Fosun’s Venture Capital Arm Backs Israeli Booking Site in an Ongoing Travel Push

Chinese investment group Fosun keeps broadening its travel portfolio. In December its majority-owned travel company, Fosun Tourism, which includes Club Med, spun out as a separate public company that claims to be the largest leisure tourism resort group in the world by revenue.

On Monday, Fosun’s Shanghai-based corporate venture capital arm, Fosun RZ Capital, said it had led a $6.75 million Series A investment round in Splitty, a hotel booking startup based in Israel.

“Fosun will definitely invest more in travel,” said Wilson Jin, chairman of Fosun RZ Capital.

In March 2017, Fosun RZ invested in Ixigo, which has since become the largest price-comparison travel search brand in India. It’s reported to be participating in a Series C round in Ixigo, too. It has invested in Shijie Bang, a Beijing-based travel agency specializing in outbound international services for Chinese travelers. The venture capital unit helped Fosun’s insurance company invest in MakeMyTrip, India’s largest online travel agency, which is similar to China’s Ctrip — which has, in turn, also invested in MakeMyTrip.

A Bet on Blending Hotel Reservations

Splitty combines multiple hotel bookings at different rates under one reservation. A customer presents a single voucher when they check in.

Hoteliers may be of two minds about Splitty. They want to maintain a high level of occupancy, typically above 65 percent, because high occupancy makes the best use of their fixed costs. However, they don’t want to sacrifice too much of their average daily rate or their profit margin to woo guests.

Splitty can help boost occupancy. “I’ve always wondered what can be done to maximize hotel occupancy,” said Carl Wilson, a former CIO of Marriott International and an advisor to the startup. “That’s a true challenge, and Splitty actually solves it.”

But a majority of its inventory matches varies offers for rates, amenities, and cancellation rules to provide consumers with discounts of up to 30 percent off. Hoteliers may worry they’ll lose control of their discounting, or revenue management, strategies.

“Splitting a reservation isn’t something we invented,” said CEO Eran Shust. “For decades travel agents have done it manually. However, we’re automating the process at the time of booking and contacting the hotel, so the customer doesn’t have a problem at the front desk.”

Shust argued that Splitty isn’t purely about discounting. Nearly 40 percent of the startup’s booking combinations are between different room types, where you stay in a “classic” room for three nights and then move to an executive suite for two nights. If the hotel didn’t have availability in the “classic” room for a full five-night stay, it wouldn’t have appeared in the search results of online aggregators for a search on those five night without Splitty’s combination.

Jin said he liked Splitty because if its “very innovative artificial intelligence solution” to a tough technical problem.

For example, a search for a five-night stay across multiple rate types will generate too many permutations. No company can practically run hundreds of thousands of searches per customer. Splitty has a workaround. It uses machine learning to analyze typical patterns from a four-year industry-wide pricing data set.

Splitty also has business-to-business services. El Al, for instance, uses Splitty to help its employees book hotel rooms. (El Al backs Splitty via Cockpit, its corporate venture arm.) The startup offers to distribute to global distribution systems and travel agents, its inventory via a data feed. For airlines it offers a white-label hotel booking tool. For hoteliers it offers a widget that can be embedded on any hotel’s booking engine on its direct website.

Since launching a year ago, Splitty has remained small, generating barely $300,000 in revenue last year, Shust said, speaking at Amadeus’s T3CH conference in Madrid last month. It has mainly attracted “thousands upon thousands” of customers from Europe and the U.S. primarily through advertisements in price-comparison search engines Trivago and Skyscanner.

“Splitty is already in discussion with quite a few travel companies about potential partnerships,” Jin said.

This year, it plans to expand its business in Asia. Deals with hoteliers and online travel agents worldwide will let it deliver “double-digit millions of bookings over the next year, said Shust.

“A hallmark of good corporate venture capital practice is to be a partner,” said Jin, who describes Fosun RZ as “a financial investor with strategic resources” rather than a strategic investor for the parent company.

“We not only provide financial support to enterprises but also help startups with various resources for their development. Fosun has a broad portfolio of travel companies, and a lot of connections industry-wide as well.

Future Deals

Jin’s 40-person investment team focuses on technology-driven companies. So it only looks to invest in travel companies using technology to solve industry pain points.

Meanwhile, parent company Fosun continues to collect assets around three themes — what it calls happiness, wellness, and wealth. Unlike formerly acquisitive companies HNA Group, Dalian Wanda, and Anbang Insurance, Fosun continues to report profits and keep a clean bill of health from Chinese regulators. It is considering acquisitions in North America. This year Club Med plans to open up to 10 ski schools in China. Fosun Tourism will open two hotels in China in 2020 or 2021 in projects it will develop and that Thomas Cook, Europe’s second-largest tourist business after TUI, will manage, as part of a broader joint venture.