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Jan.2 (NBD) -- Travel service companies Tongcheng Network, a unit of Tongcheng Tourism, and E-dragon Holdings Ltd (or eLong) said on Friday that they would merge to create a new travel platform as Tongcheng-Elong Holdings Ltd.

James Liang, Ctrip's Co-founder and Executive Chairman, will serve as the new company's Co-Chairman. Wu Zhixiang, Tongcheng Co-founder and Tongcheng Group CEO & Chairman, will also be Co-Chairman. Ma Heping, Tongcheng Co-founder and Tongcheng Group CEO and Chairman, and Jiang Hao, eLong CEO, will be Co-CEOs of the new company. 

NBD noticed that the two companies have complementary travel services and the merger would optimize resources and enhance efficiency. Ctrip, along with Tencent, will be the major strategic shareholders of the new company. After the deal is closed, the new entity will likely enter the capital market.

Tongcheng Network holds a leading position in the domestic air ticketing, train ticketing, and other transportation ticketing areas. In April 2014, Ctrip purchased a minority stake of the travel service provider and has stayed on as a strategic shareholder.

eLong is a platform that allows travelers to book hotels, home stays, apartments, and other accommodations as well as air and train tickets. In May 2015, Ctrip made a strategic investment in eLong and remained as an important shareholder when eLong completed its "going-private" transaction in May 2016.

According to company filings revealed, Tongcheng-ELong will be dedicated to providing wider traveler coverage and offering better travel services. After the merger, the company is expected to have nearly 200 million users. An internal letter from Wu Zhixiang shows that Tongcheng Group completed 5 million deals in 2017 alone, reaping over 100 billion yuan (15.4 billion U.S. dollars) in turnover. 

The merged company will combine hotel and ticketing platforms of Tongcheng Network and eLong and continue to offer online travel services via Weixin Wallet and Mobile QQ Wallet.

Cao Lei, director of the China E-Commerce Research Center, told NBD that Tencent is the second largest shareholder of eLong and the third largest shareholder of Tongcheng Network. Ctrip is the largest shareholder of eLong and the second largest shareholder of Tongcheng Network. Only the listing of the merged company can deliver more capital returns for the two large investors, Cao explained.

Zhao Huanyan, senior economic analyst of Huamei Consulting Co., Ltd, noted that the competition of online travel agents (OTAs) will be among internet-based OTAs, rather than traditional ones. The merge is a good deal, which not only diminishes competitors but also benefits from significant traffic via Tencent's Weixin and Mobile QQ platforms.   

However, the cooperation of online and offline services will be a challenge for the new company. He also suggested that the original platforms of Tongcheng Network and eLong should be retained and that the new entity only needs to empower the platforms to share backgroud data, just like what the newly emerged rating platform Meituan-Dianping does. 

Email: tanyuhan@nbd.com.cn