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Booking-Didi Chuxing – it’s not about the money
Jul 30, 2018
The recent deal between the world’s biggest travel company and a Chinese ride hailing giant is pure strategy
One thing that the Booking Holdings – Didi Chuxing just announced partnership deal is not about is money. For all that Booking is putting $500 million into the Chinese ride-hailing giant, the gains are strategic. This is a coup for Didi, taking it nearer global dominance as it contemplates an IPO, and it puts Booking apps in front of a huge new audience in China’s vast domestic market.
Didi Chuxing, as online tech research group TechCrunch points out, “is in global expansion mode”, having launched services in Mexico, Australia and Taiwan, purchased Brazilian ride-hailer 99 and announced plans to roll into Japan, to name just the largest.
“Beyond boosting a brand and consumer touchpoints, linking up with travel companies makes sense as ride-hailing goes from simply ride-hailing to become a de facto platform for travel between both longer haul (flights) and short haul distance (public transport) trips,” it comments.
That explains why Didi has doubled down on dock-less bikes and other transport modes.
The deal with Booking.com will increase visibility for Didi in markets abroad where it is an unknown compared to the most popular apps – Uber and Lyft. (Though, having handled 7.4 billion rides last year, compared to Uber’s four billion, Didi is the largest.)
As investment website Motley Fool comments: “…it's also not too hard to see why it's a good deal for Didi Chuxing. It is carefully assembling the pieces to become a global travel-and-mobility powerhouse. It's already close to becoming a one-stop shop for Chinese citizens travelling both in China and abroad (and for foreigners traveling in China, too). As it integrates more tightly with regional mobility partners like Ola, Grab, and Lyft, it could well relegate Uber to also-ran status – even in markets like the United States.”
Didi itself has said it is not the cash that drove the deal. It has plenty of cash with multiple billions of US dollars on its balance sheet, thanks to a gigantic $4 billion funding round that closed at the end of 2017 and a history of around $20 billion raised in recent years. What is more, it has a following of heavy-hitters, including Apple and Japan’s mega-multinational Softbank.
Connecting the journey
Booking is pursuing its basic strategy here, to connect every segment of the traveller journey and winning business with collaborative innovation – something that Todd Henrich touched on recently at EyeforTravel Europe.
Indeed, Booking has already invested in China, and has a stake in mega Chinese OTA Ctrip. This will add a substantial base for hotel bookings on its various platforms, including Booking.com and Agoda.com, not just in China itself but also with Chinese tourists booking accommodation when they are travelling abroad.
This latest move is further proof that Booking is following through on its connected traveller strategy. When the Didi news broke, Henrich told a press conference that:
"Didi has clear advantages in technology and scale in the shared-mobility industry. We believe that together we can offer smarter transportation services to our brands' customers, and help Didi's customers with seamless access to the products and services the brands in our company provide throughout the world."
Win or die
The numbers involved in this deal are huge – Didi selling to 550 million users through its various transport apps, Booking Holdings servicing users and partners in 220 countries and territories through its six primary brands.
Both groups refer to new things to come, and “more collaborative innovation”, with both employing vast teams of techies. When it comes to innovation in China, Booking has already said that, for example, it is looking at building all of its services there onto one app.
In fact last year, the group told China Travel Daily that it was very aware of how cutthroat the market in China could be. Pepijn Rijvers, CMO of Booking.com described it as one in which “winner takes all” and you “either win or you die”.
However, he added that he thought Booking had found a formula that would win: “Partnership works well in China – we do a lot of that.”