LvYue Receives Windfall from Tencent, Sequoia, Baidu and Goldman Sachs
COVID-19 and China
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If you thought that the recent economic downturn would prove lethal for China's tourism sector – apparently not. Three-year-old, Tianjin-based online hotel reservation upstart LvYue (旅悦) received over USD 100 million in its second financing event on November 16, making a little more history for the country's swelling tourism industry.

Aside from the lead investors – global heavyweights Goldman Sachs and Sequoia Capital, as well as tech behemoths Tencent (0700:HK) and Baidu (BIDU:Nasdaq) – Chinese asset management company Oriza Holdings (元禾控股), investment bank CITIC Trust, travel service provider Caissa Touristic (000796:SZ) and tourism-focused private equity firm Ocean Link (鸥翎投资) also purchased some equity this time. Group (formerly Ctrip, TCOM:Nasdaq) yielded the spin off LvYue in July 2016. The new company was established as a strategic venture undertaken by the Nasdaq-listed travel website with participation from its long-time rival, travel site, which was acquired by little-known private equity firm Ocean Management in 2017.

The startup operates in the mid- and high-end market segments. Connecting over 1900 hotels globally (most prevalently in China and South-East Asia), LvYue aims to take on both bulky traditional businesses like Booking Holdings (BKNG:Nasdaq) or Expedia Group (EXPE:Nasdaq) and disruptive digital platforms such as Airbnb or its local nemeses Tujia (途家) and Xiaozhu (小猪).

It claims to be making a difference through leveraging vast troves of user data processed by machine-learning algorithms. No surprise here, indeed – who isn't doing this nowadays? However, the consumer data that were aggregated during the most active years of Qunar (founded in 2005) and Ctrip (founded in 1999) allows LvYue to dig deeply into travelers' spending habits as well as geographical and behavioral patterns.

In addition to this platform-like function, the company possesses a set of self-developed brands. Authentic boutique holiday hotels and resorts, most of which are located close to the historical centers of various cities, are marketed under the name 'Floral' (花筑); for extra convenience, in a country of 700 million smartphone users, LvYue has launched mobile app 'Floral Trip' with access to properties in a few dozen cities, not only in China but also in Japan, South Korea, Thailand, India and some other countries of the region. 

The product mix also comprises premium chain Arula (檀程) and less fancy, budget brands Suoxing (索性) and Vyluk (蔚徕). These are designed to compete against a long list of Chinese and international players.

Zhang Qiang (张强), the firm's current CEO, has experience working for Alibaba (BABA:NYSE) and Meituan Dianping (3690:HK). According to online investment data aggregator ITjuzi, LvYue is now a workplace for more than 100 employees – a number that is likely to jump up in the short term as the company is hiring aggressively: there are over 170 open positions on the official website as of November 16.

Despite a growing number of concerns regarding macroeconomic instability and trade tensions, China's middle class is strengthening its presence in the global tourism market. McKinsey projects that the country's citizens will complete 160 million outbound trips in 2020. They are expected to spend up to USD 315 billion in the same year – 14% higher than two years earlier.

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