A Far-Sighted Differentiation-An Exclusive Interview with Yu Dunde, Co-Founder and CEO of Tuniu.com

Q: Tuniu’s business model is unique. How did it gain its competitive edge, considering the mercilessness competition of the OTA market? How will the company manage low gross profit and earning problems of its online vacation sector?

A: Tuniu turns ten years old this year. In the past decade we have taken the road less traveled. Ten years ago, we chose online leisure travel, and have worked hard since. Looking back at the progress we’ve made, the idea of “a far-sighted differentiation” has been the main thread that leads our development.

By around 2003/2004, online booking services for flight and hotel had already reached maturity, yet leisure travel services were mainly offered offline due to their level of complexity. If Tuniu could successfully overcome potential hurdles set forth during the reservation process, combine internet and travelling into one to create a better experience, the result would be welcome by the consumers. Therefore, we decided to tackle this area, with the mission to make travelling easier for everyone. And we haven’t stopped working ever since.

Tuniu came about a time when Chinese internet and leisure travel industries were experiencing a booming growth. The company dove hard into online leisure travel, eventually establishing its own competitive advantage in the aggressive OTA market. Up until now, Tuniu travel product and service transactions account for 23.1% of the entire online leisure travel market in China, ranking #1 in market share. The company also gradually set high thresholds in branding, regional service networks, systems, and cash flow. These areas not only supported the construction of Tuniu’s core capabilities, but also the steady profitability growth that we wish to achieve in the future. Apart from the mainspring travel sector, Tuniu is also engaged in emerging businesses such as financial services, film and television, wedding services, and communication services. These sectors are closely incorporated into the core business, innovating on the borderline and functioning as a new source of growth.

We have experienced rapid growth in the past decade, and now will enter an era of corporate collectivization. While making sure that we remain the front-runner in sustaining and expanding our vacation sector, the company aims to stimulate the growth of new business sectors, which include ticketing, hotel, finance, film and television, wedding services and more.

Q：As Chinese people travel more, the quality of service has slowly taken the place of prices of goods, and tourists tend to focus on that quality when they reach for their wallets. As for the competitive online travel industry, a fast response to the customers’ inquiries as well as to the problems that may arise before, during, and after travel is the “first hurdle” to boosting service quality and enhancing customers’ experience. This hurdle is becoming the key point of competition amongst online travel companies. My question for you is, what are the features of Tuniu’s customer service system, and how did this system become a benchmark for other companies to follow?

A: In the past few years, Tuniu has been customer-oriented, using internet technology to extend our online customer services to PCs, phone applications, WeChat, Weibo, and more. Tuniu takes care of the entire travel process, assisting customers through the whole process: inquiries, reservations, pre-trip, mid-trip and post-trip questions. Aside from the traditional over-the-phone, online, or in-store reservations, Tuniu has also worked hard to create a “chat-style” reservation mode, where travel consultants communicate with customers on WeChat. Consultants reply to customers’ inquiries, suggest tour routes, and reservations can be made through friendly conversation. Tuniu’s online human intelligence service relies heavily on technical support: with our phone app and WeChat accounts connected to our customer service server, the intelligence service can automatically answer customers’ questions per their area of inquiry. We provide constant, uninterrupted service so that users can quickly obtain necessary information.

At the same time, with the support of intelligent systems such as big data, CRM software, and members’ profiling, Tuniu has been providing intelligent cross-recommendations for its members since 2016. Travel consultants actively communicate with members to gain sufficient customer information in a small amount of time, then they categorize customers by age, hobbies, and spending habits etc., using big data analysis. Through categorization, Tuniu can recommend trips that cater to the customers’ needs, which include family trips, elder trips, honeymoon trips, and luxury trips. In addition, since the establishment of the 180 domestic regional service centers and 11 overseas service centers, the company has been facilitating the fusion of online travel and offline service businesses so that customers can receive face-to-face services on top of telephone and online customer services, maximizing their experience with us.

Supported by the matrix of an extensive number of diligent representatives, customer service here at Tuniu can be summarized in one word, “fast,” meaning that, 95% of the phone calls are answered within 5 seconds, 100% of the online inquiries are answered within 30 seconds, 99% of the callers receive callback within 30 minutes, 98% of the post-sale issues can be resolved within 2 days, and the list can go on. Our staff ensure that customers receive timely responses and efficient assistance every step of the way.

Q: Many service industry enterprises are implementing “membership systems,” what features does the Tuniu membership system possess, and why is the company placing so much emphasis on it?

A: Tuniu first put together a membership-service team in 2012 to provide exclusive one-on-one service for our star members. In March 2016, the company launched a VIP membership service brand called “Tuzhi,” which provides full service while increasing user stickiness and activeness. As of right now, Tuzhi has more than 120,000 members, and this number continues to expand along with a steady growth in its reenrollment rate.

Tuzhi membership benefits have been continuously upgraded to ensure that its members enjoy the upmost quality of service. Tuzhi membership services, amongst others, include exclusive consulting, “Tuniu door-to-door,” as well as Wifi privileges. On top of the free airport drop-off services that platinum and diamond members receive, Tuzhi launched five new membership services in the fourth quarter of 2016: “Points for Tickets,” “Domestic Airport VIP Lounging (for domestic long flights)”, “Physical Examinations,” “Birthday Cake Tickets,” and “Exclusive Birthday Coupons.” Additionally, Tuniu has been exploring the area of paid-membership services, where regular Tuniu members can become Tuzhi members with a fee instead of the automatic qualification of such memberships by spending over 50,000 yuan. This way, Tuniu members can easily enjoy Tuzhi membership benefits such as “Tuniu door-to-door,” Wifi privileges and exclusive birthday coupons.

Q: The market has shown approval towards the coming-together of tourism and finance, what plans and experiences does Tuniu have in travel financing?

A: As the first online travel business to blend internet, travel, and finance into one, Tuniu has licenses in fund sales, insurance broking, commercial factoring, financial leasing, etc. Tuniu is not only able to provide industry chain partners with abundant supply chain financing and insurance broking services, but can also present individual customers with different comprehensive financial products. The efforts put into promoting Tuniu’s online travel financing business has in turn had positive effects on our main travel business, which is experiencing a growth as well.

Let’s use supply chain financing as an example. In 2016, while Tuniu focused on the factoring business of accounts payable/orders, it also expanded into the financial leasing and petty loan business. Thanks to this expansion, Tuniu fulfilled the funding needs of more than 1,200 distributors and boasted more than one billion yuan in credit support. In addition, our year-on-year number of credit services provided increased by 176%, the average sum increased by 86% and finally, Tuniu succeeded in decreasing the account settlement period for our distributors by 45 days.

From now onwards, Tuniu will be working on corporate collectivization, where we split into subsidiaries, one for vacation and travel, the other for finance and technology. Through these efforts, we will better promote the fast development of new businesses, including that of the finance sector.

Q: Hotels, plane tickets, and travel products, amongst others, are becoming more and more homogenized. What does Tuniu think of this phenomenon, and how do you think this problem should be solved?

A: Customers today are increasingly diverse, individualized, and have different needs, and the limited products we can provide them is the root of our homogenization problems. Tuniu wants to follow the footsteps of consumption upgrades, which means that we have a lot of room for improvement. The company sees homogenization as a challenge as well as a great opportunity.

As for the high rate of standardization regarding the booking of planes tickets, hotels, and more, Tuniu utilized its past decade of leisure travel advantages and gathered its customers to form a series of creative product modes, including “plane tickets + X” and “hotel + X,” opening a new path for competitive differentiation. The “+ X” package deals effectively accelerated the growth of Tuniu plane ticket and hotel sales, while at the same time increasing customers’ frequency of purchase as well as consumer stickiness. By the second quarter of 2016, Tuniu’s plane ticket transactions was eleven times, and hotel transactions was eight times greater than that of the same period last year. Currently the ecosphere of Tuniu’s “+ X” products is sustaining continuous and rapid growth, of which “plane tickets + hotel” products surpassed 600,000, “plane tickets + local pick-up” more than 100,000 in sales and “plane tickets + cruise” products have coverage at every cruise port in the country. At the same time, the company has been working to further enrich its “hotel + local play” products, integrating Tuniu group tours, individual tours, road trips, customized trips, wedding events, team-building trips, and other product categories into preexisting ones. From September to October 2016 alone, Tuniu added 20,000 top-quality products to its existing line.

With travel products, Tuniu avoids homogenization by creating a rich variation of product brands, including “Exclusive trip for the coolest people,” “Family trip for fruit pick-up, ”“Blooming trip for mom & dad,”“Customized trip for friends,” “Let’s go the two of us,” “Let’s hit the road,” and more. “Exclusive trip for the coolest people,” Tuniu’s first independent product brand, not only satisfies customers’ need for consumption upgrades in high-quality tour group products, but also distinguishes itself from other products, effectively creating different levels for different products. “Exclusive trip for the coolest people” as well as other differentiated product brands succeeded in achieving gross profits and enhancing profitability. Currently, the proportion of “Exclusive trip for the coolest people” customers in relation to overall tour group transactions has risen from 14% in 2012 to 31% by the third quarter of 2016.

Q: How will joining the WTCF assist Tuniu in its future development?

A: Cooperating with an international platform like WTCF, Tuniu will be able to stay on top of the newest trends of international tourism development. By effectively strengthening international connections with other members as well as co-sponsoring relevant projects, Tuniu wishes to contribute to the development of the travel industry along with the rest of the companies.