Although online travel is no longer something new, planning and booking tours online is still growing fast in China. Revenue for Tuniu, the leading online package and group tour company in China, saw triple digit growth to Rmb 1.2 billion (in gross revenue) last year. In an interview with its CEO, Donald Yu, said the trend will continue and Tuniu’s revenue is expected to more than double this year.
The Nanjing based company was founded in October 2006 by Donald (Yu Dunde) and his partner and current COO Yan Haifeng. It provides travel services including packaged tours, group travel, DIY tours, and combined air ticket and hotel booking packages. The company covers both Chinese domestic travel, as well as international tours.
Focus on leisure travelers
“Compared with others in the industry, we concentrate on package and group tours. Some competitors offer package tours, but the bigger ones mostly focus on booking hotels and air tickets. Meanwhile, eLong does not offer package tours at all, instead focusing on hotels and airfares,” said Donald.
“I like their direction,” Don Jiang of Gobi Partners said when being asked why he invested into Tuniu in 2008. Gobi is an early stage venture capital firm in China. At that time, Ctrip and eLong dominated the online travel industry in China. Both are listed on Nasdaq and focus on providing hotels and air ticket booking services for business travelers. “The business travelers are well-serviced by Ctrip and eLong. On the other hand, there is room for a player concentrated at leisure travelers,” said Don.
China’s white-collar workers are growing fast and their income is improving. Like what happens in the West, traveling has become one of their favorite pastimes. Package tour is still something they prefer, especially for new destinations and overseas travel, said Don. “Also, the total cost is cheaper than booking your own tickets and hotels,” he added.
Steady and fast growth
The Chinese government expected total domestic travelers would be 2.9 billion this year, an increase of 10%, and domestic tourism income would be Rmb 2.22 trillion, an increase of 15%. Total tourism income (including both domestic and foreign travelers) will reach Rmb 2.57 trillion, an increase of 14%. In an industrial conference in Guangzhou, Shao Qiwei, head of China National Tourism Administration, said travel industry would continue its steady and fast growth. On the other hand, industry experts believe online travel will be growing even faster, at 30% annually.
“I also like the management team. They are young and they learn fast,” Don of Gobi said. Before founding his own company, Donald worked for a blogging site in 2004 and then a parenting site.
When Tuniu was founded in 2006, it had only 5 staff members but it grew rapidly. By end of 2007, after just one year, its staff increased to 50. In addition, the Beijing and Shanghai offices were established in 2007. In 2008, Tuniu expanded to provide greater coverage around China.
Tuniu also developed its own business operation support system (BOSS). It uses its BOSS to conduct database analysis, which allows it to understand trends in the Chinese travel market quickly and effectively.
“We make the booking process simple and we provide better prices for our customers. That is why we are the market leader for package and group tours,” said Donald.
By the end of 2009, the company had 270 employees. Last year, it saw triple digit revenue growth. Total gross revenue increased to Rmb 1.2 billion. And Donald expects Tuniu’s revenue to more than double this year.
Tuniu currently has about 1,500 employees. It provides tours leaving from 20 cities in China. It has over 20,000 different travel products and it has booked more than 1 million tours for customers.
The company has had 3 round of fund raising so far and has received total investment of about US$60 million. It had A and B rounds of fundraising in 2008 and 2009. Gobi was involved in both, while DCM was involved in the B round only. The C round took place last year, and included DCM and three other investors.