Tuniu is taking on rivals Ctrip and Qunar for a bigger share of the country's online tourism market by expanding its services to flight and hotel bookings.
Online travel agencies like Tuniu have boomed with the growth of China's middle class. The company had a market share of 23.1% in China's leisure travel sector, slightly lower than the 24.6% held by Ctrip, according to Analysys.
Tuniu's inroads into services dominated by bigger rivals also come as China's biggest airlines try to sell more tickets directly, rather than paying a commission fee for sales through web services.
Last year, China's state assets regulator mandated that the country's three State-owned airlines raise their share of direct ticket sales to 50% in the next three years, compared with less than 30% currently. The regulator also ordered commission fees paid to agencies to be halved from 2014 levels. These changes are set to hurt online travel service providers that have relied on plane tickets as a significant source of revenue.
Earlier this year, the country's largest airlines stopped selling tickets via Qunar's online booking platform, citing complaints from customers over issues such as imposing additional costs for flight cancellation and rescheduling, penalties and pricing.
Qunar's sparring with major airlines has affected its ticketing business and bit into revenues. Flights and related revenues at Qunar slid 12% to USD 86.57 million during the first quarter this year from the fourth last year.
Airfares now account for the largest share of China's online travel service market, at 58.3% last year. Hotel booking came in second at 20.8%, according to data compiled by consultancy iResearch.
However, the share held by flights has declined steadily over the years as leisure travel services emerge as a promising business for online travel agencies. Leisure travel services are expected to account for 18.7% of the market this year, up from 16.2% in 2015, iResearch said.
Yu said tickets sales through online travel agencies still appeal to customers, despite airline efforts to divert sales away from agencies. "Consumers don't necessarily go for a particular airline when they buy tickets. What they want is comparison and also discounts that come when flights are bundled with other travel services," Yu said.
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