China’s online travel agency (OTA) player Tongcheng-eLong is reportedly headed for its pre-IPO hearings in early October and is set to debut on the Hong Kong Stock Exchange (HKEx) in mid-November 2018, raising at a valuation anywhere from HK$34b to HK$42.6b (US$4.4b to US$5.5b), approximately 20 to 25 times its expected earnings for 2019.
The firm, according to an earlier report by the Wall Street Journal citing people familiar with the matter, plans to raise between US$1 b and US$1.5 b from its public debut. Underwriters of this Tongcheng-eLong’s initial public offering (IPO) include CMB International, Morgan Stanley, and JP Morgan Chase.
Formed via a merger between the merger of Tongcheng Network and Elong Holdings Limited in December 2017, this Suzhou-based firm counts Ctrip, Tencent, and Dalian Wanda Group as investors. Tencent and Ctrip are the largest and second-largest investors backing the online travel agency.
It is pertinent to highlight that, in a stark contrast to other OTAs owning their dedicated apps to acquire users and conduct businesses, after the merger, the new entity did not bother to launch a new app, but chose to offer its train ticketing and hotel booking services via WeChat’s mini-program platform, given WeChat’s huge traffic resources and Tencent is the largest stakeholder in the company.
Its rise by building on WeChat’s traffic has been spectacular. Mini-programs analytics service Aladdin revealed that Tongcheng-Elong’s new ‘hotel and train booking’ remains to be the top ranking programs within the WeChat ecosystem, making WeChat an efficient customer acquisition channel for the company.
Another interesting development is: it has added virtual reality (VR) technology to enhance its hotel booking services, allowing its users to have a real peek into the hotel rooms they booked online.
To-date, Tongcheng-Elong has seen its user numbers or monthly active users (MAU) grow 7.6 million in 2015 to 79.6 million in 2017, at a compound annual growth rate (CAGR) of 223.6%.
While China’s OTA market is highly competitive with major players like the Nasdaq-listed Ctrip and HK-listed Meituan-Dianping, it seems that Tongcheng-Elong is now moving its strategy from relying only on internet traffic – the core driver of China’s internet boom – to include other aspects like group-buy and lower-tier Chinese cities’ young users.
Users of its mini-program get to enjoy cash backs or even reduce the ticket/booking price by as much as 50% just by inviting their friends to the deal.
Exploring the relatively untapped market in the lower-tier Chinese cities via its social commerce model is also its new engine of growth.
This social commerce trend that has propelled the successes of the Nasdaq-listed Pinduoduo and Qutoutiao looks set to also change the dynamics in China’s OTA in the coming future.
Editor: Ben Jiang