Leading Chinese group-buy platform Meituan has confirmed it will acquire full ownership of online travel platform Kuxun to step up its hotel coverage and complete its business range.
The acquisition, expected to be worth tens of millions of dollars, has been in negotiations for several months and has reached the final stages of due diligence.
China's top group buy site acquires OTA
Established in 2006, Kuxun has been leveraging vertical search technology to provide accurate real-time information on air tickets, hotels, vacations and rail tickets. Kuxun’s service network covers 200 Chinese cities and it boasts the largest and most comprehensive hotel database in China covering over 80,000 hotels. It also offers information of over 50,000 travel destinations.
With its comprehensive business scope and data bank, Kuxun fits into Meituan’s new strategic direction, outlined by its leadership on July 13, of extending its hotel and tourism businesses from domestic market to overseas and to expand its business scale.
Meituan’s founder and CEO Xing Wang announced earlier the introduction of a takeout service department and hotel tourism department, with vice president Liang Chen appointed senior director and head of the hotel tourism department.
Meituan’s founder and CEO Xing Wang
Meituan has become the second largest online hotel platform in China. In the first half of 2015, its hotel tourism department recorded RMB7.1 billion (approx: US$1.14 billion) in turnover, of which RMB5.3 billion was from hotel business and RMB1.8 billion from vacation business. Over 10 million customers purchased group-buy vacation products via Meituan, daytrip and weekend excursions to attractions being some of its most popular offerings.
A Meituan spokesperson said Kuxun’s technical team is most valued by Meituan as Kuxun is known for offering users the latest and most accurate pricing and information for travel products. Kuxun’s speed in rail ticket transfers is well known within the industry and it has always been acknowledged as the leader in data mining and smart recommendations technology.
US-based Expedia, the world’s largest online travel service provider, acquired Kuxun via its subsidiary Tripadvisor in 2009. The acquisition was reported to be worth US$12 million and was part of Tripadvisor’s US$50 million investment in the Chinese market.
Expedia’s recent sales of major OTA eLong and now Kuxun effectively signals its exit from China’s OTA market. However, it remains unclear whether Meituan, after taking over Kuxun from Expedia, is able to successfully wrest control of vertical travel business from the top OTAs.
Meituan’s OTA competitors Ctrip and Qunar, both Nasdaq-listed companies, have been suffering substantial losses — Ctrip recorded losses of RMB126 million in the Q1 2015, and the recently acquired eＬong registered a loss of RMB181 million, while Qunar reported losses of RMB700. This clearly shows that the OTA market in China is a very costly business indeed.
The Meituan spokesperson maintained that the Kuxun acquisition has disproved speculation of the company having any capital related issues, and Mr. Wang himself said Meituan’s losses were nowhere near as much as suspected.(Translation by David)
