Chinese travel site Tuniu gets $500M injection, JD now biggest shareholder

Tuniu, a NASDAQ-listed Chinese travel and tourism site, announced today it has secured a US$500 million investment led by ecommerce giant JD. JD will purchase US$350 million worth of shares in Tuniu, with the rest divided between Hony Capital, DCM Ventures, Ctrip, Temasek Holdings, and Sequoia Capital. The deal is expected to close sometime in the current quarter.

Ctrip, JD, and Hony in December contributed to a US$148 million injection into Tuniu. JD is now Tuniu’s largest shareholder with a 27.5 percent stake.

JD is Alibaba’s closest rival in China.

Soaring travel market

As part of the deal, Tuniu will be more closely integrated into JD’s online marketplace, according to a statement by the ecommerce company. It also means Tuniu will “operate, for five years without commission, the leisure travel channel for both JD.com’s website and mobile app, and will become JD.com’s preferred partner for hotel and air tickets booking services.”

Just a few short years ago, China’s online travel market was heavily fragmented. But more recently, the industry is consolidating along the lines of the country’s three biggest web giants, collectively referred to as BAT. In one corner sits Tencent, backed by Tuniu, JD, Ctrip, and Woqu. In another corner sits Baidu along with its compatriate Qunar. And completing the triangle is ecommerce titan Alibaba, which uses its extremely popular marketplaces Tmall and Taobao to sell travel services. Alibaba has also backed outbound visa service ByeCity. Alibaba last year spun off many of its online travel services into a separate website called Alitrip.

China surpassed 3.8 billion tourists, both domestic and outbound, in 2014. Travel and tourism revenues rose 14.7 percent year-on-year to RMB 3.4 trillion (US$547.5 billion), according to TravelChinaGuide.

Tuniu troubles

Tuniu has had a rough ride since listing on the stock market. Chinese tech blog Huxiu implied its US$120 million IPO was a ponzi scheme. Tuniu has never made a profit, with last quarter marking the firm’s biggest net loss ever at RMB 176.5 million (US$28.4 million). The site specializes in booking travel and tour packages, a highly-competitive marketplace with rivals like Ly.com, 17U, Yikuaiqu, and Lvmama.

Tuniu engaged in a price war with Ly.com last year, and demanded all of its partner agencies offer it lower prices. Ly has since fired back, saying it would completely surpass Tuniu within 12 months. Ctrip, China’s largest online travel company, is a common investor in both companies. Ctrip is embroiled in a price war of its own with Baidu-backed Qunar.

Last month, a group of 17 travel agencies launched a boycott of Tuniu over pricing disputes. Tuniu has responded to the boycott by calling it irrational and suggesting that it will hurt the healthy development of China’s international tourism industry.