Priceline has long been one of the smartest players when it
comes to mergers and acquisitions and it looks to have made another key move
with its recent investment into Meituan-Dianping finds EyeforTravel’s new report
into the company.
Priceline just strengthened its Chinese market position by
investing into Meituan-Dianping, one of the fastest growing players in the
Chinese digital space, showing its ambition in international expansion and
giving it a new edge says the
report into the online giant. In October 2017 Meituan-Dianping announced
the investment as part of Series C
funding into the start-up, which brings
together group buying, booking and reviews.
It is a rapidly
rising power in Chinese online travel thought to be behind only Ctrip and
Qunar. Reportedly, Meituan-Dianping recorded more than 18 million room night
bookings in July 2017 alone and claims to have meteoric growth rates that are
quickly making it one of the world’s top start-ups by reported valuation. In
the latest round of investment the company was able to raise USD4 billion,
giving it an estimated value of around USD30 billion – a valuation that would
put it among the biggest of the emerging tech companies and perhaps even bigger
than Airbnb.
Although Priceline has a
comparatively small stake in the company, with its investment reportedly valued
at USD450 million, it also
announced that it was to create a distribution partnership between the company’s
travel division and Priceline’s main Asian arm, Agoda. This is potentially more
crucial than the investment itself and likely what Priceline was mainly looking
to get at in the funding round.
“Now, Priceline has a fantastic presence in Asia-Pacific
through Agoda, its partnership with Ctrip, and now this additional investment,”
says Alex Hadwick, Head of Research at EyeforTravel. “It is therefore sitting
on a well-fortified position within the market space and is also hoping to grow
its Booking.com presence in the country with a local team. What’s more it has
been able to achieve this without having to put in the huge sums other
international tech giants have made into market. Famously Uber invested
billions before conceding to local competition, so Priceline are able to minimise
risk through their network of investments while growing market penetration.”
With a predicted Compound Annual Growth Rate (CAGR) of more
than 8% between 2017 and 2020 and even a faster growing domestic market, the
attraction is obvious for Priceline and getting involved with local players at
this stage could be crucial as EyeforTravel’s research suggests that more than
seven out of ten digital travel bookings in China are made with Online Travel
Agencies (OTAs).
