Meituan has an advantage in travel over some of its competitors as it is a platform company, offering a wide range of retail services, although food delivery is its core business. The Chinese hotel market is clearly changing with Meituan and, to a lesser extent, Alibaba, behind Ctrip.
Dennis Schaal, Skift
Hotels are more than just fun in Meituan Dianping, China.
As food delivery dominates Meituan Dianping’s transactions and revenue, as part of its ‘Food + Platform’ strategy, the Chinese e-commerce and lifestyle giant now claims to handle more domestic hotel nights than any of its competitors, including Ctrip.
Releasing its fourth quarter and full year 2018 results, its second such quarterly year since completing an initial public offering, Meituan CFO Shaohui Chen said “ we continue to maintain our leading position in terms of domestic overnight stays ”. He said the national hotel business is profitable.
In 2018, Meituan saw its domestic overnight stays jump 38.5% to 283.9 million. As part of the IPO process, Meituan claimed last year that it was just ahead of leading online travel agency Ctrip in terms of booking domestic overnight stays with 33.6% market share for Meituan against 33% for Ctrip.
It is difficult to say if Meituan has widened this gap, as it is claimed, as Ctrip does not disclose its numbers of overnight stays in the country. Ctrip executives noted strong fourth quarter growth at its low end; the mid-to-high-end and international hotel segments. He did not specifically mention national hotels.
Hotels are just one of the complementary services, including wedding, spa and gym services, that Meituan offers to its large food delivery user base, and offers hotels as a sale. cross.
Meituan’s food delivery weight – it claims 60 percent market share of delivery orders in China – is a competitive advantage. Chen said more than 90 percent of his first hotel bookings used either Meituan’s food delivery services or in-store catering services.
Chen said most of the company’s hotel bookings do so for leisure travel, but there may be more lucrative future trends as Meituan aggressively grows into high-end hotels.
“So as this younger user ages, their income and purchasing power also increase,” Chen told analysts on an earnings conference call Monday evening local time. “And their total reservation requests naturally shift to high-end hotels.”
In 2018, Meitiuan saw revenues in its in-store catering, hospitality and travel segment jump 46% to $ 2.35 billion. The company’s staple food delivery service revenue grew even faster, 81.3% to $ 5.67 billion.
“So it’s very important to remember that we operate our hotel reservation business as a category of all of our in-store business, and our overall strategy for us is more to increase profitability in the commercial segment,” said Chen said.
He argued that Meituan doesn’t have to pay undue attention to what the competition is doing “because we have the biggest user platform” and “a very good infrastructure to connect with hotels”.
Bloomberg, however, pointed out that Meituan is facing forays from competitors such as Alibaba into Meituan’s small businesses, including bike sharing and travel, where “profitability has declined.”
Is Food Delivery Growth Maturing?
Chen said he expected the growth in food deliveries to Meituan to be “modest” in 2019 compared to the previous “explosive” expansion. He said there was still “a lot of room for growth” as the company moved into “a relatively slower, but more sustainable phase of long-term growth.”
For the full year 2018, Meituan saw its adjusted profit before taxes, depreciation and amortization increase 76% to $ 700 million on revenue of $ 9.7 billion, a jump of 92% .
When it comes to hotels, however, Ctrip, which embarked on a wave of rival acquisitions several years ago, clearly faces a formidable new competitor.