Following its Series A raise of US$7m last December, Hong Kong-based TravelFlan, a travel and lifestyle AI-digital solution startup, is in the midst of raising an additional US$12m to expand across Asia. To date, the company has raised more than $9.9 million.
Said Abel Zhao, who co-founded the company in 2016 with Kenneth Lee, “Our new round is progressing as planned; in comparison to previous rounds, the biggest challenge is that it is difficult to meet potential investors face-to-face.”
Thus far, it has acquired an OTA in Beijing, called Beijing JuXingZiZai International Travels Ltd, and it is in talks to buy an OTA in South Korea. “One of the main reasons for our new round is to acquire and/or invest in more strategic partners to help us to expand faster.”
Asked if Beijing and Seoul were opportunistic acquisitions, he said, “Many travel companies, if not all, are suffering. Unfortunately quite a few might be facing bankruptcy. Some of them are our existing partners or companies were doing great prior to Covid. Therefore, they are definitely worth saving.
“In terms of pricing/company valuation, it depends on a number of factors to determine a good price or not. For example, the target OTA in Korea was originally hotel product focused in Korea market only. Their business has dropped quite a bit since the breakout, we’ve been helping them to explore other distribution channels, new partnerships outside Korea and create different bundled products (hotel+local products+restaurants) for incremental revenue. Other than travel, we are also looking into other potential acquisitions like eCom and logistic partners.”
It is also planning to open an office in Singapore by this September, for business development as well as house a local IT team to support South-east Asia projects.
TravelFlan started as an OTA but learnt the hard way how difficult that was in China, and transitioned to a B2B2C model in 2018. “We were selling attraction tickets but found it so competitive. Everybody was trying to sell but nobody was offering service. Customers spent a lot of time to prepare and research, yet products were not personalised.
“We saw that companies needed that more than anything else and so we started developing our own AI tech and big data,” said Zhao, who used to work with Amadeus and Travelport. Its concierge chatbot serves as a travel booking platform that offers recommendations and experiences for users. At the end of 2019, its goal was to serve a total of 50 million customers.
During Covid, it has become less about travel, more about lifestyle, for obvious reasons. Its biggest customers have become Samsung in South Korea and China Mobile and its solution helps these companies sell a range of services and products to their huge customer base.
“Our business model is superapp empowerment. We empower companies to do more with their customer base – for airlines and hotels to sell other products, for example,” said Zhao. “During this time, it’s about enabling them to sell non-travel related products.”
It’s had to make a few pivots during this time. “One of the travel agencies we had signed in Singapore closed down. We signed with seven airlines in South Korea – all projects were put on hold and we had to find a way to keep rolling.”
It signed up duty free shops and retail malls and provided them with e-commerce solutions to enable them to keep selling through this period. It signed up the second largest coffee chain in South Korea and it’s helping Samsung sell beauty products, for example.
The five top-selling categories at this time are cosmetics, beverages, coffee, bakeries and food delivery, said Zhao.
All these adaptations to the business mean that, post-Covid, it will have a much wider range of products to offer its partners. “We can connect hotels and flights to duty free centres, and we can distribute their products to wider audiences. This means customers do not need to jump from one platform to another, with our meta-search function.”
In 2019, 55% of its customers were from China and 35% from South Korea. It is expecting increases from South Korea. This year, it is working with Samsung for its smart fridges to become e-commerce-enabled.
The silver lining in this crisis is that companies were adopting technology faster to reduce costs and increase efficiencies. And Zhao said its solution was not only helping big companies like Samsung or China Mobile but small businesses as well.
For small businesses like ryokans and restaurants, for example, it does not charge an implementation fee but uses revenue share. For example, in Hong Kong, it has linked 60 restaurants to a telco company for its local restaurant promotions. “We are only taking a cut from the telco, not from the restaurants.”