Meituan-Dianping reportedly mulls hotel unit spin-off for independent financing
Meituan-Dianping would have to spin off its hotel business as the company was expected to run out the 3.3 billion dollars raised in its series E round within 1.5 years.
Meituan-Dianping is reportedly preparing to spin off its hotel business for independent financing but the company gave a “no comment” response to the report. Tencent Technology News reported that some of the company’s staff already knew about the potential spin-off, but there was no definite timetable.
Meituan-Dianping reported 46 million room nights in hotel bookings in the first five months of the year, and claimed hotel bookings in the first quarter rose 80% and accommodation revenue grew almost 100% in the period. In terms of room night volume, the company has become the largest hotel-booking online platform in China.
However one of its competitor OTAs disputed the figures, and revealed that Meituan-Dianping’s hotel booking statistics included lots of reservations by room “hours” instead of room nights, which indicated that the actual room booking volume on Meituan-Dianping might still be far behind the OTA giants’.
Other than competing with Qunar for midscale and economy hotel bookings, Meituan-Dianping is also expanding its hotel ranges. The company’s upscale star-rating offerings has now covered more than 10,000 hotels, with operating revenues from the segment exceeding 130% growth in the first quarter of 2016.
Meituan.com ventured into hotel tourism business by leveraging its group-buying business in 2012, before its merger with catering review website Dianping.com in 2015. Meituan-Dianping, the integrated company, now operates with four business units: group purchase, food delivery, ticketing and hotel tourism. Transaction commission, advertisement fees and subscription fees are the company’s major source of income.
“Meituan-Dianping’s staff are aware of the spin-off, as the company’s USD 3.3 billion cash raised in series E round can only sustain the company for 1.5 years at most, if the company continues to spend money the way it’s doing now,” Tencent Technology News quoted an unnamed employee of Meituan-Dianping.
Spinning off Meituan-Dianping’s hotel operation is believed to help the company raise funds separately, and also enhance the company’s spending control. As well, the company’s valuation might also rise if it seeks an IPO after gaining more funds for its split operations. （Translated by Jerry）