Deal focus: Seeing light at the end of the COVID-19 tunnel

Few entrepreneurs can claim to be as passionate about the travel industry as Ming Chen, founder of KKday, a Taiwan-based tour package vendor. This is his fourth travel start-up; two went public in Taiwan and one was acquired by Chinese travel leader Ctrip, now Trip.com Group.

An engineer by training, Chen saw an under-digitalised sector where he could add value, but there was also an important sense of satisfaction in the idea of providing experiences rather than things. “In this industry, you don’t sell a product – you sell happiness. It’s very meaningful to me,” he said.

The enthusiasm is clearly infectious. At the peak of pandemic lockdowns and closed borders in 2020, KKday raised a USD 75m Series C round featuring the likes of Monk’s Hill Ventures and MindWorks Capital.

Investors were impressed by the company’s ability to pivot from an international to domestic travel focus. This included the rollout of a software product for attraction operators called Rezio that combines inventory and order management functions with smart ticket tools.

Some 1,600 organisations have used Rezio to date, facilitating travel experiences for 2.7m people. Japan is the largest market. Among the most recent customers is Asahiyama Zoo in Hokkaido, which receives around 3m visitors a year. It plans to improve its online ticketing and introduce QR codes at entry turnstiles among other upgrades.

This is the context for a USD 25m investment last week from TGVest Capital. KKday needed a little bit of top-up money to grow the software and sales team – a 40% staff increase is planned by 2023 – and take Rezio to the next level.

Chen didn’t want to unnecessarily dilute his interest in the company at a relatively low valuation while many international borders remained closed and capital markets are volatile. As such, the investment was billed as an extension of 2020’s Series C and longstanding plans for an IPO have been once again put on ice.

KKday claims its gross merchandise value surpassed pre-COVID-19 levels in June, and that the number of travel bookings in its core markets is already back to normal. This was achieved even as international travel remains less than 10% of revenue.

“Only domestic has recovered very well. In the third quarter of this year, domestic will still have strong demand, but borders still won’t be open, except maybe places like Singapore and Korea,” Chen said. “But in the fourth quarter, our main markets like Japan, Taiwan, and Hong Kong will gradually reopen. Next year, I think the whole of Asia will open up, except China.”

Chen believes this rebound could result in international travel rising to 50% of revenue, and the company could leverage the momentum to raise a larger round at a higher valuation. All expectations are that this will reboot the IPO process.

“When COVID ends, we will still do domestic and we’ll do outbound again, so we’ll have two growth engines – and they have a lot of synergies,” Chen said.

“In Japan, for example, we’ve added almost 10,000 products in the past two years that are unique local experiences for domestic travel, but those can be provided to foreigners as well. I think our business will double when the borders open.”

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• Topics
• Greater China
• Consumer
• Support services
• Expansion
• Taiwan (China)
• Travel
• TMT
• professional services