After acquiring Ctrip and Qunar’s home sharing business, Tujia now owns four major short-term rental platforms——Tujia, Mayi, Ctrip and Qunar’s home sharing platforms.
On October 20th, Justin Luo, co-founder and CEO of Tujia, announced the acquisition in an internal letter to the company staff, saying that Ctrip and Qunar’s home sharing channel portals, operation teams, and the whole business line will be integrated into Tujia’s platform. In the future, Tujia will have access to Ctrip and Qunar’s resources on inventory, traffic, brand name, and operation etc.
Founded in 2011, it took Tujia five years to figure out a operation model fitted for the Chinese home sharing sector and gradually take all the resources it can get its hands on to its platform. When the news just started to spread, Justin Luo was interviewed by many media outlets, including TMTpost, through a phone call meeting.
Go both online and offline
“From the very beginning, Tujia has positioned itself as a home sharing platform instead of a short-term rental market place,” Luo said in the interview. Through acquisitions, Tujia will be able to expand its user base and get a hold of its traffic portal. Acquisitions are inevitable for Tujia to make its industry chain for home sharing work.
On the acquisition of Ctrip and Qunar’s vertical business, Luo stated that after the integration these platforms will still have their independent user channel and platform geared towards travelers. “We won’t just shut other channels down. It won’t be a complete integration,” Luo said. Tujia’s next operation priority is about its inventory. The company needs to connect and reorganize its home sharing sources.
Private homes and apartments have always been the center piece for Tujia as the company aims to be the rule maker in this realm. When it finally achieves a standard portal, Tujia will set the operation rules for the whole industry(in the first half of the year Justin Luo once proposed Tujia’s TOS model, Tujia Operation Standards), including a mechanism that involves home sharing source assessment and payment.
As a matter of fact, Luo has revealed Tujia’s intention to further expand its scale three months ago in his speech on the MIIC, hosted by TMTpost and Business Value.
“The first half of the sharing economy battle was all about the layout. Everybody was still exploring and trying to match the right model at that time. The Chinese sharing economy is entering the mid game, where everybody will try to expand their scale and go deep.”
It’s evident that Tujia is aiming to expand its scale through recent acquisitions.
Luo has set the second five-year plan for Tujia after the acquisitions. During the phone interview, he stated that there would be two major developments for Tujia. One is the building of an ecosystem, and the other is separating its businesses into online and offline businesses.
The first and foremost priority for Tujia is to get hold of a stable source of homes. And what really makes Tujia stands out is its complete marketing system, which connects home sources, business runners, service providers, and consumers.
Through investment and cooperation, Tujia has completed its layout in three major service sectors. To put it in perspective, Tuli, Xiantu, and Tuzhu etc. are representing Tujia’s service chain while products such as 51WOFANG etc. represent mid and long-term rental and service apartment business chain. On the other hand, Mayi represents the short-term rental sector.
Since Tujia’s entry point in the industry is home sharing, it’s natural for the offline sector to become a priority for Tujia. Justin Luo introduced the three major offline businesses of Tujia to TMTpost:
1. Tujia’s own asset operation, which is Tujia’s own business lines, including offline assets.
2. Cooperation with developers, so called BD.
3. Uthing, Tujia’s new product this year, in cooperation with Cihna Grand on new home source building, as well as sales and operation.
Luo actually revealed some important signals, that the offline businesses jointly brought about by the company’s asset management and new home sources will be divided into independent business lines.
The so-called acquisitions are actually the restructuring of Ctrip?
On the matter of the adjustments in the organizational structure, Justin Luo commented: “From now on, Mayi, Ctrip, Qunar, including former Tujia, all belong to Tujia Group. They are just different lines under the group’s name.” After the acquisitions, these business lines will be operating independently. However, they will share their inventory. The key cooperation here is a standard operation model.
Luo also said that since Ctrip and Qunar’s team on home sharing business is very small, the integration would be relatively easier. “We work with each other a lot. So we know each other.”
This acquisition is very Ctrip, making Tujia and Ctrip’s relationship once again the center of attention. A little known fact is that, Tujia, when the company was established, already had connections with Ctrip. Ctrip had made investments in Tujia during 2012 to 2015, becoming one of the shareholders of the company. When Tujia completed its D and D+ round financing in August 2015, Ctrip sold part of the shares and exited from the board.
It doesn’t really surprise us when Tujia announced to acquire Ctrip and Qunar’s home sharing business. “There might be more acquisitions in the future,” Luo said. So why Ctrip still decided to get rid of the home sharing business while the company already had a dominant influence in the OTA sector?
“Ctrip has been making quite a lot investments and acquisitions and mergers in the OTA sector, but the results didn’t meet the company’s expectations. Some become a burden for Ctrip. And there’s an overlap of businesses,” Chen Chi, CEO of short-term rental platform Xiaozhu told TMTpost. Chen Chi believes that recent acquisitions are actually the results of Ctrip’s internal adjustment and integration. “I can’t really tell what are the initial reasons for such moves,” he said.
This startup from Chen Chi focuses on short-term rental. At present, Xiaozhu’s service covers 301 cities in the country. As a matter of fact, Xiaozhu adopts a C2C model similar to Airbnb. “The home sources on Xiaozhu and Airbnb account for 80% of the C2C home sharing sector,” Chen Chi said, sharing statistics to further elaborate. As Airbnb continues to push its business in China, Tujia is facing more and bigger challenges since the company is based on B2C model while trying to grab a share of the C2C market.
Chen Chi stated that chasing after concepts on ecosystems and acquisitions won’t really help startups solve the core issue, which is to form a value. It requires great patience to succeed in the home sharing sector. “In 2016 VCs are gradually regaining their rationality. It confirms our judgment,” he said.
Is there going to be any giant in this new accommodation realm? About that, Chen Chi didn’t give out his comment: “We still need more observation to tell what such changes will bring to the industry. Can’t really make a comment so far.”
[The article is published and edited with authorization from the author @Li Chengcheng, please note source and hyperlink when reproduce.]
Translated by Garrett Lee (Senior Translator at PAGE TO PAGE), working for TMTpost.