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Alibaba's Link Motion Deal to Boost Presence in Travel Space

Alibaba’s BABA online travel unit Fliggy has entered into an agreement with Link Motion LKM in a bid to strengthen presence in the online travel space.

Per the agreement, Link Motion, a provider of smart ride and smart car, will offer smart ride service from its mobile application to the customers of Fliggy who will book tickets to Hangzhou, China.

The latest move of Alibaba will promote Fliggy's "smart scenic spot" project which encourages the tourists to enjoy the scenic beauty of Hangzhou. It will also integrate activities such as eating and entertainment into smart internet-connected screens.

Deal Rationale

The latest deal seems to be a win-win situation for both the companies. Apart from the above mentioned benefits for Alibaba, Link Motion’s user base is also likely to expand, thanks to the improving customer base of Fliggy and its own advanced ride services.

Nevertheless, Alibaba will be able to deliver enhanced travel experience to its customer by providing them smart ride service to Songcheng, Huanglong and Xixi National Wetland Park which are the primary attractions of Hangzhou.

Reportedly, almost 60% of the total tourists of the city tend to visit these three places. Further, the travelers will get the options of shopping, other entertainment and dining at popular restaurants in the surrounding areas of these spots.

All these endeavors bode well for Fliggy’s rising adoption rate. Consequently, this will expand the company’s customer base which will drive its top-line growth.

We believe this business collaboration will aid Alibaba in reaping benefits from the rapidly growing online travel market.

Per the latest report from Technavio, the global online travel booking platform market is expected at a CAGR of 11% between 2018 and 2022.

Growing Business Cooperation

Business cooperation and strategic partnerships have been playing a significant role in shaping the company’s growth trajectory over the past few years.

Recently, Fliggy joined forces with The Tourism Authority of Thailand (“TAT”) to deliver smart and digital tourism experience in Thailand by providing services ranging from online tour guides to electronic ticketing systems to the tourists.

We note that the company’s increasing tourism partnerships are not only expanding its footprint in the travel industry but also adding strength to its e-commerce business.

However, intensifying competition in the e-commerce space poses major threat to its market position.

Zacks Rank & Stocks to Consider

Currently, Alibaba carries a Zacks Rank #4 (Sell).

Some better-ranked stock that can be considered in the retail-wholesale sector are Amazon AMZN and Expedia EXPE. While Amazon flaunts a Zacks Rank #1 (Strong Buy), Expedia carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Amazon and Expedia is currently pegged at 26.5% and 16.08%, respectively.

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