Meituan Makes Gains in Luxury Hotels as Chinese Government Reshapes Online Sector

Meituan, one of the leading hotel-booking platforms in China, grew its accommodations business in the third quarter and made inroads with 5-star hotels even as Chinese government regulatory policy is reshaping major corporations.

The third quarter ended September ended September 30, but Meituan reported that in early October the Chinese government levied an approximately $532 million penalty against the company for violations of anti-monopoly rules. That hit accounted for around 3 percent of the company’s revenue.

Meituan, which vies with Trip.com Group for leadership of the country’s hotel booking industry, pledged to abide by the rules.

Meanwhile, Meituan said as part of its third quarter earnings that its board will continue to review its current corporate governance setup, where co-founder Xing Wang continues to serve as both chairman and CEO. Meituan said the “board will continue to review and consider segregating the roles” but it believes the existing structure enables the company to make decisions swiftly and effectively.

At Trip.com Group, James Jianzhang Liang serves as executive chairman and Jane Jie Sun is CEO, a setup established in late 2016.

In the third quarter, despite headwinds cause by the Delta variant and cross-province travel restrictions, Meituan saw its in-store dining, hotel and travel segment revenue grow 33.1 percent to more than $1.34 billion (RMB 8.6 billion).

Meituan has a niche in lower-tier markets and hotels, but its luxury hotels grew to 16 percent of its room nights during the quarter after working with both Disney and Universal on campaigns, the company said.

“We continue to leverage our competitive advantage in lower-tier markets and lower-star hotels to drive their steady domestic room night growth,” CEO Xing Wang said. “We have also continued to collaborate with more high-star hotels and optimized high-star hotel supply and improve service experience by driving growth in high-star hotels as well. In addition, we will explore more diversified products such as cooperation with popular theme parks as well as packaged deals across our platform to further strengthen our cross-selling capabilities.”

The dining, hotel and travel segment is a bright spot in the company’s results. The company notched an operating profit in the segment to almost $600 million (RMB 3.8 billion), a 35.8 percent jump. The operating margin tilted slightly upward to 43.9 percent.

As a reflection of where the China hotel market stood as of about a week ago, revenue per available room in China fell 26 percent year over year the week ending November 20, according to Skift’s Daily Lodging Report.

Meituan, which offers food delivery as its largest business in addition to new initiatives such as grocery delivery, as well as its dining, hotel and travel segment, saw its overall adjusted net loss widen to $861 million (RMB 5.5 billion) in the third quarter while revenue grew 38 percent to $7.6 billion (RMB 48.8 billion).

Chinese government policies were responsible for pressuring Meituan to launch an occupational injury protection pilot program for its food delivery drivers.

Rival Trip.com Group has yet to reports its third quarter financials.