Chinese OTA Tuniu.comhas announced a $500 million investment from a group of investors including Ctrip.com.
However, e-commerce giant JD.com led the investment, putting in $350 million and becoming the largest shareholder in Tuniu with 27.5% of the business. JD.com is spending $250 million cash on newly issued shares and providing $100 million-worth of support as part of an "in-depth strategic agreement".
A key element of the partnership is that Tuniu becomes the exclusive supplier, for the next five years, on the travel channel on JD.com. It will provide packaged tours, cruise line products, tourist attraction tickets, visa processing services, train tickets and car rental services.
Tuniu also becomes the "preferred partner" for hotel and flight bookings.
Conversely, JD.com will support Tuniu with access to its big data, financial services, traffic and operating resources.
Ctrip has spent $20 million on newly issued shares.
The implications for the already hyper-competitive Chinese online travel market are that Chinese consumers have another choice of where to buy their travel online. Suppliers who work with Tuniu will have wider access to consumers, giving Tuniu greater negotiating power through the added scale.
JD.com confirmed that Tuniu is not replacing another OTA as the exclusive partner. It told Tnooz in a statement:
"We have our own in-house team that has traditionally operated our travel channel, but much as the Bitauto agreement brought vertical expertise to our auto channel, this partnership with Tuniu brings vertical expertise to our travel channel.
(At the start of this year JD.com invested more than $1 billion in Bitauto, a B2B2C platform).
"This is part of our long-term strategy to partner with and leverage the sector expertise of the leaders in key verticals.
"We've seen good growth on our travel channel off a relatively small base, but we see this area as a key growth opportunity for us long term. As Chinese consumers have more disposable income, overseas travel is an increasingly accessible luxury.
"Tuniu's expertise making overseas travel easy, even for Chinese travelers who don't speak English, makes them an ideal partner for us."
Arguably, the leading Chinese OTAs are unlikely to be overly concerned by the tie-up, other than a ramp-up in the competitive landscape. China's e-commerce behemoth Alibaba Group might be paying more attention. It has a big e-commerce operation like JD.com and last year announced that it was launching Alitrip.com as a standalone business unit for its travel e-commerce, removing travel from its marketplace structure.
JD.com's approach is different. It is effectively white-labelling Tuniu's inventory to power its travel channel, replacing in-house sourcing but keeping travel firmly as part of its core JD.com platform.
Was Alibaba's decision to spin off travel premature? Time will tell...