Just after the first the anniversary of introducing the “luxury hotels” platform, Meituan revealed that the platform listing mainly luxury hotels has a listing of 15,000 hotels, or 92% of luxury hotels in China, drawing more than 10 million users to the platform. Meituan-Dianping’s vice president and hotel division general manager Qing Guosaid that the “luxury hotels” platform draws 60% of new registered users to Meituan.
One out of 10 hotels listed on Meituan are luxury hotels. The growth rate of room nights booked for luxury hotels reached 300%. Users of luxury hotels are trending towards younger ageand higher income levels – nearly 65% of the users are in their 20s and 30s, while 59% of the new users are aged below 30. Some 66% of them use iPhone.
Mr Guo believes that luxury hotels will be a key growth area in online domestic accommodation booking. “We have to empower new users and make the cake bigger together with luxury hotels, not fleece luxury hotels.”
Meituan cut into online hotel booking in 2012 through offering group buys, and expanded in the segments of budget hotels, hour-rate hotels and inns. It set up a hotel tourism division in 2015 featuring four streams, and accommodation is one of them. The division evolved into a separate “Meituan Travel” brand in April, and the ambition is to build a one-stop travel platform.
The luxury hotel segment is a key step for realising the ambition. The strategy of strengthening its foothold in the luxury hotel was revealed in May last year. Internally, the accommodation business is regarded a “rocket”. Meituan has amassed a large number of young users whose needs tend to have become more personalized, diverse and quality oriented. Luxury hotels are big ticket items that also bring more substantial commissions and thus higher returns.
Meituan-Dianping adopts industry standards in categorizing luxury hotels. There are four stars, five stars, high-end and deluxe hotels. The luxury hotels listed on Meituan app go for an average room rate of 360 yuan per night, where the luxury hotels listed on Dianping app has an average room rate of 500 yuan.
Meituan going after the luxury hotel segment is challenging the dominance of Ctrip in the segment. “We did face some interference from Ctrip in the process,” Mr Guo said, referring to reports that InterContinental Hotels Group faced pressure from Ctrip when the group was discussing partnership agreement with Meituan-Dianping.
“This is a battle we have to fight. Many of our 10 million users never stayed in luxury hotels before. There is no overlap with Ctrip’s user groups. We are actually bringing new customers to add to Ctrip’s market.”
Meituan takes on the battle by quickly expanding its business development team, which as nearly 2,000 people currently.
It is inevitable that Meituan has to throw in money to play catch up in winning over merchants and customers. The commission rate it is getting from luxury hotels is just 10% on average, which is lower than the industry average of 12%-15% offered to OTAs. Certain single hotels with lower bargaining power pay up to 18% to 20% in commission. “Hotel operators will feel that there is finally a channel that can understand them,” Mr Guo said.
As a newcomer, Meituan also has to dig into areas where needs are not yet met, such as putting online certain luxury hotel services like buffet and family-based recreations, in order to develop more revenue streams other than accommodation. “Our user surveys show that 32% of users have F&B needs during their stay, and 17% of the users have recreational needs. The message for luxury hotels is that we can meet these needs together with the operators,” said a Meituan business analyst.
Meituan-Dianping has accumulated some 600 million users in total. “Users may buy food or movie tickets on the platform. They are all lifestyle spending that generate information flow and cash flow. Hotel is very much the same,” Mr Guo said. Through certain algorithms, the accommodation preference of users can be deduced from their spending habits on food and their consumption power.
Since sealing the deal with InterContinental in December, Meituan-Dianping has reached partnership with more well-known accommodation brands such as Beijing Capital Tourism, Wanda Hotels, Empark Hotels and Resorts and Shangri-La Hotels and Resorts. These partnerships also helpMeituan-Dianping attract more high-end customers and connect with high-end markets.
Meituan reports that the platform achieves a daily conversion rate of 37% for luxury hotels and a repeat business rate of 36% by luxury hotel customers in three-month periods. About 30% of the new users will also book again on Meituan within three months.
Despite such numbers, Meituan is thought to be “limping” ahead in between counter-strikes by giant OTAs.
Meituan-Dianping reported a record number of hotel bookings on a single day, at 1.2 million room nights on April 29 this year. In April, Meituan and Dianping platforms collectively registered bookings for 17 million room nights, while media are sceptical of such numbers.
In response, Mr Guo said: “The number of hotel rooms that are available for online booking on Meituan and Dianping totals 12.5 million. The volume of daily booking is only 6% of that total.” He believes that only 20% of the accommodation industry supply is supplied on line, “which implies that the capacity of accommodation is so enormous that the industry could easily accommodate two Ctrips and twoMeituans.”
Meituan believes it’s competing against itself rather than Ctrip. The platform is focusing on whether its team has the capacity to keep up with the speed of platform building and if the company’s development pacecan keep up with the maturing of its consumers.