Amid an industry-wide debate about the true strength and viability of China’s online travel industry, it’s been learned that over $60 million (RMB 412 million) worth of investments found their way to innovative online travel companies this August alone.
In 2017, China’s online travel market was worth $130 billion (RMB 892 billion), according to the 21st Century Business Herald. But while companies are enjoying rapid growth, they’re also struggling to differentiate from each other. Alibaba Group Vice President Hu Chenjie addressed this in May 2018, saying that the online travel agency model of offering little more than price comparisons “falls short of meeting young consumers’ comprehensive demands.”
Investments in up-and-coming online travel agencies (OTAs) may signal a shift in the market, or it might simply be a sign that investors want to diversify within the industry. Here are some of the largest online travel industry investments this August:
Blackfish.cn, an online travel agency that adopted Costco’s membership model to sell travel packages, received the largest investment with $50 million (RMB 343 million). While the investment came exclusively from stand-alone financial investors as opposed to travel/tech industry strategic investors, this company’s background is firmly rooted in the online travel industry.
The Blackfish’s founders started at Tuniu.com (its Chinese name means “cattle route”), one of China’s top 10 OTAs which is partly funded by JD.com. Tuniu.com has suffered continuous financial losses since it went public in 2014 despite its market visibility. In 2017, its net loss shrunk to about $100 million, despite a 50 percent increase in revenue. As reported earlier this year, JD.com has expressed serious interest in buying out Tuniu.com but ran into resistance from the target company’s senior leadership, prompting the founding team to part ways. Yan Haifeng, the former COO of Tuniu, and three other senior managers resigned and opened Blackfish.cn in November 2017.
With 10 years of experience in the OTA business and generous financial support from nine venture capital firms, Blackfish has had a smooth ride so far. Within their first two months of operations, the company reportedly received over 100,000 member registrations.
The company currently offers 3,000 types of products and services. The $44 (RMB 299) annual membership fee allows consumers to receive travel product discounts, cash back, and sales commissions. In addition, the company provides credit cards to consumers, financial services to small businesses, and other non-travel products. It’s reported that the company has accumulated more than 10 million credit customers since it launched at the end of 2017.
Blackfish isn’t alone in using the membership model, a program that’s catching on as a way for Chinese online businesses to retain customers. Alibaba and JD.com have both introduced membership services this year that offer customers exclusive discounts and entertainment options.
While Blackfish.cn is considered an innovative online travel agency, the company 11visa.com has the potential to resolve a different—and huge—issue for many outbound Chinese travelers: obtaining visas.
11visa.com (its Chinese name means “panda visa”) is a two-year-old, multi-country, online visa application agent. Their centralized, digital visa application system can handle applications to 84 countries and 1,165 visa types. From generating visa photos, collecting documents, filling out application forms and passport delivery, 11visa.com’s service covers all of China and claims a 99-percent visa approval rate (along with insurance for a full refund for denied applications).
Chinese travelers made 71.3 million overseas trips in the first half of 2018, according to China Tourism Academy, which is the research arm of the Chinese government’s Ministry of Culture and Tourism. Although more countries are starting to offer visa-free travel for Chinese tourists, many popular international destinations still require some level of pre-approval.
Previously, Chinese citizens got their visas from brick and mortar travel agencies, but in recent years, online companies have started to offer assistance with visa applications. 11visa.com is attempting to disrupt this market by using a centralized visa application system and secure personal information storage systems. The company has completed more than 400,000 visa applications so far.
The near $10 million (RMB 60 million) it received in August was the company’s third round of fundraising in just 20 months. They’re now valued at about $15 million (RMB 100 million). Five venture capital firms have reportedly invested in 11visa.com, with Shenzhen Bohuiyuan Venture Capital Co. Ltd. leading this most recent round.
The third notable investment in the month was in Hainiaowo.com (its Chinese name means “seabird nest”), which provides travel gear rentals like drones, GoPro sports cameras, and waterproof cameras. For a small fee, customers can rent equipment—mostly intended for beach holidays—for seven to ten days. The gear ships to customers prior to their trip. Hainiaowo.com also sells other types of travel gear, including snorkeling equipment and activewear.
In August, the company—which has been in operation since 2012—received more than $1 million (the exact sum was not disclosed) from Ant Financial Services Group, an affiliate of Alibaba. While considered a small investment, Ant Financial might be testing the water for a new travel services segment. There are other gear rental companies in China, but Hainiaowo is the only one focused on the travel sector, in particular. Rentals for beach holidays could become a niche market, as one-third of overseas trips in 2017 departed for island destinations, mostly in the Asia-Pacific region, according to China Tourism Academy.
The final noteworthy investment in the month of August was in the travel activities market, as Alibaba invested $5 million in FunNow, a Taiwanese travel activities company. Interestingly, the tech giant also invested in the Taiwan-based travel activities vendor KKday the previous month, proving that Alibaba sees potential in the segment.
As China’s domestic and international tourism markets continue to grow, venture capitalists and major tech firms will likely seek more investment opportunities that capitalize on the growing list of niche markets within the country’s travel industry.