As of August 2019, there are nearly 400 unicorns (privately held start-up companies valued at more than $1 billion) globally, with a combined market capital of more than $1.1 trillion. The majority of these are tech-based platforms founded within the past 10 years; the global travel and tech mobility sectors account for more than 10% of all unicorns. In 2018 alone, $44 billion was invested in the travel and tech mobility sectors.

CBInsights notes that of the 400 unicorns, about 50% are headquartered in US, followed by China (25%), the UK and India (5% share each), with the remaining 15% being distributed globally. It appears markets and companies headquartered outside of the US could be under-invested and will seek to correct this over the next five years.

One fact that may surprise many readers is the scale of the Chinese outbound travel market, which in 2018 was worth $277 billion – almost double the US market. According to Phocuswright’s 2019 China Online Travel Overview, the country had the second largest OTA market in the world in 2018 at $45 billion, ranking behind the US at $77 billion. However, the delta between the two is quickly shrinking as China’s OTA market is growing rapidly at 27% alone in 2017 – more than four times that of the US.

It appears investors are catching up too, and there has been a marked shift in the markets that venture capitalists are favouring, with about 60% of 2018 global investment having been across the Asian markets.

It is not yet clear whether this has been driven by an under-supply of emerging tech platforms in western countries, or whether investors are simply becoming more accustomed to Asian markets.

Tech giants like Tencent Holdings and Alibaba Group see an opportunity to capture market share from more established operators. Overseas companies such as LuluTrip, a Silicon Valley OTA founded in 2007, are also looking to ride the wave of outbound Chinese travel by specialising in travel services for Chinese-speaking customers.

In 2014 Alibaba Group decided to enter the travel market via its online travel platform Alitrip (relaunched as Fliggy in 2017). Today, Fliggy provides international travel opportunities to young, affluent and travel-hungry Chinese customers and the ambitions of the group do not stop at the domestic Chinese market. Fliggy, and Alibaba, has made “globalisation” it’s raison d’être.

Angel Zhao, president of Fliggy, pledged the company would achieve a global footprint by partnering with “leading international domestic players” and by “expanding operations through M&A activity”.

In turn Ctrip, currently China’s largest OTA and the third-largest in the world behind Expedia and Booking Holdings, has ramped up its own M&A activity in recent years. In November 2017, Ctrip acquired Trip.com having made a number of investments in Chinese travel companies including Tuniu and Tongcheng-Elong; and who can forget its acquisition of Skyscanner for a mouth-watering 45 times Ebitda in 2016?

With Chinese travel firms targeting global expansion their primary strategy, there are two options: open their platforms to the western world and organically onboard customers, or acquire a share of the international travel market through M&A activity.

With the latter, the ability to gain both an international foothold and leverage their acquired brands and product to their existing Asian customer-base will be key to maximising return on investment.

For anyone who might want to consider working with Chinese operators – do plenty of research to get to grips with this emerging landscape.