Venture Capitalists Bleed As Dominant Ctrip Crashes Travel Start-Ups In China

In China, dozens of online travel start-ups have failed or are inching toward collapse, sending blows to venture capitalists who have bet hundreds of millions of U.S. dollars in the online travel sector bubble., branded as Taozailushang in Chinese, an online customized travel package platform with backing from Alibaba Group Holdings, Redpoint Ventures, Softbank Corp and New Horizon Capital, has confirmed that it is currently going through liquidation.

Maidou Travel, a start-up providing overseas leisure travel packages, has folded. Weekend get-away trip provider Where To Go On Weekends has shut down operations. Last-minute travel package start-up Ailvxing is no longer in business, while its rival Lailaihui is cutting staff and fighting for survival.

"They didn’t have timing on their side," an executive at an unnamed Chinese travel giant was quoted by Chinese media, referring to the increasing dominance of Ctrip and a cooling environment of venture funding.

Where Ctrip Stands, No One Else Will

Venture capitalists have invested around US$500 million in the Chinese travel sector during the past two years, according to data tracker IT Juzi. In 2014, there were a total of 129 investment deals in the online travel segment, with 66 deals in the seed and angel round.

But investors didn’t foresee the degree to which Ctrip was able to consolidate the whole sector. Last year, the online travel giant acquired a large stake in eLong, announced a Ctrip-Qunar tie-up, and invested in many smaller competitors including Tujia and Tongcheng Network. Last month, an entity potentially acting in consort with Ctrip proposed to buy out Qunar and take it private.

As a result, Ctrip is now the absolute monopolistic force in online travel in China. One anonymous analyst jokingly describes it as holding a 100% market share, as the company does not disclose its market position for fear of attracting regulatory attention.

Numbers from its annual report are telling evidence of its dominance, however. For the first quarter of 2016, Ctrip reported total revenues of RMB4.4 billion (US$682 million), an 80% increase year-on-year primarily due to the Qunar deal.

Ctrip’s scale makes it almost impossible for any start-up to compete, no matter where the battle ground lies. For instance, Ctrip would pay millions of RMB to book all the rooms in a resort during weekends, in effect cutting any competitors off, says the founder of Where To Go On Weekends.

At the time when Zhang Wenlong established Where To Go On Weekends back in 2014, his plan was to zero in on weekend get-away travel products, a fragmented area with relatively low Internet penetration.

Unfortunately, Ctrip shared the same thought. Since 2015, the company made massive investments in one-day trips and local get-away packages. After the Ctrip-Qunar deal announcement in October 2015, Ctrip formally established a local travel business unit., a start-up focused on high-end overseas travel packages, experienced another way to be defeated by Ctrip. After attracting two rounds of venture rounds with Tencent Holding Ltd. as an investor, partnered with Ctrip by providing its tour packages on Ctrip’s platforms as a third-party supplier.

Similarly, as Ctrip decided to expand its own overseas tour package offerings last year, it began giving its own products preferential treatment in search and guided traffic flows. quickly discovered it wasn’t able to generate enough traffic on its own to survive.

2B, 2C Or 2VC?

Aside from bad timing, Chinese travel start-ups believe their failure may be partially attributable to a speculative mindset, or the so-called 2VC model.

The term means founders started companies with the sole purpose of raising venture capital money, which is used to acquire users and then to raise more money, without a solid business model or innovative technology.

Founders of, or Taozailushang, reportedly spent most of their evenings dining or clubbing with venture capitalists. Their close relationships among the VC circle afforded the company easy money. In an 18-month span, the company burnt over RMB200 million, according to Chinese media reports.

Founders of Maidou Travel reportedly gleaned information on which public account venture capitalists followed the most on Wechat. They then bought advertising dressed as real content on these Wechat accounts to gain investor attention and eventually venture funding.

To be sure, the 2VC model is prevalent among Chinese start-ups across all sectors. The only difference is that travel start-ups have woken up earlier than others to the problems of not having a sustainable business plan.

Despite tough market conditions, some entrepreneurs are not giving up yet.’s founder Huang Zhiwen believes there are still opportunities for start-ups to succeed in online travel.

"There are still lots of inefficiencies in travel such as hotel marketing and local tours," he says. "But there is no chance that anyone can create another travel platform."

(Correction: Maidou Travel was not backed by Gobi Partners, as indicated in a previous version. The venture firm looked into investing in the start-up, but decided against investing in the end.)

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Nina Xiang is the co-founder and managing editor overseeing editorial content and product development at CMN. Before founding CMN in 2011, Nina worked at BusinessWeek magazine in Beijing and Institutional Investor magazine in New York, writing about business and financial services. While in New York, she also served as part-time correspondent for Shanghai's financial television channel, China Business Network, as well as China Radio International, China's national English-language radio network.