Deal focus: Investors book trip with China's Tongcheng

On this basis, a company like Tongcheng Network Technology - which is behind travel website Ly.com and a leader in the online travel agencies (OTA) market - has arguably realized just a fraction of its true potential in China. This was the rationale behind CITIC's decision to join existing investors Wanda Group and Tencent Holdings in a RMB6 billion ($967 million) round of financing for the business.

CITIC had been eyeing investment in China's travel space for the past two years and OTAs emerged as one of the more attractive areas. "Deeper penetration, especially in sub-sectors such as tourist destination tickets and packaged tour products - both domestic and outbound - will grow rapidly," he explains. "OTAs are gaining market share from offline players with their national coverage, larger user base, higher efficiency and price advantage."

Set up in 2004, Suzhou-based Tongcheng provides online travel services including tickets for scenic attractions, hotel booking, domestic and international air tickets and cruises. It most recently received $200 million from Ctrip International, which became the second-largest shareholder after the management team, in April.

The company previously got RMB500 million from Tencent, Boyu Capital and Oriza Holdings, having raised an undisclosed sum from Tencent Collaboration Fund in May 2012. The company's first round came in early 2010 when Oriza - then called Suzhou Ventures - put in $2.9 million.

Last year Tongcheng claimed it had served 30 million customers since inception; the company further says it is among the top three players in the industry, by gross merchandise value (GMV) and by number of customers served. CITIC came by the deal through its relationship with existing investors Tencent.

"This is our first investment in the OTA sector, and we have a few other targets in the pipeline in the general travel sectors, including tourist destinations and travel services," Wang adds.

One of Tongcheng's strengths is that it now has the kind of scale required to provide a wide spectrum of products outside of its core offering of travel tickets and local tour packages - something its smaller competitors struggle to do. Wang also notes that while the company is still competing with other leading OTAs for market share and volume, the entry barrier is becoming higher.

"Tongcheng will use the proceeds for branding building, strengthening its system and providing the most wonderful user experience in its app design, product offering and service," he says. "The company will continue to strengthen its market position in all aspects of travel products, as the leading OTA in China."

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• Topics
• Greater China
• Consumer
• Technology
• Venture
• China
• TMT
• Consumer
• Venture
• CITIC Capital
• Growth capital