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Trip.com teams up with JD.com to sustain its role in China's business travel market
During the COVID-19 epidemic outbreak in the first half-year, tens of millions of trips booked on Trip.com were canceled or rescheduled, which puts a lot of competitive pressure on it.
On August 16, Trip.com and JD.com inked a strategic cooperation. JD.com will have access to Trip.com's core product supply chain, and the two sides will carry out all-round cooperation including users, channel resources, business travel expansion.
It's worth noting that prior to the official cooperation was announced, there were rumors that Trip.com chairman Liang Jianzhang and Alibaba CEO Zhang Yong had a meeting in Hangzhou, and that the two sides might be cooperating more on the basis of Alipay, and there were even rumors that Alibaba might be teaming up with Trip.com by way of acquisition, equity stake or strategic cooperation.
Whether the news is accurate or not, Liang Jianzhang is indeed looking for a partner for Trip.com, and the main reason behind this is to fight with Meituan, its arch-rival.
In July this year, Meituan launched a hotel advance purchase product named "Super Group-Buying", mainly for the international and domestic (China) high-end hotel group to attract investment, whose requirement is to participate in the hotel discounts below the market price of 60%, unused and expired at any time back.
Obviously, the move is a direct threat to Trip.com's development. And in the face of Wang Xing's challenge, Liang Jianzhang also takes an active measure.
Meituan is expanding its businesses from all sides, while Trip.com is sticking to its hotel and tourism business market. Now, the two are on a direct conflict, and it's unclear who will win.
Meituan launches new business to compete with Trip.com
Meituan's entry into the hotel and tourism business market is no coincidence. In 2016, Meituan signed a distribution partnership agreement with an intercontinental hotel. It meant that Meituan began to enter the high-star hotel market, which is Trip.com's core business.
For Meituan, the delivery business, which currently accounts for more than half of its revenue, accounts for only a third of its gross margin. While the in-store and travel business, with gross profit margins as high as 90%, is the most profitable business for Meituan. For this reason, Meituan has also been focusing heavily on the hotel and tourism business.
According to the data from Trustdata, a third-party data agency, in the first half of 2019, Meituan's hotel orders accounted for more than half of the total for the first time, reaching 50.6%. At the same time, Meituan's hotel overnight volume accounted for 47.3%, once again surpassing the combined total of Trip.com, Qunar.com and Tongcheng-Elong.
The development of the hotel and tourism business has also indeed brought benefits to Meituan. According to Meituan's financial report, in the third and fourth quarters of 2019, the in-store and hotel and tourism business contributed 57% and 58%, respectively, of the total gross profit for the period, more than half share.
However, most of Meituan's hotels are low-star hotels with low unit price, which leads to low gross profit margins, so its income is not as good as Trip.com. And the purpose of the launch of Meituan's group buying business is to make a breakthrough in the high-star hotel business.
On July 30, Meituan officially launched the "Super Group-Buying Day", and started the live broadcast event that night. According to the official disclosure data of Meituan, during the one-hour live broadcast, the total number of viewers reached 5.5 million.
However, it won't be that easy for Meituan to grab the high-star hotel market from Trip.com in the near future.
"In the high-star hotel market, users trust Trip.com more, which is the result of years of accumulation and is difficult for outsiders to break in the short term. Even if other platforms have acquired some customers through subsidies, they may not be able to retain customers." Li Lin, an employee of Trip.com, told Tech Planet (ID: tech618).
He also said that most of the high-star hotels involved in Meituan's "Super Group-Buying" project can only be considered as mid-range hotels, so it will not pose much of a threat to Trip.com.
At the same time, Trip.com has also been consolidating its relationships with high-star hotels. Liang Jianzhang understands that only by firmly grasping the resources of high-star hotels can the company occupy a place in the online hotel industry, or else it will soon be out of the game.