China's Tuniu Finds A Way To Love Packaged Tours
In China, travel has proven to be one of the few reliable sweet spots for Internet businesses outside of gaming. Nasdaq-listed Ctrip and eLong have traditionally been market leaders, but technology platform Qunar has been making strong gains, especially since Baidu invested $306 million in the company, valuing it at $500 million. But a less talked about competitor called Tuniu is busy making its own waves with a unique-to-China approach.
Rather than focus on flight and hotel bookings for high-end customers, Nanjing-based Tuniu targets the masses by offering both domestic and international package tours. The company is capitalizing particularly on China's fast-growing number of first-time tourists. As the country develops and its middle-class continues to grow, more and more Chinese are leaving the country in a bid to see the world.
From 1949 to 1983, private Chinese citizens weren't allowed to travel abroad, and it has only been since the mid-1990s that it has become relatively painless to get a passport. As the economy has improved over the last decade, Chinese citizens have embraced international travel with alacrity. In the first half of this year, nearly 39 million Mainland Chinese residents traveled overseas, an increase of 19.75 percent compared to the same time last year, according to Reuters.
But because they're so new to global tourism, and because of some cultural preferences, they tend to travel in packs as part of organized tours during China's public holidays. Part of the reason is that many Chinese travelers are driven by value for money, which packages offer, and many first-time travelers aren't confident when it comes to navigating culturally and linguistically unfamiliar terrain.
That's where Tuniu comes in. The 1,700-person company not only provides search and advice for package deals, but it also helps with logistics, such as securing tourist visas – a requirement for any travel agency in China. That's a pretty stark illustration of the importance of online-to-offline service in China and a key difference of the Internet market here compared to the US. It's hard to imagine Expedia or Orbitz sorting out a visa for your trip to India. In that sense, Tuniu's not only competing with Ctrip and eLong, but also with traditional bricks-and-mortar travel agencies.
The company, which has taken a total of $60 million in three rounds of funding from Gobi Partners, DCM, Sequoia, and Highland Capital, expects to see a triple-digital increase in revenue this year to $188 million (RMB1.2 billion), according to TechNode.
Thomas Tsao, a venture capitalist with Gobi Partners, told me earlier today that Tuniu plans to update its smartphone app to allow bookings direct from mobile by as early as September. Currently, the app provides search, promotional information, and photo sharing. Tsao says that Tuniu is prepared for the day that China's travel market matures beyond package deals and is looking at moving into flight and hotel bookings. That would put it more squarely in competition with Ctrip, eLong, and even Qunar, which offers aggregated search, much like Kayak in the US.
Tuniu is one of the few hot startups in China not to be based in Beijing, Shanghai, Guangzhou, or Shenzhen. But Tsao says its Nanjing location can be an advantage, because IT salaries are lower there, staff turnover isn't as high as it is in the major centers, and as a "big fish" in a smaller pond, it can be easier to attract the city's top talent.
And anyway, Nanjing isn't really that small a pond. It is the capital of the rich Jiangsu province and has a population of 8 million people. Haven't been? I know a good way to find a package tour...