Investors book passage with Tuniu

Tuniu provided over 40,000 tours to more than 3 million visitors in the first half of this year, and it has the potential to grow further as China's online travel industry continues to develop rapidly. Last year, market transaction size exceeded RMB170 billion ($28 billion), with an annual growth rate of 30%, according to iResearch. 

Investors appear to be convinced by the Tuniu story. The latest round of funding, led by Temasek Holdings, is worth $60 million, of which $10 million comes from DCM. It brings total investment in the company to around $123 million. Gobi Partners backed Tuniu's Series A round in 2008, with DCM entering in the second round. The Series C saw Highland Capital Partners, Sequoia Capital and Rakuten join the investor roster.

When the company launched in 2006, group booking and package products was a more complex, under-exploited segment typically served offline by tourism agencies. Since most Chinese tourists still prefer to travel in groups instead of just hopping on a flight to a vacation destination, Tuniu decided to list those products online and provide lead generation to the offline tour package companies.

Hurst Lin, partner at DCM, says the company now has enough purchase power to come up with its own branded tour products. "What's different now is that it is reaching into supply chain and is more involved with the upstream supply chain," he explains.

For example, the funding will help diversify the service to offer a list of tour components that users can mix and match to personalize their tours. But a lot of customers need to sign up to for each attraction and hotel that goes into the package and this requires scale. Once there is a certain level of demand it brings the cost down.

"Tuniu is raising more money so it can scale up enough to drive down the cost of these tour packages and more travel agencies will list their products on the platform," Lin adds.

As the business evolves to a hybrid model, it will work to identify trends in customer preferences with its business operation supporting system. The technology provides database analysis to understand what customers are buying and adjust offerings to meet demand.

A wider choice for also means attracting more tour suppliers and increasing the number of departure cities and destinations it offers. "We continue to add cities based on where we see the demand. Our destinations are places Chinese are fond of going and if they want to head to out-of-the-way places like Scotland or Iceland, we'll add those destinations," Lin says.

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• Topics
• Venture
• Greater China
• Consumer
• Technology
• Technology
• Consumer
• China
• Temasek Holdings
• DCM-Doll Capital Management
• Venture