Expedia’s eLong Creates $100 Million Fund for Mobile Tech

Expedia Inc.’s eLong unit, based in Beijing, says it is creating a $100 million fund to encourage innovations in mobile hotel-booking capabilities.

eLong, the second largest “online travel agency” in China, says it is transitioning from an online to a mobile hotel-booking strategy.

And, that strategy change occurs as eLong unveiled the formation of $100 million Mobile Travel Innovation Fund, generated from its cash balance, to encourage mobile development related to hotel bookings.

CEO Guangfu Cui told analysts that the fund will target external angel investments in startups, venture investments in second rounds and later, and mergers and acquisitions. The fund will also fund eLong’s internal innovation, he added.

The news comes as eLong, majority-owned by Expedia Inc., reported its second quarter financial results, including the fact that its mobile hotel bookings, which amounted to more than 20% of all room nights stayed, overtook its call center hotel bookings.

Online hotel bookings, elong states, is its leading channel.

“We see an accelerating trend towards mobile hotel bookings, which comprised more than 20% of our hotel room nights in Q2, surpassing our call centers to become our second largest hotel booking channel,” said Guangfu Cui, eLong CEO. “To capture this great market opportunity, we have moved from an online hotel strategy to a mobile hotel strategy. We are also establishing a US $100 million fund to encourage innovation in this fast-growing area.”

During a discussion with analysts, Guangfu said:

“Our new mobile strategy includes the following components: 1) aggressively promote downloads of our mobile apps using all effective marketing vehicles; 2) promote our html5 enabled mobile websites; 3) continue expanding our mobile product and technology teams; 4) procure mobile-friendly hotel products such as last minute deals and heavily discounted groupbuy products; 5) establish an innovation fund of US$ 100 million to promote mobile travel products and service.”

eLong’s mobile apps have attracted 25 million downloads, the company states, and the fact that mobile hotel bookings have surpassed call center bookings is a major development as phone bookings are still the main way Chinese travelers reserve their hotel rooms.

eLong, which competes with the larger Ctrip in China, saw its hotel room nights stayed jump 58% to 5.8 million room nights in the second quarter, the company said.

While Expedia controls elong, Priceline’s Booking.com has a hotel partnership with Ctrip.

Despite its growing hotel business, eLong recorded a net loss of about $12.44 million in the second quarter of 2013, compared with a profit of $2.62 million a year earlier. Revenue increased 28% to $41.15 million, and hotel reservations constituted some 78% of total revenue.

The loss was attributable mainly to a 64% year over year increase in operating expenses.

Expedia officials stated recently that they are encouraged by eLong’s performance, and that it has a real chance of giving Ctrip a real challenge.