Unlike the Priceline Group and Expedia Inc., TripAdvisor tried to go-it alone in China without a long-term home-grown partner. Expedia failed even though it had a Chinese partner in eLong so there are no guarantees in doing business in this potentially very lucrative but stubbornly difficult market.
The Chinese domestic market sure is a rough and tumble one for foreign businesses and you can now add TripAdvisor to the list of U.S.-based companies, including Expedia, Facebook and Google, that have taken their lumps in what will one day be the world’s largest travel market.
TripAdvisor announced that it sold Chinese metasearch site Kuxun.cn, which offers flights, hotels and train travel throughout the country, to Alibaba-backed group-buying site Meituan for an undisclosed sum. TripAdvisor, which acquired Kuxun in 2009 while TripAdvisor was still a unit of Expedia, stated that it prefers to focus on the outbound Chinese traveler market.
Stephen Kaufer, the CEO of TripAdvisor, hinted in the company’s first quarter earnings call in May that the company was “not winning” in China and that there would be changes.
“In China, it is a huge market,” Kaufer said. “It remains a fast growing market. It is super-ultra-competitive and when we look at our efforts to-date, we have to acknowledge ton of hard work by the team, good product, good efforts, but and I have to say sort of status quo is not what we’re aiming for here.
“We’re not winning in the way that we wish to and so from – the team has – in China has come back and said, ‘hey, here’s a set of things that we need to do differently to succeed in a particular space within the China travel landscape.’ Outbound travel, you can see on the site is a particular highlight of ours and it does in fact resonate with Chinese travelers, because we have a phenomenal amount of international content. And while we have every hotel you could want to stay in, in China, the strength of us versus the competition for the Chinese traveler we feel it plays to our strengths focusing on the outbound. So, you can see a bunch of that on the site today and I can simply hint that more change to come over the course of the year.”
Until earlier this year, TripAdvisor had operated four sites for Chinese travelers: a Taiwan site; a mainland China site, Daodao.com, which rebranded to Mao Tu Ying in May; a site launched in March in simplified Chinese for overseas Chinese living beyond Chinese censors i.e. the Chinese firewall, and Kuxun.com, a metasearch site in mainland China.
TripAdvisor did not include Kuxun in its China rebrand in May, which was another hint that it wasn’t part of TripAdvisor’s long-term plans despite years of investment. Kaufer said during the company’s second quarter earnings call in July that the company operates in China at a loss and is in investment mode there.
TripAdvisor’s shedding of Kuxun follows the decision by TripAdvisor’s former parent, Expedia Inc., to sell its stake in Chinese online travel agency eLong to rival Ctrip.
Why is China so difficult for U.S. companies?
Travel analyst Henry Harteveldt of Atmosphere Research Group says homegrown Chinese brands such as Alibaba and Tencent may have an “an intangible perceived advantage” among Chinese consumers based on trust issues and other factors.
“TripAdvisor has given China a full-court press and I don’t think this is a decision they have taken casually,” Harteveldt says.
Kuxun focused on flights, hotels and train travel within China. TripAdvisor states that the transaction doesn’t affect its other Chinese sites, which are more focused on outbound travelers.
“Our strategy in China is to focus our resources and efforts on delivering the TripAdvisor proposition to Chinese outbound travelers as well as the broader Chinese-speaking community already residing in different parts of the world,” says TripAdvisor spokesperson Desiree Fish. “We continue to grow and serve this audience through TripAdvisor branded sites and mobile apps hosted in mainland China (www.tripadvisor.cn) as well as through TripAdvisor’s other sites worldwide such as Taiwan (www.tripadvisor.tw).
TripAdvisor has shut down plenty of sites that it has acquired but this is the first TripAdvisor property that it has sold to another company.
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Photo credit: TripAdvisor sees huge potential in future generations of outbound Chinese travelers, and has given up on competing domestically in China. Pictured are students studying English in China on November 16, 2006. Brian Yap / Flickr.com