China’s largest ride-hailing company Didi Chuxing has responded to media reports of its potential entry into the country’s massive hotel booking market, denying that it has such plans. The Beijing-based tech unicorn told us in an emailed statement, citing its full focus on “safety and operational upgrades” and that it “has no plans to launch new businesses in the near future”.
Local business magazine Caijing, citing anonymous sources, reported on Saturday (link in Chinese) that Didi is looking at possibly entering the hotel booking space and that if it does, it will do so through strategic alliances.
Expanding into other verticals isn’t foreign to Didi; it has been expanding horizontally and has ventured into areas like bike-sharing as well as food delivery, fighting with Meituan and Alibaba, both also have a stake in the travel industry. However, the company, after recently driving into a turmoil following the two passengers killings, have shifted its focus to ramp up safety practices.
A possible driveway
The same Caijing story revealed that the hotel business exploration was being carried out by an internal team dubbed R-Lab, with the R meaning Rebuild.
The secretive R-lab was founded in the last half of 2017 as a response to Meituan’s aggressive expansion into ride-hailing, which is Didi’s core business. The task force was charged with exploring and incubating new businesses for Didi.
The R-Lab was also responsible for launching the firm’s very own food delivery business, which has been directed into the slow lane in September, as we reported before. At that time, we noted that the suspension of its food delivery business was due in large part to a cost burden resulted from large investments coupled with low returns. Also, Meituan has dominated with food delivery sector with Alibaba eagerly grooming the Ele.me and Koubei merger to catch up. The food delivery market is already replete with the costly competition.
On the other hand, the hotel sector, though saturated with big players such as Ctrip and TongCheng Elong on the surface, might still pose a way out for Didi’s expansion avidity.
Just like how Meituan could surprisingly overtake Ctrip to become the top OTA in terms of hotel room nights in the first quarter of this year, the hotel sector is always up for some changes.
The alliances
According to people familiar with the matter, as cited by Caijing, Didi has internally confirmed its intention of venturing into the hotel sector, though has yet to decide on a certain entry point or a business model. The company is still at the early stage of a final launch, and is currently investigating the traditional hotel businesses.
Didi’s recent US$500 million funding from travel reservations giant Booking Holding should have also shed light upon the rumoured entry. The two companies announced a partnership through which a Didi user would then be able to book hotels on Agoda or Booking.com via the car-hailing app and vice versa.
Didi was also previously said to be in talks with India’s budget hotel operator Oyo Rooms to invest in its China operations.
Both incidents demonstrated the company’s strong interests in the hotel sector.
Some industry insiders believe the expansion into the hotel sector makes sense for Didi. As a ride-hailer, what Didi does, is to get people around, which fits into the travel and hotel business. This explains well why on OTA sites like Booking.com or Priceline, transportation services are always offered in tandem with hotel or flight bookings.
Editor: Nadine Freischlad & Ben Jiang
