China's online travel agents - eLong and Tongcheng - have entered into a strategic partnership that will see the companies exclusively supply certain products to each other.
Under the agreement, eLong will become the exclusive supplier of agency hotel and group-buying hotel inventory for Tongcheng in mainland China, and Tongcheng will become the exclusive supplier of scenic attraction ticket inventory for eLong.
Background of eLong's hotel business focus
For the year 2013, Expedia-backed eLong reported an all-time-high net revenue of $166.8 million, an increase of 36% over the previous year.
Hotel room nights in 2013 increased 60% to 25.8 million compared to 16.1 million in 2012.
eLong's focus segment is its hotel business. The company has made this clear in the recent quarterly report, and it also stated its aim of becoming the number one player in hotel bookings.
In Q4 2012, eLong’s 10% of total hotel bookings were from mobile. It has been increasing 5% ever quarter, with 30% of its total hotel bookings in Q4 2013 originating from mobile.
Background of Tongcheng's attraction ticket business
Founded in 2004, the Suzhou-based company's services include attraction tickets, hotel booking, domestic and international air tickets, car rentals and cruises.
In February 2014, Tongcheng raised $82.5 million in Series C funding from Tencent, Oriza, Boyu Capital and existing investors.
Tongcheng announced that the new fund will be used to expand its domestic and international holiday package division, attraction ticket service and mobile offerings.
The company has established partnership with Guangzhou-based online attraction service provider Yikuaiqu to sell its attraction tickets.
Tongcheng was also known as 17u.cn, but recently re-branded to LY.com.
eLong and Tongcheng partnership
The new partnership means that Tongcheng will continue to sell hotel products to its customers, but the supply will be from eLong, and this is in line with eLong’s hotel-focused strategy, explains eLong.
eLong does not yet have a large scenic attraction ticket business, and will add these Tongcheng supplied attraction products for sites in mainland China, according to eLong.
CEO of Tongcheng, Wu Zhixiang, says:
"With this agreement we will provide an expanded selection of hotel offerings for our customers, and will focus our resources to build on our leading position in the scenic attraction ticket and leisure travel markets in China."
The trigger
The partnership between eLong and Tongcheng comes at a time when the country's two largest travel sites - Ctrip and Qunar - are rumored to be in a merger talk.
According to iResearch, a research company in China, among the OTAs in China, Ctrip has a marketshare (by revenue) of about 50%, and eLong and Tongcheng have a combined marketshare of about 25%.
When it comes to site traffic, Qunar, the travel search service tops the chart, followed by Ctrip, Tongcheng and eLong.
Now, this would put the four companies - Ctrip, Qunar, eLong and Tongcheng - in the perspective of their marketshare and size.
We asked eLong whether this partnership with Tongcheng was a result of the rumored merger talk between Ctrip and Qunar, but no response was received till the publish time of this article.
The common stakeholder between eLong and Tongcheng is Tencent, one of the biggest internet business giant in the country who is also making its travel industry presence stronger.
Local business blog reports that Tencent could be the trigger for this partnership between eLong and Tongcheng, in an effort to compete against the potential player Ctrip-Qunar.
NB:Partnership image via Shutterstock.