During the 2013 Spring Festival, a young man deliberately rushed back to his hometown in Henan for the New Year. After eating a hearty New Year's meal, I was faced with a series of dilemmas.

It turned out that the old house was too small, and it would be very crowded when the family lived in, so when they got back, the young man had to find a place to stay.

He habitually opened Ctrip to book hotels, but he discovered that the website did not include hotels in his hometown county town in the fourth tier, forcing the whole family to face sub-zero temperatures and sweep the streets to find places to stay in the deepening night.

This experience, at that point, is bound to be particularly memorable.

At that time, on every street covered by the network in Tier 1 and 2 cities, Ctrip and Elong were staging an OTA (online travel) “price war”, and no one took the market in the small third- and fourth-tier cities seriously.

After the start of the new year, a hotel project team called “Watermelon” avoided the battlefields of the two giants and carefully extended their hands to third- and fourth-tier cities. Behind it stands Meituan, who covets the wine travel market.

At first, “watermelon” labels such as layman and low end made competitors lose sight of them, but the young man took the right eye.

It wasn't long before he joined Meituan. Perhaps he was familiar with the pain of “looking for a hotel during the Spring Festival” in a small county town (he still mentioned it after joining Meituan). He dominated one sinking battle from the bottom up one after another.

And this young man, Guo Qing, later Vice President of Meituan, was in charge of the hotel business.

After turning the chapter, the black swan of the 2020 epidemic hit. In the first half of the year, Ctrip, Tongcheng Yilong, Meituan Wine Travel, etc. were all in a slump, showing negative revenue growth.

However, in the second half of the year, there was a difference.

Financial reports show that 2020Q3 and Q4 Meituan wine tourism revenue resumed positive growth, while Ctrip and Tongcheng Yilong were still in negative growth zones, and even Ctrip's revenue fell by about 40%.

At the same time, starting in 2020 Q2, the revenue of Meituan's wine tourism business surpassed Ctrip, becoming number one in the OTA industry.

So, how exactly did such a small OTA sneak out of the gap between “giant competition” achieve a “counterattack”?

According to Wang Xing at the 2014 annual conference, this is a story about “carelessly planting willow and willow becoming yin.”

Low-tier cities knocked out OTA “dark horses”

In 2012, Meituan climbed out of the “dead mountains and seas” of group purchases and successfully “went ashore”.

According to Wang Xing's plan, Meituan is next: the first goal is to achieve monthly break-even before the end of the year, and eventually become a profitable company.

To achieve this goal, the main group buying business, which has just gone through the “buying volume” stage of subsidies, is clearly struggling.

To this end, Meituan launched a T-shaped strategy of “steady as a dog” and “internal horse racing” — horizontal group purchases, vertical industries such as movies and hotels, to comprehensively expand localized services.

Afterwards, the MTR Force, which had experienced a thousand battles, was split into teams one by one to develop resources for other businesses.

At the time, the company's attitude towards all teams was “scum” that treated all teams equally: it was only if you did it first and did it well before I invested more resources in you.

Hotel OTA is one of the dark horses that brought Meituan back the fastest.

In 2013, 120 hotels were signed in the first month of launch, and at its peak, it was possible to sign more than 6,000 hotels a month. In 2014, Meituan upgraded its hotel business and transferred it to an independent business department.

However, Meituan's OTA business at this time was not viewed as a threat by peers; they were even looked down upon.

Guo Qing, who had just joined the Meituan wine tourism business at the time, felt the most: the Meituan Hotel was so small that people couldn't look at us; they thought we didn't have a show.

For example, Liu Jian (who has now joined Meituan), who was the product manager of Yilong Hotel's reservation back office at the time, complained: Isn't Meituan just about eating, drinking, and having fun? How can they handle such a complicated hotel reservation system?

After taking a disdain glance, Eilong's gaze turned back to clashing with her old rival, Ctrip.

At the end of 2013, Ctrip openly sent the message “Each Ctrip hotel is 10% cheaper than Yilong” to Yilong customers. Cui Guangfu, CEO of Yilong, immediately claimed that Ctrip “two-thirds of hotels are 10% more expensive than Yilong,” and “made an agreement” with Ctrip CEO Liang Jianzhang.

The curse of public opinion triggered a price war between the two companies.

Closely tearing each other apart, the performance of the two companies “bleed” seriously. Ctrip's profit declined for three consecutive quarters, and Elong lost money for 5 consecutive quarters.

In fact, the tit-for-tat between Eilong and Ctrip began in 2010.

At that time, Ctrip focused on the “flight+hotel business”, focused on business people, and enjoyed an advantage in the middle and high-end hotel market. Yilong abandoned the airline ticket and vacation business, started with price-sensitive leisure hotels, and specialized in the hotel reservation market at low prices.

The first battle was a success. In the first half of 2012, Elong's hotel bookings were already half that of Ctrip.

A few months later, Ctrip CEO Liang Jianzhang personally fought back and invested 500 million US dollars to fight against Yilong. The end was just as disastrous.

According to the data, in 2012 Q3, Elong Network saw its first quarterly loss in three years, with a loss of 33.1 million yuan; Ctrip's profit also fell 39%.

However, when the price war between Ctrip and Yilong was raging, the “sneaky” Meituan wine travel business developed rapidly. As shown below, in 2015, Meituan surpassed Yilong to become second in the OTA hotel market.

Some people may wonder, why are the two big players sitting back and watching Meituan make such a big move? This is a real injustice to them.

In the early days, Meituan focused on local single hotels in low-tier cities through differentiated competition. In this way, the possibility of a clash with Ctrip in the high-end hotel field was completely avoided.

Since low-end single hotels do not have a membership system for hotel chains, customer acquisition channels are clearly insufficient. Relying on high frequency and diverse local service scenarios, Meituan OTA can reverse flow to hotels.

Under each model required, the middle- and low-end hotels that Meituan OTA cooperated with grew rapidly. For example, in 2017, the proportion of mid-range and low-end hotels in Meituan was around 90%.

As for Eilong, it is already difficult to protect itself, and there is no time to take Meituan into consideration.

In May 2015, Ctrip teamed up with Platao Group and Tencent to acquire all of the shares of Expedia, the majority shareholder of Elong. Elong changed hands and became part of Ctrip.

Since then, “Battle with Dragons” has come to an end.

In the same period, Meituan launched a complete new system applied to the hotel business to achieve the transformation from group purchases to reservations, while the Meituan Hotel Division was also upgraded to a hotel tourism business group, preparing to become a high-star hotel.

So, with Ctrip's worries over and dominating the market (where Ctrip will go in 2015), will Meituan's active provocation “cause trouble” and be punched in the face?

Low commission bait, implying high-end hotel “fish ponds”

History is always strikingly similar, and Meituan was not favored as a star in the beginning.

“High stars are hard to do. There have been people inside us, including friends from outside, who said you should stop being tall stars.” Guo Qing later said in his recollections.

But even though it was very difficult, Meituan had to do it.

The high proportion of low- and middle-end hotels has greatly reduced the average price of a night at Meituan Hotel. The low customer unit price not only affects the total transaction volume, but also weighs heavily on the profits of the wine travel business.

Taking the ratio of high-star hotels and non-high-star hotels in 2017 at 1:9, assuming a hotel room rate of 200 yuan per night, based on a 10% commission rate, Meituan can only earn 20 yuan. If you remove the costs, you can imagine the profit.

If we want to break out of the logic of “making hard money”, developing the middle and high-end hotel business is an inevitable choice.

At the time, Ctrip, which had been deeply involved in high-end hotels for a long time, had formed a certain monopoly position in this field.

According to Chen Ruiliang, senior vice president of Ctrip Group in 2019, Ctrip currently has more than 3,000 supplier partners and 1.4 million partner hotels worldwide.

It is reasonable to say that under pressure from Ctrip, it will not be easy for Meituan to grab a high-end hotel. However, coincidentally, Ctrip was reversed by its monopoly position, which gave it a small chance.

All along, Ctrip has continued to increase commissions under some hidden pretext.

For example, in 2017, Ctrip lowered traffic to high-end hotels such as Marriott International and Intercontinental, and placed the ranking at the bottom. One of the purposes was to increase commissions on high-end hotels. After the dispute, Ctrip did raise commissions on some high-end hotels in Xiamen to 25%.

“The enemy is weak, we advance”. At this point, Meituan entered the high-end hotel market with a low commission strategy.

According to Guo Qing, although there are differences in hotel commission rates at various levels on the platform, the overall rate remains at 10%.

In addition to “tempting” high-end hotels to join hands by reducing commission costs, Meituan also offered conditions that would allow high-star customers to “get ahead” — to attract money.

According to Meituan's 2019Q2 conference call, 90% of consumers who book a room are now diverted from takeout business and in-store catering business.

“Two legs” entered the market, and Meituan ushered in a honeymoon period with the high-end hotel sector.

·At the end of 2016, Meituan Dianping reached a global distribution cooperation with Intercontinental Hotels.

·In 2017, lodging products belonging to more than 130 international hotel groups including Shangri-La Hotels Group and Hilton International Hotel Group were signed.

·In 2018, Meituan Hotel signed dozens of high-star hotel groups.

According to Meituan's 2019Q2 conference call: We have brought better revenue performance to high-end hotels. This has been welcomed by high-end hotels and has become the main driving force for hotel revenue growth.

According to the data, as of 2019Q4, the gross profit of Meituan's in-store hotel business had risen by one level. Meanwhile, in March 2018, the number of nights at Meituan hotels also surpassed the total number of nights at Ctrip hotels for the first time.

Just after the front had the upper hand, Meituan's “ambition” swelled in the high-star market.

According to the 2019 Q3 conference call, the company continues to climb to higher-end hotels, cooperates with high-star hotels, and is also further entering the high-end hotel reservation field.

Judging from random research, Meituan already holds C position in terms of the number of hotel businesses, whether in Tier 1, 2, or Tier 3 cities.

Market positions have changed, and “Little People's Desire” Meituan confronted Ctrip, mocking that its users' spending power is also declining.

According to the 2019Q2 conference call: We are now continuously expanding into high-end hotels because today's generation of young people has more disposable income.

It wasn't long before the “despicable” rhetoric went down, and the hotel industry was hit by the indiscriminate “black swan” epidemic. Regardless of whether young people have the potential to upgrade their consumption, or middle-aged business people with no poor money, they are all “pushed” at home.

Under the general downturn in the wine travel business, Meituan's C position is likely to be synonymous with “heavy losses” at this time.

The Meituan wine travel bubble under the pandemic has not started in the high-end

Over the past quarter of 2021, the financial reports of various companies for the previous year have come out one after another. The OTA hotel industry that Meituan is betting on has released financial reports.

The results were surprising, as shown at the beginning of this article — Meituan was the only one among the top three OTA companies to resume positive performance growth in the second half of the year.

However, what allowed Meituan OTA to cross the negative growth threshold was not the high-end hotel business that it has always “fought” with Ctrip, but the low-end hotel market.

The hotel industry has a cyclical characteristic, that is, changes on the supply side often lag behind changes on the demand side. When placed on the black swan of the epidemic, the logic is roughly as follows:

During the pandemic, no matter whether it was a low-end hotel or a high-end hotel, no one was doing business. However, self-employed people are no better than capitalists. It's easy to sit and eat, and many low-end single hotels have died in the dark before dawn.

After the epidemic recovered, consumers became sensitive to “money” (everyone who experienced it understood), and demand for low-cost housing soared.

At this time, low-end hotels were “in short supply” and had the flexibility to raise prices appropriately due to a large number of people falling into the midst of the epidemic; high-end hotels were just the opposite: they had basically carried through the epidemic and faced a situation of oversupply and insufficient demand, and hotel turnover naturally declined.

Of course, some high-end hotels adjust their supply in a timely manner, and mainly promote low-cost lodging. However, the cost is there. If you can't make money by playing low-priced cards, it's unlikely that OTA platforms will pay high commissions.

In this general environment, the performance of Ctrip, which focuses on high-end hotels, “bleed” (the growth rate was always around -40%), while Meituan, which started with low-end hotels, received “dividends.”

According to the 2020Q2 conference call: Compared to Tier 1 and 2 cities, lower-tier cities were less affected by the epidemic and recovered more quickly. Hotel bookings have returned to the level of the second quarter of 2019.

Even if it relies on the low-end hotel business to boost Ctrip's performance, Meituan is simply “itchy” in Ctrip's high-end hotel market.

According to the 2020 Q4 conference call, the proportion of high-star hotels in Meituan at night only exceeded 15%.

The benefits of the epidemic are clearly only a phased highlight. When the wine travel industry returned to normal, the “bubble” of high performance elasticity burst, and Meituan, which relied on low-end hotels, still faced a high-end wine travel market situation with Ctrip.

At this pace, the “Battle with the Beauty” price war is probably not far off.

Summarize

Under the permissibility of treatment when the project was first established, the Meituan Wine Travel Service (OTA) moved from a low-end city, went through a blank space in the price war between OTA giants, and became the dark horse that killed the “horse racing mechanism.”

After securing the group's resource slant, Meituan Hotel used risk to “touch the tiger”, using low commissions and drainage as bait, and frantically experimented with Ctrip's high-end wine tourism basics.

The results prevailed, but they may also have completely woken up the “Tigers.”

After entering a period of steady development, Meituan will inevitably have to fight closely with Ctrip. Will they be able to get through the next wave of tests “without getting involved”? I can only say that it has yet to be traced.