Travel service firms plan merger to create unified platform

Travel service companies Tongcheng Network, a unit of Tongcheng Tourism, and E-dragon Holdings Ltd (or eLong) said on Friday that they would merge to create a new travel platform called Tongcheng-Elong Holdings Ltd.

Ctrip.com, China's leading travel platform, which is a major shareholder in both companies, said the merger would help integrate its mobility and hotel resources under one umbrella. Tencent and Ctrip will become major shareholders of the new company after the merger along with other shareholders like Wanda and Ctrip-backed OceanLink.

Tongcheng currently deals with air tickets, hotel booking, train tickets and bus tickets while eLong focuses largely on the hotel business.

The merged entity is expected to have around 200 million users. Prior to the merger, the companies have processed more than 500 million deals in 2017, grossing more than 100 billion yuan ($15.4 billion) in turnover.

Liang Jianzhong, co-founder and executive chairman of Ctrip, and Wu Zhixiang－co-founder, president and CEO of Tongcheng Tourism－will serve as co-chairmen of the new company.

Ma Heping, co-founder of Tongcheng Tourism and president of Tongcheng Network and Jiang Hao, CEO of eLong, will be the joint CEOs.

The new company will be positioned as a leading online travel service platform, supported by the complementary core strengths of the two parties.

According to data from Analysys, in 2016, eLong's market share in the online hotel booking market is about 15.6 percent and was ranked third after Ctrip and Meituan. The fourth position went to Tongcheng Network with about 2.7 percent market share.

In the online ticketing market Tongcheng had about 4.8 percent market share, while Ctrip held about 58.5 percent.

Tongcheng Network's access to train tickets and eLong's access to hotels through WeChat wallet will help the new company to target the huge number of WeChat users by offering higher-quality products and services.

Tongcheng Tourism consists of two units－Tongcheng Network and Tongcheng Travel Agency Group. Tongcheng Network deals with air, train tickets and hotels, while Dongcheng Travel Agency Group focuses on leisure travel and tourism.

An internal message from Wu Zhixiang shows that Tongcheng Network's online business has seen rapid growth, with net profit of over 500 million yuan in 2017, while Tongcheng Travel Agency Group, Tongcheng Financial and other sectors have achieved their 2017 targets and are expected to become profitable in 2018.

In July 2017 alone, Tongcheng Tourism made 30 million yuan in profit after 43 months in the red.

Liu Chiping, president of Tencent, said that "Tongcheng-Elong is a strategic partnership which Tencent has built within its healthy internet ecology system. We will continue to support the business and the development of the new company through the WeChat and QQ platforms on mobile, enriching online and offline products and services for customers."

The online travel business is no longer a competition between online travel agencies but between internet giants, said Zhao Huanyan, an analyst at Huamei Hotel Consulting.

The future of travel industry lies in the fierce rivalry among various internet ecosystems within Tencent, Ctrip and Meituan, he said.

Between 2014 and 2015, Ctrip invested $200 million in Tongcheng. Ctrip also cooperated with Tencent and Paleno－a domestic hotel group to acquire 37.6 percent share in eLong and became its largest shareholder. Ctrip also invested in Tuniu and Qunar. China's leading internet giant Baidu is the largest share holder of Ctrip, about 20.1 percent, according to Ctrip's 2016 financial report.