ChinaTravelNews has learned that major tour operator HKCTS Group has merged its subsidiary CTS with OTA Mangocity, indicating that HKCTS is taking a big leap towards O2O integration.
The merger was implemented in a simultaneous meeting in Shenzhen, Beijing and Hong Kong at 10 am today (June 24, 2015), through merging the two companies’ management and businesses. The management of both companies will share responsibilities of the other company, and Mangocity’s CEO James Li will take on the additional title of CTS vice president with responsibilities on online operations.
CTS is the flagship travel service arm of parent company HKCTS, an enterprise under the State-owned Assets and Administrations Commission (SASAC), and it was listed in Hong Kong in November 1992.
Mangocity was registered in Shenzhen and began operations in 2006 and now has over 600 staff and operations in travel services covering air tickets, hotels, resorts, cruise, event tickets, visa service and car rental.
With ferocious price wars heating up competition in the Chinese OTA market and mobile apps adding fuel to the fire, the gap between underfunded Mangocity and its big player competitors like Ctrip, eLong and Qunar has widened in recent years. Mangocity has also fallen far behind its booming startup competitors LY.com, Tuniu and Utour recently, relegating it further into irrelevance for industry observers.
In late 2013, Mangocity appointed Mr Li, then eLong’s vice president, as its CEO. Since then, Mr. Li has been actively advocating integration of CTS’s offline resources and agency system with Mangocity’s online platform in order to counter OTAs’ encroachment of offline travel market. This brought about the merger of Mangocity and CTS.
As the top tour operator in China, CTS’s operations include inbound tourism, outbound tourism, domestic tourism, corporate travel, MICE, visa agent service, air travel, ticketing and others. HKCTS and CTS were restructured as flagship enterprises in the Chinese tourism industry by SASAC in 2007.
The significance of the CTS and Mangocity merger lies in the integration of O2O resources and networks. The travel industry has already had a major trend shifting towards cross penetration and integration of online and offline businesses, led by Qunar investing in tour operator Travelling Bestone, Tuniu setting up shops in second- and third-tier cities and Utour investing in travel ecommerce Uzai.
However the biggest challenge O2O companies face is working out the differences in management teams, corporate cultures, operation systems, compensation and benefits of each business to turn it into a cohesive model. (Translation by David)