In a move that sends a subtle signal to US travel titans Expedia and Priceline, Chinese travel giant Ctrip has bought a tiny US startup called Trip.com.
Trip.com was founded in 2010 by former Myspace exec Travis Katz and employs 25 people in Palo Alto, California.
The purchase indicates the global ambitions of Ctrip to move into Western markets.
Chinese travel giant Ctrip has made an interesting step into the US travel market by buying a small Palo Alto, California, startup known as Trip.com. Terms were not disclosed but Trip.com raised $39 million from investors like Battery Ventures, Redpoint and Expedia via a strategic partnership with Expedia's vacation-home-rental unit Homeaway.
CEO Travis Katz, who is staying on along with all of his employees, told us he put the deal together himself and is "happy with it" as are his investors.
Ctrip is China's biggest travel booking company and one of the largest travel booking companies in the world. It trades in the US on NASDAQ with a market cap of $25 billion.
Ctrip sent waves through the travel industry when it bought Scotland-based flight search company Skyscanner at the end of 2016 for about $1.74 billion. Skyscanner is the like the Kayak of Europe, a popular site for searching multiple airlines. Ctrip's acquisition signaled that the Chinese company had ambitions beyond Asia, starting with Europe.
Europe is an easier target than the US in many ways. The US industry has become a duopoly of sorts between Expedia and Priceline, each of which have snatched up most competitors of any significance. Expedia owns Hotels.com, Hotwire, Trivago, Travelocity, Orbitz, and HomeAway and others. Priceline owns Booking.com, Priceline, KAYAK, Rentalcars.com, OpenTable and others.
In fact, the hotel industry is so unhappy with lack of competition and the 20%-ish commissions these two companies can now command, it has been lobbying to lawmakers against them, CNBC reported in May.
The app got noticed when it started to help Chinese travelers
Trip.com is so tiny, Ctrip's acquisition of it will be noticed by the US giants. The app is similar to Trip Advisor in that it combines finding a deal on a hotel with recommendations on places to eat and things to do. Its claim to fame is providing users with recommendations from "tribes" like foodies, adventurers, families, business travelers and so on.
But its popularity is growing. It's among the top 500 apps according to AppAnnie and 10 million people use it, Katz says.
Earlier this year, Katz launched international versions, including one in Chinese. His wants to help the growing number of Chinese travelers find cool things to do when they leave Asia.
And that caught Ctrip's attention. Katz had met Skyscanner's cofounder and CEO Gareth Williams and the two men hit it off with a shared visions of the future of travel booking – an AI app on your smartphone that knows who you, where you are and what you want, Katz said. Williams introduced Katz to Ctrip's executives. (Interesting note: Ctrip is run by women, including the CEO Jane Sun, its CFO and its chief strategy officer.)
Locked in a hotel room on vacation
Acquisition talks began in the summer while Katz was, ironically enough, vacationing with his family. The family went out to have fun and "I ended up locked in hotel room on phone with these guys trying to get the deal done," he says.
Katz says the purchase of his startup by Ctrip doesn't mean that the Chinese travel company is moving in on the US market immediately. The current focus remains Europe. But, he points out, "Ctrip is the first Chinese Internet company making aggressive moves in the West." He adds that "Chinese companies tend to take a long view on things."
In other words, Ctrip knows the US is a hard market to crack and it's not ready to try just yet. But they also see the discontent with the status quo and that could become the opening they need.