket agents and small and medium-sized travel agencies. “By leveraging the internet, we unite traditionally fragmented and seemingly weak travel agencies, providing them with faster and more flexible channels, assisting in their transformation and upgrading, so they can compete against the seemingly dominant OTAs. Yet as a group, small and medium-sized travel agencies are actually not weak. On the contrary, they represent the fundamentals of China’s tourism industry and hold the frontline product and service resources.”
The collaboration between Tuniu International and Xinxin Travel hinged on the integration of financial elements — a unique differentiator in their industrial chain services. At present, Tuniu International has developed comprehensive financial services around business travel, including third-party payment “Tengfutong,” microloan service “Rongyixing,” and P2P lending platform “Tengbang Venture,” essentially gearing up to open the door to financial services for the six million travel agency clients on the Xinxin Lvtong platform. Ticket agents and small and medium-sized travel agencies are groups surviving in tight spaces, yet they are also crucial links between upstream and downstream product suppliers. Reasons such as product underwriting or advance funding mean they require significant working capital. In the travel agency industry, there are two groups: those with capital accumulation (tour organizers) and those requiring operational funds (local reception agencies). The turnover cycle in the travel industry is around 45–90 days, creating imbalances in capital flow and thus generating demand for liquidity. Tuniu International’s financial tools serve as a platform to ensure the healthy circulation of funds along the industrial chain. The integration of financial elements is multidirectional. For example, the introduction of the third-party payment “Tengfutong” allows Xinxin Lvtong to form a true transaction closed loop, with idle funds from platform members being parked in “Tengfutong” to earn profits through financial management funds. Travel agencies lacking liquidity can turn to “Rongyixing” microloans for financing, solving capital shortage issues, expanding their businesses, and thereby gaining greater profit margins and revenues. Tuniu International and Xinxin Travel, in control of big data on the platform, also hold inherent advantages in risk control. “Business travel + finance,” upgraded to “tourism + finance,” remains a powerful tool for dominating the high ground of the industrial chain.
The union of Tuniu International and Xinxin Travel can be described as a match made in heaven. Tuniu International brings a solid industrial foundation, deep resource endowment, and powerful financial tools, while Xinxin Travel is a quintessential internet company — nimble, fast-moving, and driven by continuous innovation. The outcome of their combination and leadership in the development of the online travel B2B market is highly anticipated.