Jingdong Travel’s Summer Spending Spree: Is It Worth It?

This summer, JD.com has been on a significant spending spree.

Not long ago, JD.com was locked in an intense battle with Meituan and Ele.me in the food delivery sector, making headlines every few days.

The subsidy war, sparked by “one-yuan milk tea,” had this author nursing a constant stream of milk tea.

I’m almost afraid to step on the scale these days.

Recently, JD.com made a grand entrance into the travel and hospitality sector, announcing a “zero commission for up to three years” policy targeting hotel merchants.

The timing is strategic, with late June to mid-August being the prime season for the tourism industry. Summer presents an opportune moment to bolster their travel business.

Furthermore, by making waves around the 618 shopping festival, JD.com can cleverly draw attention to its broader e-commerce operations.

It feels like a well-orchestrated move.

On the merchant side, JD.com is offering commission waivers. For consumers, the strategy involves subsidies and a commitment to “no bundled offers.”

The travel segment, now branded as JD Travel, is readily accessible within the JD.com app.

We took it for a spin and were immediately greeted with a new user gift package. Dismissing it only brought up a personalized red envelope, as if to ensure you didn’t miss out on any potential savings.

We then proceeded to search for hotels across various price points and categories.

For a brand like All Seasons Hotel, JD Travel listed it at 334 yuan. On comparable platforms, the same hotel, room type, and dates were consistently 10-50 yuan more expensive.

For a high-end resort like Hangzhou Xixi Ten Miles Fragrance Resort, JD Travel priced it at 1077 yuan, again undercutting competitors by 142-200 yuan.

However, during our searches, we encountered a notable number of “no rooms available” listings, while other platforms still had inventory for the same dates.

This indicates that while JD.com offers competitive pricing post-subsidy, its room inventory needs significant enhancement.

Beyond discounts, JD.com is emphasizing a “no bundled offers” policy for flight bookings, clearly marking this feature in the booking interface.

While most Online Travel Agencies (OTAs) now support unbundled options, our testing revealed that on some platforms, it requires a bit of digital maneuvering to avoid being upsold into a package. JD.com’s approach offers a comparatively smoother user experience.

So, what’s the real game plan for JD.com in the travel and hospitality sector?

Is JD.com aiming to become a one-stop shop for everything within its app?

JD.com’s foray into travel dates back to 2011 with the launch of flight booking services. Over the years, it introduced a travel channel, invested in Tuniu, partnered with Ctrip, and this year, it has been actively recruiting talent for its travel division.

While it may seem like a diversification into a new sector, there’s strong underlying logic:

JD.com already possesses substantial local lifestyle traffic. This existing base was leveraged to launch its food delivery business. Given that food delivery operates on thin margins, integrating with the higher-margin travel sector creates a powerful synergy. The high-frequency, low-profit food delivery can drive lower-frequency, high-profit travel, while its PLUS membership program helps to cultivate a core user base, thereby enhancing its “local lifestyle and instant retail” strategy.

Indeed, while food delivery boasts high transaction frequencies, the profitability is quite modest.

Since 2021, JD.com has stopped disclosing financial data for this segment separately.

Meituan’s core business encompasses food delivery, in-store dining and travel, and emerging sectors like Meituan Select and Xiaoxiang Supermarket. Correspondingly, JD.com has JD Delivery and 7Fresh supermarkets. With the addition of the travel segment, JD.com completes its portfolio.

While JD.com’s entry into travel might suggest a direct challenge to traditional OTAs like Ctrip, its current focus appears to be more directly competing with Meituan.

“Meituan cultivated user habits and loyalty through food delivery, making it the go-to app for many needs. When people travel, they might also consider using Meituan for tickets or hotel bookings. JD.com’s expansion from food delivery to travel seems to aim at driving local lifestyle engagement,” commented Wang Ke, Senior Analyst at Analysys, in an interview with Zhiwei.

Why is JD.com aggressively entering the local lifestyle market after years of groundwork?

The current Chinese internet landscape is dominated by a fierce “war for existing customers,” with most platforms experiencing slowing growth and seeking new avenues for expansion. This isn’t isolated to JD.com; many major traffic platforms are actively exploring ancillary businesses based on their existing strengths.

It’s not just internet giants; companies in drone manufacturing are venturing into robotic vacuum cleaners, and home appliance manufacturers are even entering the food service industry.

Therefore, the travel and hospitality sector represents a logical and promising path for JD.com.

However, this promising path is fraught with challenges, and success is far from guaranteed.

Hotels can broadly be categorized into three types:

Independent hotels, such as small, owner-operated establishments.

Branded chain hotels, like Atour, HUAZHU, etc.

High-star hotels, such as those under Marriott.

JD.com’s commission-waiver strategy directly addresses a key pain point for hotels: the commission structure with OTAs.

However, this approach is most likely to attract revenue-sensitive independent hotels. For branded chain hotels and high-star properties, commission waivers alone may not be sufficient, as these segments prioritize stability.

According to JD.com’s internal communications, the company’s target demographic includes these high-star hotels.

Stability, in this context, refers not only to the reliability of sales channel technical integrations but also to the potential impact of joining JD.com on existing OTA relationships.

Perhaps the most critical aspect of stability is the platform’s ability to consistently absorb a large volume of inventory, i.e., bookings.

Mere stability isn’t enough; it’s the entry ticket. Once in, the next step is securing resources.

Jiang Ge, a veteran in the travel industry, shared that hotel suppliers, beyond OTA channels, also reserve inventory for their direct sales and distribution networks. They meticulously manage inventory allocation on a daily basis.

For new platforms, hotels often allocate only a small portion of their inventory, gradually increasing it based on the platform’s sales performance.

With limited resources, new entrants will inevitably face constrained inventory, potentially leading to a lack of available rooms during peak seasons.

Moreover, established OTAs have significantly invested in upstream and downstream partners.

For example, Ctrip has invested in LvYue, HUAZHU, and Shilitong.

Tongcheng acquired Hainan Yanoda Scenic Area and Wanda Hotel Management Company, among others.

Therefore, JD.com must also contend with the established presence of traditional OTA players on this path.

On the eve of JD.com’s official push into travel, CEO Richard Liu stated, “JD.com’s business operations are solely centered around the supply chain.” Both food delivery and travel are intended to bolster its supply chain infrastructure. However, specific details on JD.com’s model and supply chain services for the travel sector have not been elaborated.

Nevertheless, any business focused on supply chains must be able to aggregate a significant number of hotels directly, a task that presents far greater challenges than initially perceived.

This endeavor requires time for accumulation, and early movers have already built substantial advantages over a considerable period.

Amidst the escalating commission disputes between hotels and OTAs, hotels are actively promoting their direct sales channels.

Many branded hotels have developed mini-programs and other direct sales channels, offering the most competitive pricing and services through these platforms.

For instance, HUAZHU Group and Home Inn & Flower House reported an increasing proportion of room nights booked through their direct channels in 2022. However, at present, the broader reach and mass appeal of OTAs still hold significant competitive weight.

In recent years, not only JD.com but also platforms like Douyin, Xiaohongshu, Meituan, and Kuaishou have attempted to capture a share of the travel market. However, the dominance of traditional OTAs remains largely unshaken.

According to Jiang Ge, a deep dive into the hotel industry through a supply chain lens could take another three to five years to yield significant results.

Of course, with its substantial base of corporate users and high-spending consumers, JD.com is not without its opportunities.

However, for any player aiming to conquer the travel and hospitality sector, the key may lie not in the speed of disruption, but in the patience for deep integration and cultivation.