At the same time, HNA Tourism and Tuniu announced a strategic procurement agreement. Under this agreement, HNA Tourism will provide Tuniu with access to its airlines, business jets, and hotels among other premium resources at a preferential rate, under fair competitive market rules.
BEIJING – HNA Tourism Group Co., Ltd (HNA Tourism), a tourism conglomerate under the Global Fortune 500 HNA Group Co., announced a US$500 million investment for a 24.1% stake in Chinese leading online travel company Tuniu Corp. HNA Tourism will purchase Tuniu’s newly issued Class A ordinary shares for US$5.50 per share, or the equivalent of US$16.50 per American Depositary Share (“ADS”). A total investment of US$500 million led by HNA Tourism and its subsidiaries Caissa Touristic and Beijing Travel and Development Fund, among others, is expected to close in December 2015, making HNA Tourism Tuniu’s biggest shareholder.
At the same time, HNA Tourism and Tuniu announced a strategic procurement agreement. Under this agreement, HNA Tourism will provide Tuniu with access to its airlines, business jets, and hotels among other premium resources at a preferential rate, under fair competitive market rules. During the next two years, is expected that Tuniu will purchase no less than US$100 million in products and services from HNA Tourism.
Uniting resources and platforms
HNA Tourism has extended its service network across more than 28 countries and territories at a fast pace through a number of acquisitions, forming an integrated tourism business and considerably increasing its international competitiveness. The global expansion of the company started in early 2011 with the acquisition of the leading tour operator Caissa Touristic, positioning the company at the forefront of outbound tourism in China. Subsequently HNA Tourism has acquired majority stakes in top international companies including NH Hotels, Tsogo Sun Hotels, Red Lion Hotels, Swissport, and PVCP among others.
At the end of 2014, HNA Tourism reported total assets valued at close to US$18 billion (RMB 115 billion), and annual earnings of approximately US$5 billion (RMB 36.8 billion).
The HNA Tourism and Tuniu partnership represents an important step forward in the former’s Online-to-Offline (O2O) strategy. Tuniu has held the second largest share of the Chinese online travel market for many years. It has a solid brand reputation and a massive customer base which will leverage HNA Tourism’s portfolio of both online and offline tourism channels. At the same time, Tuniu will be infused with vital resources incorporating HNA Tourism’s extensive collection of hotels and airlines into its online platform. By uniting their core advantages, both companies are expected to enhance their respective competitive positions both online and offline.
Through mergers and acquisitions, investors are tapping into the Chinese online travel market. Regardless of the intense market competition, HNA Tourism has a unique position as the owner of a number of airlines, hotels, tour operators, tourism finance providers, and investment business units. Through this new partnership with Tuniu, these extensive offline resources are to be incorporated onto an inclusive online platform.
Reinforcing alliances for win-win outcomes
In addition to the capital investment, HNA Tourism and Tuniu’s strategic procurement agreement extends preferential rates and also eases access to an increasing number of airlines and hotels for Tuniu. This will improve the competitiveness of Tuniu’s “Flight+Hotel” products, and will also offer more domestic and international destinations for Tuniu’s service packages. For HNA Tourism, Tuniu’s purchases will increase occupancy rates for both airlines and hotels.
Tourism specialists have expressed that the partnership between HNA Tourism and Tuniu will improve customer service experiences. The travel market is currently dominated by young travelers who are accustomed to using online channels to plan and book tourism plans, therefore it is of key importance to improve and solidify the company’s online and mobile distribution channels.
Contributing to the development of the entire tourism industry
According to China’s National Tourism Administration, between 2016-2020 China will double the total number of online booked trips, during this period over 600 million people are expected to book trips online and spend more than RMB 1 trillion in online travel services. Thus the tourism and Internet industries will continue to dominate the business arena with the large numbers of users and customers. Unsurprisingly, China’s Top 10 Internet companies have entered the travel market. Undoubtedly, the “Tourism+Internet” combination will deliver significant gains for both markets.
As one of China’s leading tourism groups, HNA Tourism will pursue its ambition of using O2O as a core development strategy. The company will improve the competitiveness of its own OTA 51you.com, while it continues supporting the growth of its Internet partners such as Zhubaijia.com. By investing in Tuniu, HNA Tourism has successfully finished laying the foundations for its O2O development strategy.
In the near future, HNA Tourism will continue incorporating resources into digital platforms, while building smart platforms and using travel technology for its sustainable development. The company is enhancing public-private collaborations into a closed-loop tourism ecosystem, forming a truly global tourism enterprise.
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
