Business / Companies

VC firms find a sweet spot in travel agencies

By Cai Xiao (China Daily) Updated: 2015-02-24 07:47

Venture capital firms are increasing their investments in Chinese companies that curate outbound and weekend travel plans for domestic customers, industry sources said.

"With the Chinese government keen on upgrading domestic consumption, we are extremely positive on companies that provide outbound travel and weekend getaway packages," said Jixun Foo, managing partner of global VC firm GGV Capital.

Foo has already led investments in several such deals, including one for Chinese online travel agency Qunar, Beijing-based vacation apartment booking platform Tujia, a San Francisco-based last-minute hotel-booking app called HotelTonight and taxi-hailing app Didi Dache.

What makes the case for VC investment even more appealing, is that the number of outbound travelers from China stood at about 114 million by the end of last year, a 16 percent growth from the numbers seen in 2013, said a report published by the China Tourism Academy.

According to Foo, the number of outbound travelers from China is set increase by 20 percent to 30 percent every year, over the next five years, with places like Southeast Asia, Hong Kong and Macao set to see the maximum footfalls.

"It is also important for outbound travel companies to offer good services (air tickets, hotels, and entertainment programs). They should be able to cover many areas at a fast pace and offer competitive prices," he said.

"As there are several big companies in China offering air ticket and hotel booking services, new players can hope to attract customers with personalized entertainment packages," he said.

"We are extremely positive on firms that provide weekend getaway packages, as we believe that such companies will be in huge demand," said Foo.

Yet another sector that offers rich pickings is vacation apartment rentals, as there has been a sea change in the way people take their holidays. Earlier, most of the travelers would just visit a place for a short time and spend most of the time visiting the sights. That has now changed, with tourists keen on spending more time at the tourist spots to enjoy their holidays. This has triggered huge demand for vacation apartments as it is much more convenient and cheaper than a hotel room and more suited for the entire family, said Foo.

"Using technology innovation or the usage patterns, a start-up company can easily find an entry point to do big business and compete with large players," said Foo. "It is certainly a boom period for companies that provide outbound and weekend travel services."

Cao Yi, founding partner of Source Code Capital, a venture capital firm that has invested in Haiwan, a company that provides diversified entertainment products for outbound travel, said many VC firms are keen on companies that provide various tourism-related services at outbound destinations.

"With more giants entering the outbound travel market, it is the right time for startup companies to showcase their capabilities," said Cao.

Li Wei, a partner at Beijing-based PartnerAngel Inc, who has led investments in Xianlvke, an overseas local tour guide booking platform, and Shanghai Travo Information Technology Co, which runs a mobile travel application said the diversified travel demands of tourists offer several new investment opportunities for VC firms.

Li said her firm is keen to invest in companies that provide online to offline related travel services, especially those that are innovative and can bring benefits to users directly.

However, most online travel investment deals have been expensive, even those at the very early stage, Li said, adding that the company is now scouting for similar deals in overseas markets, like the United States.

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