Why Booking Holdings is investing in Asian tech companies
Asian e-commerce has been a difficult puzzle for Western businesses to solve. The Chinese market has significant regulatory limitations and it can be difficult to meet local tastes in other Southeast Asian and East Asian markets. But there is much to be gained since these markets (China in particular) are among the fastest growing e-commerce opportunities in the world.
UberThe experience in China shows how difficult this can be. After spending billions of dollars to gain a foothold, the company still couldn’t win against local rideshare favorite Didi Chuxing. Uber has finished sell his Chinese business in exchange for equity in Didi in an admission of defeat.
Reserve assets (NASDAQ: BKNG) took a somewhat different approach in Asia and achieved a surprising level of success. Here is how they did it.
A partnership model
There were several directions Booking could have taken to establish its presence in Asian markets, but the company chose to partner with local e-commerce leaders. Booking’s partnerships have involved equity investments in exchange for access to a large user base.
Booking’s Chinese partnerships with Ctrip (NASDAQ: TCOM), Meituan-Dianping (OTC: MPNGF), and Didi Chuxing are probably equally seeking to avoid the burden of Chinese legal problems by accessing China’s population of over one billion. The partnership with Grab, based in Singapore, gives access to Booking to users in Indonesia, the Philippines, Thailand, Vietnam, as well as other regions.
|The partners||Established||Company Description||Description of the partnership|
|Ctrip||2012||China’s leading online travel booking site||Booking bought Ctrip shares. Ctrip uses Booking for outgoing international trips.|
|Meituan Dianping||2017||One of the largest Chinese platforms for food delivery, shopping and travel||Booking bought Maituan Diaping shares for $ 450 million. Meituan allows users to book hotels on Booking from the Meituan platform.|
|Didi Chuxing||2018||VTC in China, Taiwan, Mexico, Australia, Brazil and Japan||Booking has invested $ 500 million in Didi shares. Didi allows users to book hotels on Booking from the Didi platform.|
|To catch||2018||Carpooling in Southeast Asia||Booking bought $ 200 million worth of shares in Grab, which allows users to book hotels on Booking from the Grab platform.|
What is there for Asian platforms? More options for users. Although Ctrip and Meituan-Dianping offer many travel options for hotels and domestic flights in China, they do not have Booking.com’s vast inventory of international travel options in Greater Asia and the world. And providing more features (such as travel) makes online platforms more valuable to users, thus creating a win-win proposition for Booking and its Asian partners.
In addition to generating more business for Booking, the partnerships have provided great gains on its equity investments. In Booking’s annual report, he notes an unrealized gain of more than $ 400 million on his investment in Ctrip. The company’s $ 450 million investment in Meituan-Dianping is now worth around $ 1 billion, an attractive return of 120% in just one year.
Didi Chuxing and Grab are not yet public, so it is difficult to determine if Booking made any money on these investments, but there is a good chance that he will come out with good earnings. The two ridesharing companies have strong market positions and continue to grow.
Booking’s equity investments in its Asian partners were as strategic as they were financial. One of the advantages of this arrangement is that the company has several ways of earning.
Lots and lots of growth
By all accounts, the Asian online travel booking market is growing very rapidly. In 2018, more than 130 million Chinese residents traveled abroad. This is only a small fraction of the global travel booking market today, but Chinese international travel is expected to become a large part of total travel by 2050. Booking also has a nice “booking option”. ‘call’ on travel to Southeast Asia through its partnership with Grab. and its ownership of the Asian travel booking site Agoda.com.
All this announces strong growth for Booking from Asia. The company’s partnership approach has enabled it to establish a strong presence in the region which should be beneficial for the years to come.
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