Meituan Wants to Lead Luxury Hotel Bookings in China

    Just a year after it launched its own luxury hotel booking service, Meituan's online luxury bookings have grown dramatically.
    InterContinental Hotel in Ningbo. InterContinental reached an agreement with Meituan-Dianping in 2016. Image Via official website.
    Mason HinsdaleAuthor
      Published   in Finance
    InterContinental Hotel in Ning Bo. Image Via official website.
    InterContinental Hotel in Ning Bo. Image Via official website.

    Meituan-Dianping is quickly becoming a dominant force in the business of online luxury hotel bookings in China. After a year since launching the luxury hotel category on Meituan, a popular Chinese e-commerce platform, 10 percent of the hotels listed on the site are now luxury hotels. The site lists 15,000 luxury hotels in China, which represents 92 percent of all luxury hotels. Moreover, 60 percent of new Meituan users are drawn to the site to book rooms at luxury hotels according to the vice president and hotel division general manager of Meituan-Dianping, Qing Guo.

    This past year, 6 percent of total bookings on the company’s platforms were luxury bookings and bookings of luxury hotels on Meituan grew by 300 percent.

    Younger and higher income users tend to book luxury hotels on the site and luxury hotels were identified by Guo as a key area of growth in the overall Chinese hospitality sector, online hotel booking business, and for Meituan-Dianping specifically. Guo believes that only 20 percent of the total hospitality sector in China is available to book online, meaning there is still substantial growth potential for the online hotel booking industry.

    The firm launched their own travel platform this year and hopes to turn it into a one-stop travel platform for its customers. Meituan started as a service that sold vouchers for services and entertainment online. It merged with Dianping, a Chinese group-buying website, in 2015.

    Average prices for luxury hotels differ on the company's different platforms. Luxury hotels on the Meituan app are on average 360 RMB (US52) per night, but on the Dianping app they are on average 500 RMB (US73) per night. This means the category of "luxury" hotel on Meituan covers a wide range of accommodation options.

    According to Guo, Meituan received pushback from Ctrip, the domestic leader in travel and hospitality bookings, when it was discussing a partnership with the InterContinental Hotels Group. Ctrip was concerned that Meituan-Dianping would challenge Ctrip’s dominance of the luxury hotel bookings market. However, Guo noted that most of Meituan’s customers had never stayed in a luxury hotel before and argued that the move actually increased the size of the market for Ctrip’s services.

    The agreement between Meituan-Dianping and the InterContinental Hotels Group was finalized in December 2016. The agreement allows Meituan and Dianping users to book InterContinental Group hotels online and gives the group access to the user bases of the apps, about 600 million in total.

    Meituan-Dianping has also reached agreements with Beijing Capital Tourism, Wanda Hotels, Empark Hotels and Resorts, and Shangri-La Hotels and Resorts. Meituan-Dianping takes a booking commission rate, paid by the hotels, on every purchase which on average is 10 percent but some single hotels pay up to 18 to 20 percent.

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