On April 10 2014, news from insiders showed that Baidu’s acquisition of Ctrip was going to finish. Once the acquisition is done, Ctrip will be merged with Qunar. Baidu invested USD 306 million in Qunar in June 2011, and became the largest shareholder.
By April 10, Ctrip’s market value was USD 7.228 billion and Qunar’s market value was USD 3.486 billion, the total market value of Ctrip and Qunar added up to around USD 11 billion.
Many of Ctrip’s institutional shareholders were also Qunar’s, the idea of the two’s merging came up early but only got approved until recent.
The Change of OTA Market
Not only Baidu had the intention of acquiring Ctrip, rumor said that Alibaba wanted to. Baidu’s acquisition means that Ctrip gave up develop independently, many of Ctrip’s competitors chose to rely on giant internet enterprises. Qunar accepted Baidu’s investment, Tencent held Elong’s 16% stake with USD 84.4 million in May 2011. On Feb 17 2014, CEO of 17u Wu Zhixiang confirmed in inner email that 17u had received 500 million yuan (USD 81 million) investment from Tencent and other two institutions, and the goal of 17u was still IPO.
It used to be battle between Ctrip and Qunar, now the OTA market turned to the fight among Baidu, Alibaba and Tencent, also known as BAT.
Taobao Trip, belonged to Alibaba, was launched in 2010. In 2013, Alibaba joined OTA O2O market with etao (an online shopping search engine), in cooperation with Ctrip, Elong, 17u, Qunar, Mangocity and qmango. In March 2013, Alibaba invested in mobile travel app 177go, which also became an important mobile terminal traffic driving for Taobao Trip. In July 2013, Alibaba invested in Qyer, a Chinese travel information and value-added services website. In March 2014, Alibaba announced a new investment together with CBC (China Broadband Capital). Byecity, the first Chinese outbound OTA, gained USD 20 million investment from Alibaba and CBC.
In 2013, Ctrip’s travel business transaction reached 10 billion yuan (USD 1.62 billion), organized 3 million person-time trip. Ctrip and Qunar were the major market players in OTA, with market share of 33.9% and 22.1% respectively. When the acquisition and merger finish, Baidu will be the leader in OTA market in China.
Why Does Baidu Choose Ctrip?
Ctrip is the biggest OTA in China, its revenue comes from three parts: hotel booking, ticket booking and travel. Although Baidu’s Qunar had accumulated a lot of business resources for several years, it still could not challenge Ctrip especially in high-end business travel market. If Baidu could integrate Ctrip with Qunar, Baidu will control the whole OTA market in China.