China’s online travel market continues to attract not only eye-watering levels of investment but also new entrants, with LY.com getting RMB3.2 billion ( $515 million) from Wanda Group.
Wanda is a conglomerate with four business units – commercial property, luxury hotels, culture & tourism, and department stores – and this investment is its first move into the online travel sector.
It is a huge business – it is on track to become the world’s biggest owner and operator of commercial real estate. In China alone it owns nearly 100 department stores, 70 five-star and luxury hotels and 500 cinemas. It owns Asia’s biggest ski resort, theme parks and film studios.
It also owns one of China’s biggest travel agency chains. The official statement said a key pillar of the deal sees LY.com help Wanda shift some of its existing tourism interests online.
Wanda’s entry into the online travel sector is yet another sign that the market in China is so big that businesses outside the sector are looking to muscle in and disrupt the travel-focussed incumbents.
Only six weeks ago weeks ago, another conglomerate HNA Group announced that it was linking up with internet service provider NetEase to launch a brand new OTA for China.
Wanda’s approach is different in that it is investing in an existing business. It is not known how big a stake its $515 million gets. In April 2014 Ctrip, China’s biggest OTA, invested $200 million in LY.com. Tencent, one of China’s “big three” e-commerce giants alongside Alibaba and Baidu, also has a stake in ly.com.
The $515 million will be used by ly.com ” to improve user experience and ramp up investment in brand, mobile, R&D, big data and market expansion.”
The incumbents are responding to these new market entrants with significant fundraising rounds of their own. Since the start of May this year Qunar has raised $500 million; Ctrip got another $250 million from Priceline and raised more than $1 billion through a bond issue; tuniu.com raised $500 million from a group led by JD.com.
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