Singapore: The Ascott Ltd has formed a joint venture with Tujia, China’s largest sharing economy apartment rental platformm.
The Ascott Limited (Ascott) is leading a
consortium to invest S$67.69 million (US$50 million) in
Tujia. Ascott will also form a joint venture with Tujia with
an initial capital of S$54.15 million (US$40 million). This joint
venture led by Ascott will operate and franchise serviced
apartments in China.
Beijing-based Tujia's apartment sharing site, valued at more than US$1 billion, caters to travellers looking for alternatives to hotels, for vacation as well as business travel within and outside of China. Its website features more than 310,000 apartments covering 388 travel destinations across China as well as overseas destinations such as Bangkok, Singapore and Tokyo for Chinese outbound travellers. Besides its online capabilities, Tujia operates some apartments for owners for a fee and franchises its business to third-party operators.
Lee Chee Koon, Ascott's CEO, who has also been appointed to the board of directors of Tujia, said: "China's lengthening list of billion-dollar technology startups is an indication of investors' confidence in the country's booming internet sector, including O2O (both Offline-to-Online and Online-to-Offline) commerce. The growth of mobile internet connectivity via devices like smart phones and tablets has enabled O2O commerce to thrive and establish itself as a mainstream market at an exponential rate, especially in China where the size of the market is considerably greater than just physical transactions. By investing in Tujia, a frontrunner in the online apartment sharing platform, Ascott is now well positioned to benefit from this growth."
Lee added: "Ascott has the world's largest serviced residence network in 92 cities across 26 countries, with a target of 80,000 units by 2020. This investment will also allow Ascott to better integrate our offline resources with Tujia's online capabilities to participate more strategically in the O2O space. We plan to make our three internationally recognised brands of serviced residences - Ascott, Citadines and Somerset - available on Tujia's website for booking, expanding our reach to more customers online. Through Ascott's joint venture with Tujia, we will be able to quickly scale up our presence in China to 20,000 units by 2020. With the rapid increase in Chinese travellers overseas and Ascott's presence in many of the tourist and business cities worldwide, our penetration of the Chinese market through our partnership with Tujia is also expected to contribute to Ascott's business globally."
As part of its joint venture with Tujia, Ascott will operate serviced apartments located within the key growth cities of China using a new brand. This will include newly sourced properties and Tujia's serviced apartments in China that are deemed suitable for conversion. Ascott is the largest international serviced residence owner-operator in China with over 14,000 apartment units in 77 properties across 24 cities.
Justin Luo Jun, co-founder and CEO of Tujia, said: "We welcome Ascott onboard as a strategic investor and a key joint-venture partner. Ascott has an established track record for over 30 years and is renowned for its strong capabilities in managing over 200 properties globally under three award-winning serviced residence brands that enjoy recognition worldwide. We expect to have more than 400,000 apartments to be listed on Tujia's website by the end of this year so as to cater to the market demand. Our collaboration with Ascott will allow us to tap on Ascott's expertise to offer more world-class serviced apartments and strengthen Tujia's position as the leading online apartment sharing platform in China."
Ascott's parent company CapitaLand Limited has also formed a technology council to boost its digital efforts to drive its real estate business. The council is made up of "high-calibre digital visionaries", venture capitalists Foo Jixun, managing partner of GGV Capital and David Su, managing partner of Matrix Partners China, as well as Gabriel Lim, CEO of the Media Development Authority of Singapore. The council was formed to provide strategic critique of CapitaLand's operations and insights to the digital universe.
Lim Ming Yan, president and group CEO of CapitaLand Limited, said: "CapitaLand's technology drive is part of the Group's efforts to sharpen our customer-centric focus to develop real estate of the future - integrated and interconnected smart communities through smart buildings as well as seamless online and offline customer experiences. We are privileged to have stellar tech visionaries join us in the CapitaLand Technology Council. With the wealth of experience and fresh perspectives of the council members, CapitaLand will gain much insight on using digital technology to decode the art of human needs and wants, so that we can create smart buildings for smart customers.
"The council will also identify tech trends, challenges and
opportunities to sharpen CapitaLand's smart focus. This includes
offering advice and guidance on how we can drive our growth through
strategic collaboration with strong technology partners, such as
Tujia.com International (Tujia) - China's largest and fastest
growing online apartment sharing platform, which has been dubbed as
the Chinese equivalent of U.S. home-rental website Airbnb.
CapitaLand's investment in Tujia through Ascott, gives us the
opportunity to expand into a new vertical which will augment
Ascott's core strength," added Lim.
While other serviced apartment operators and hospitality companies dither, and in some cases even continue to maintain that Airbnb and its ilk are not a direct threat to their businesses, Ascott has impressively reinforced its progressive credentials by taking the bull by the horns and entered in to a JV with Tujia, known as China's Airbnb.
The tie-up gives Ascott access to a potentially huge new untapped customer base for its existing brands, and it is also creating a new brand specifically for the Tujia platform. The deal is the latest in a series of canny partnerships Ascott has formed with other 'best in class' companies including Samsung, Qatar Investment Authority and Quest Serviced Apartments.
If anyone in the serviced apartment sector had any lingering doubts about the relevance of the sharing economy to the industry, this deal should have definitively banished them.