The US$500 million investment to be made by HNA Tourism into Tuniu, the Chinese online leisure travel company, will give Tuniu wings to fly and, more importantly, “greatly help us when we are organising our own package tours”.
Conor Yang: A competitive advantage with HNA Tourism partnership.
Conor Yang, CFO of Tuniu, told WIT that HNA’s ownership of 12 different airline companies including Hainan Airlines, Capital Airlines, Hong Kong Airlines, as well as more than 400 hotels, would give Tuniu a competitive advantage over rivals as it expands its global outbound business.
HNA also recently bought a 23.7% stake in Azul for US$450m, as part of its expansion of its global footprint. Azul has 145 aircraft flying to more than 100 destinations in Brazil and the United States.
HNA Tourism’s investment into Tuniu, announced last week, will mean that it will become Tuniu’s largest shareholder, with approximately 24.1% of Tuniu’s total outstanding shares. The transaction is expected to close this month.
As part of the investment, HNA Tourism and Tuniu have entered into a strategic procurement agreement, pursuant to which HNA Tourism will provide Tuniu with access to its premium airlines and hotels resources at a preferential rate, under fair competitive market rules.
Under the strategic procurement agreement, Tuniu is expected to acquire no less than US$100 million in products and services sourced from HNA Tourism over the next two years.
Yang said that close to 70% of Tuniu’s business is now outbound and despite growing concerns of a softening of the China travel market, he remains bullish.
He said the market was still showing “very strong growth as demonstrated in our third quarter results that we grew at 128% year on year”.
“Domestic consumption is still strong especially for leisure travel” and he said opportunities were still plentiful.
At the WIT Conference in Singapore in October, Yang pointed out two trends taking place in China’s outbound market – faster growth from second to fourth-tier cities, and thus increase in sales of organised tours, and more travellers going longhaul to Europe, Australia/New Zealand and Middle East.
He told the audience that of Tuniu’s 10 billion RMB in GMV (Gross Merchandise Value), 70% comes from organised tours and the remainder from FIT.
He also said that despite the August decline in the stock market, Tuniu hit a record 70m RMB in sales during its 9th anniversary special sale.
The panel, The Great Treasure Mountain: Reboot, also talked of changes in Chinese traveller behavior in terms of buying tours and activities. Leo Wang, VP & CEO of Woqu International, said when the tours and activities startup was launched n 2013, it had to do a lot of education of the market.
But now it’s seeing customers buy tours & activities 15 days ahead of trip. Customer behavior is changing and changing very fast, he said, and this speed of change is also being seen in mobile.
In two years, mobile traffic to Tuniu has grown from 10% to 70%, helped by the company’s investment in mobile marketing as well as improvements in China’s infrastructure with 4G speeds now enabling faster downloads of rich content.
Asked by WIT if this latest funding by HNA would mean Tuniu expanding beyond China, Yang said, “At this stage, Tuniu will remain focused on customers from mainland China. But we’ll build up teams in more than 10 popular foreign destinations for local sourcing and providing better services to our clients when they are in these destinations.”
