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Alibaba's Secret Weapon In Online Travel Wars: Li Zhongchu

10/30/2014| 9:24:22 AM|

Li Zhongchu works with 6,000 hotels in China, including the Kempinski and Shangri-La brands, managing their IT support with his Beijing Shiji Information Technology ,

Li Zhongchu works with 6,000 hotels in China, including the Kempinski and Shangri-La brands, managing their IT support, from room bookings to parking lots. He is excited about the possibilities of the smartphone. “People are going to disappear from the front desk” in the future, he enthuses in the offices of his Beijing Shiji Information Technology , whose sales in the first half of 2014 more than doubled from a year earlier, to $164 million. Shiji’s commensurate stock price rise in Shenzhen puts Li at No. 61 this year.

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The 51-year-old got into computers as a sideline to an early government job. He found that trading companies selling PCs in the Beijing IT hardware hub in Zhongguancun didn’t know much about support. Moonlighting, he found he could make more in an hour as a techie than in a month at his work. “That made me interested,” Li smiles. He set up shop in his bedroom in 1998, investing in a nice fax machine whose letter quality impressed customers.

A turning point came when he was called in by the Shangri-La to troubleshoot and replace an outdated mainframe with a PC-based system. He got a further boost from Y2K worries in 1999 and then after the SARS crisis, when he had cash to snap up hotel-IT support rivals that were hurting. Several members of the Shangri-La staff whose faith in him was a turning point today work at Shiji. “Now they call me Mr. Li,” he says with a chuckle, his accent reflecting his Hunan Province roots.

In gaining four-time status on FORBES ASIA’s Best Under A Billion list, Shiji also has made solid inroads into China’s midrange hotels, and Li believes that sector will stay hot for a decade as leisure and basic business travel spreads in the country. One hospitality area has him more concerned: conferences. “People will use the Web more and more,” he predicts.

In September the company took a huge step toward ensuring its own future. Li reports that a half hour into a pitch for business with the chief operating officer of Alibaba Group, the Chinese Internet giant’s executive said he wanted to buy into Shiji. The result was a $438 million investment for a 15% stake.

The agreement would allow users of Alibaba’s Taobao Travel site to book air and train tickets, hotels and vacations online or by mobile with support from Shiji and its hotel network. Alibaba will get access to a Web-to-hotel online reservation system that is already used by many of China’s best hotels. For Shiji the pact could bring more new hotels into its IT-support fold. The promise for all includes cost savings as IT squeezes out the human element in bookings and other transactions. “That is what the Internet does,” Li says.

Li hopes he can ride the growth wave overseas, following his existing IT-support clients. And he sees increased opportunities with restaurants, already 10% of Shiji’s business.

One loser in all this may be China’s online-travel pioneer, Ctrip, which falls within the sights of increasingly all-purpose Web players like Alibaba. Since the Shiji pact was announced, Ctrip’s share price has dropped. Even a rapidly growing travel market may not have space for all.

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TAGS: Alibaba | Li Zhongchu | Beijing Shiji Information Technology
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