Date
23 September 2017

Time for eLong to rethink its single-product strategy

Don’t put all your eggs in one basket. In the highly volatile world of the internet, this adage means don’t focus on just one core business or operate just one platform.

In their latest report cards, most of the major online travel agents (OTA), both domestic and foreign, appear to be doing well, except for eLong (LONG.US), a Chinese OTA backed by Expedia and Tencent (00700.HK).

Battered by its cut-throat competition with Ctrip.com (CTRP.US), eLong booked a 168 million yuan (US$27 million) loss for 2013, its first yearly loss in the past five years. 

Cui Guangfu {崔廣福}, the company’s chief executive, blamed the huge deficit mainly on fierce competition and a slowdown in traffic as a result of its cooling ties with Baidu (BIDU.US).

Both explanations are valid, but eLong’s focus on a single major business — hotel bookings — is probably the real problem.

Ctrip, which offers one-stop holiday booking services, reported a net profit of 998 million yuan for the year.

Cui has insisted on hotel bookings as the firm’s core business, and the strategy used to work for several years.

In this business, eLong books lots of hotel rooms from various hotels to enjoy bulk purchase discounts, and then sells them through its site at a slight mark up. Back in 2012, Cui said eLong was the largest player in the sector, with its sales in terms of hotel room nights four times bigger than Ctrip’s.

But after group buying sites led by Meituan {美團} and Dianping.com invaded the territory, eLong soon lost its leading status.

ELong’s relationship with Baidu, meanwhile, turned distant after Baidu invested in its own OTA –Qunar {去哪兒} – and became its majority shareholder. The two have worked more closely after the latter went public last year.

On the other hand, eLong’s relationship with Tencent doesn’t seem to bringing much synergy.

Back in 2011, Tencent invested US$84.4 million in exchange for a 16 percent stake in eLong, a move that was taken to mean the internet giant wanted to expand into the OTA sector as well.

While Cui kept telling media about the benefits of the eLong-Tencent alliance, nothing much happened after the capital injection. Cui never saw the kind of support he had hoped to get from Tencent.

ELong is now trying other tricks to revive its business. In the last quarter of 2013, its hotel bookings through mobile platforms comprised more than 30 percent of its total, up from 25 percent in the previous three months. However, rivals like Ctrip are also cultivating the mobile channel.

ELong was also the first OTA to link itself up with Tencent’s payment system Weixin Payment. But just weeks ago, Ctrip announced that it has also linked up with Weixin Payment, thus removing eLong’s edge in this respect.

In fact, Ctrip appears to be more successful in tapping the advantages of having a mobile channel and a tie-up with Weixin. For smartphone users, it is more convenient to book an airline ticket, accommodation and holiday package using a single mobile platform, something which eLong cannot offer.

What’s more, Ctrip appears to be close to winning over another major partner. Rumors have it that e-commerce giant Alibaba is considering taking a stake in Ctrip.

If that happens, eLong may find it even tougher to catch up with Ctrip.

– Contact the writer at [email protected]

CG

EJ Insight writer

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