HONG KONG - The giants of China's online
travel agencies, eLong and Ctrip, have a new
challenger in the battle to profit from the
country's fast-growing travel business. Tuniu,
founded in late 2006, has found a winning niche by
already becoming the leading online package and
group tour company in China.
gross revenue last year and forecasts a further
doubling of sales this year, according to chief
executive (Donald) Yu Dunde told Asia Times
Online. The Nanjing-based company, whose chief
operating officer Yan Haifeng is a co-founder,
took in revenues of 1.2 billion yuan (US$188
million) in 2011, providing packaged tours, group
travel, do-it-yourself tours, and combined air
ticket and hotel booking packages. The company
covers Chinese domestic and international travel.
"Compared with others in the industry, we
package and group tours.
Some competitors offer package tours, but the
bigger ones mostly focus on booking hotels and air
tickets. Meanwhile, eLong does not offer package
tours at all, instead focusing on hotels and
airfares," said Yu, who previously worked for a
blogging site then a parenting site.
and eLong dominate the online travel industry in
China. Both are listed on Nasdaq and focus on
providing hotels and air ticket booking services
for business travelers.
largest online travel company, increased total
revenue 21% last year to 3.72 billion yuan. Of
that, hotel reservation and air-ticketing took in
about 40% each, and packaged tours contributed
14%, or 534 million yuan. Net profit grew at a
less impressive 2.6% to 1.07 billion yuan.
Close rival eLong, whose total revenue
jumped a similar 22% last year to 650 million
yuan, garnered 72% of its sales from hotel booking
and 20% from air-ticketing. Net profit in 2011
surged 90% to 39 million yuan.
shares of both companies, however, have tanked
over the past 12 months, hit by the global
financial crisis and a downturn in the domestic
economy. Ctrip has tumbled 65% from a year ago to
US$15.48 on July 10 and eLong has declined 52% to
US$11.43. The shares were also hit by a reaction
against Chinese listed companies in the United
States after Muddy Waters LLC, a short-selling
firm, last June accused Sino-Forest Corp., a
timber company that traded on the Toronto
exchange, of exaggerating its assets.
"There's this sort of stigma on Chinese listed
companies," according to Phil Groves, president of Hong Kong-based DAC Financial
Management China Ltd, Bloomberg reported on Wednesday.
Tuniu is attracting optimistic comment on
its future growth prospects.
"I like their
direction," Don Jiang of Gobi Partners, an early
stage venture capital firm in China, said when
asked why he invested in Tuniu in 2008. "The
business travelers are well-serviced by Ctrip and
eLong. On the other hand, there is room for a
player concentrated at leisure travelers. I also
like the management team. They are young and they
The numbers and income of
China's white-collar workers are also growing
fast, and as with their Western counterparts,
traveling has become one of their favorite
pastimes. Package tours are still strongly
preferred, especially for new destinations and
overseas travel, said Jiang. "Also, the total cost
is cheaper than booking your own tickets and
hotels," he said.
The travel industry in
China will continue its steady and fast growth,
Shao Qiwei, head of China National Tourism
Administration, said at an industrial conference
in Guangzhou, recently. In spite of dark clouds
over both the local and global economies, the
government expects a 10% increase in total
domestic journeys this year to 2.9 billion, with
domestic tourism income rising 15% to 2.22
trillion yuan. Total tourism income (including
both domestic and foreign travelers) is forecast
to jump 14% to 2.57 trillion yuan.
Industry specialists are even more bullish
on the online travel-related business, predicting
30% growth annually - a rate of expansion that
Tuniu is more than familiar with. After starting
with only five staff members, it had 50 a year
later, in 2007, when offices were established in
Beijing and Shanghai. By the end of 2009, the
company had 270 employees and now has 1,500. They
help to provide tours leaving from 20 cities in
China and sell 20,000 different travel products.
So far, Tuniu has booked more than 1 million
To drive the process and conduct
database analysis, Tuniu also developed its own
business operation support system, which allows it
to understand trends in the Chinese travel market
quickly and effectively.
"We make the
booking process simple, and we provide better
prices for our customers. That is why we are the
market leader for package and group tours," said
The company has raised about US$60
million in total investment so far through three
rounds of fund raising - with Gobi in 2008, and
Gobi and Silicon Valley-based DCM in 2009. Three
other investors joined DCM, which manages more
than US$2 billion, in the third round of
investment last year.
Not everyone is
optimistic about Tuniu. "In the long term, the
future of online travel is not package tours, but
travelers booking their hotels and air tickets
directly. That is the direction of Ctrip and
elong," said one hedge fund manager. "Also, Tuniu
does not develop its own travel product. It just
acts as a reseller of those who arrange package
tours. I believe the value they create is not
large enough to fence off competitors in the long
Tuniu, however, may have the
requisited organizational edge, according to
Richard Chen, a former chief technical office with
eLong. He believes that although Tuniu is acting
as a reseller, its work is not easy for a
competitor to imitate. "ELong put a stop to the
packaged tour business in 2007 to focus on core
businesses. Part of the reason was the company
wanted to focus on hotel booking, but another part
of the reason was that it takes a sophisticated
system to arrange package tours online," he said.
"Say, a group of 10 people is traveling
together and if a change happened with one part of
the package (such as the flight), all the rest
(hotel booking, tour guide booking) have to
change. How to change everything across different
suppliers is a challenge, " he said.
while some people prefer to arrange their travel
plans themselves, package holidays and tours will
not be phased out for a long time. "It is China.
People have different preferences. Some people
like the freedom of planning their own travel.
Some prefer the convenience of package tours."