China's tech titans slug it out in travel

Alibaba, Baidu, Tencent eye wallets of world's largest population of middle-class spenders

SHANGHAI • After slugging it out in ride-hailing, bike rentals and food delivery, China's technology giants are doing battle in the travel sector.

At stake is control over the world's largest population of middle-class spenders, tourists and Internet users.

Meituan Dianping, which has funding from Tencent Holdings, is getting ready to spend hundreds of millions of dollars over three to five years to unseat leader Ctrip.com International, backed by Baidu. Also targeting the space is e-commerce juggernaut Alibaba Group Holding.

Online travel is the latest front in a running war between China's largest Internet corporations - Baidu, Alibaba and Tencent - that is spilling across the breadth of the country's on-demand services economy. Meituan Travel wants to sell you a flight to Beijing, museum admission, a dinner booking and finally a room to crash in - all within the app - something a specialised service like Ctrip cannot match.

Mr Chen Liang is tasked with leading that charge. The president of Meituan Travel is declaring open season on Alibaba's Fliggy (formerly Flying Pig) and Ctrip.

He wants to build China's largest hotel service by the middle of next year, banking on 240 million users who already make dining reservations, schedule massages and hunt for retail discounts on its Groupon-like platform. Alibaba's 500 million-plus customers, in contrast, mostly buy from its online bazaars, he argued.

"Meituan Travel really nicely complements our business," Mr Chen said in an interview.

Ctrip is expanding into lower-tier cities with customers seeking a "superior quality of service", it said.

Meituan is one of Tencent's standard-bearers in a war with Alibaba and Baidu. It is a battle waged via multibillion-dollar investment deals and proxies like the Alibaba- driven food service Ele.me, or Mobike and Ofo in cycle rentals.

Meituan started out offering Groupon-style deals, then expanded into food delivery. Now it is going toe-to-toe with Ctrip, which last year agreed to buy flight aggregator Skyscanner. But Meituan's advantage is a user base that checks the app more frequently than on purpose-driven Ctrip, though convincing someone who is looking for discounts on a massage to also book hotel rooms may be a tough sell.

"If you want to convert them to travel users, Meituan may need to spend more on marketing dollars or give discounts, and compared to Ctrip and other travel sites the price must be more attractive," said Ms Marie Sun, an analyst with Morningstar Investment Service.

Travel is a key sector because it galvanises a swathe of consumer spending from food to entertainment. Digital sales of everything from hotels to flights could rise 28 per cent to surpass US$113 billion (S$156 billion) this year, consultancy eMarketer estimates.

There is plenty of room to grow; Internet travel bookings represented just 10 per cent of China's total tourism revenue, compared with 56 per cent in the US, according to Phocuswright statistics compiled by Bloomberg Intelligence.

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A version of this article appeared in the print edition of The Straits Times on June 29, 2017, with the headline 'China's tech titans slug it out in travel'. Print Edition | Subscribe