It appeared several years ago that Ctrip had locked up the Chinese online travel market when it took control of Qunar and Elong, but that ship has sailed. The emergence of Meituan and now Tongcheng-Elong's initial public offering make it clear that many players will scramble for market leadership.
Two major players in the Chinese travel and technology industries, Tencent and Ctrip, teamed to execute an initial public offering for Tongcheng-Elong in Hong Kong that raised $160 million in net proceeds.
Tongcheng-Elong, which cited iResearch figures showing it had the third highest gross bookings in Chinese online travel in 2017, said it will use the proceeds from the public offering to expand its product and services, increase marketing, improve its technology, and pursue partnerships and acquisitions.
Tencent, which owns the WeChat mobile messaging platform, and Ctrip, China’s largest online travel agency, wield roughly 23.18 percent and 22.61 percent of the voting rights, respectively, now that the stock began trading Monday in Hong Kong. Neither is a controlling shareholder, but working together they could exercise control for all practical purposes.
If the name Elong sounds familiar to Westerners, then that’s because Expedia became its controlling shareholder in 2004, and after piling up substantial losses, sold its stake to Ctrip in 2015. Tongcheng and Elong merged in March of this year.
For the first six months of 2018, Tongcheng-Elong notched a profit of around $93.4 million compared with a loss of some $15.8 million a year earlier. Revenue in the first half of 2018 increased 60.3 percent to $287.2 million.
Like Booking Holdings, which is spreading its bets around in China through major investments in Ctrip, Meituan and Didi Chuxing, Ctrip and Tencent are expanding their diverse holdings, as well, through this initial public offering.
The newly public Tongcheng-Elong has a web of technical, sales and partnership relationships with its two largest investors, Tencent and Ctrip. For example, Tongcheng-Elong will be the exclusive provider of the rail plus flight, and hotel offerings in two Tencent “super apps,” Weixin Wallet and Mobile QQ.
The initial public offering’s net proceeds of $160 million are relatively modest, but going public should position the company and the volatile Chinese travel market for plenty more maneuvering.
Following is the initial public offering prospectus
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Photo credit: Pictured are tourists taking a photo of Palais Garnier in Paris on July 31, 2010. Tongcheng-Elong claims to be the third leading player in Chinese online travel. It is backed by Tencent and Ctrip, the market leader. zoetnet / Flickr.com