Klook: a Hong Kong unicorn

The online travel agent founded by three former Hong Kong investment bankers raised more than $200 million in a new funding round, moving one step closer to going public

Key Takeaways:

  • Klook founder Eric Gnock Fah says the travel agency he co-founded is ready to go public in Hong Kong or the U.S. at any time, following a major new funding
  • The Hong Kong travel platform recorded over $3 billion in revenue this year and achieved its first profits

    

By Lau Chi Hang

Inter Miami, an American soccer team owned by the legendary David Beckham, will visit Hong Kong next February. With global superstar Lionel Messi on board, the tour is expected to be sold out in the city, shining a spotlight on Klook Travel, a local rising star with rights as the event’s exclusive ticket seller.

The Hong Kong-based operator of an online travel agency (OTA) made its own recent headlines when it raised $210 million from a group of established investors including U.S.-based Bessemer Venture Partners, Asia’s Atinum Investment, Golden Vision Capital, Thailand’s Ayutthaya Capital and Krungsri Finnovate, a subsidiary of Bank of Ayudhya.

This is the company’s seventh financing since its founding nine years ago. Klook raised $5 million from Matrix Partners in in its first round in 2015, and counts big names like Hongshan, previously known as Sequoia China, Goldman Sachs and SoftBank among its backers. The company exceeded the $1 billion valuation mark pre-pandemic in 2018, making it a “unicorn,” though it declined to give a new valuation with the latest fundraising.

Klook’s rapid rise is no small feat given its relatively small base in Hong Kong, a city of just 7 million where it also competes with big global names like U.S.-based Expedia (EXPE.US) and Mainland China’s Trip.com (TCOM.US: 9961.HK). The company’s story began with three young investment bankers with big dreams.

Seminal trip to Nepal

Life is unpredictable for entrepreneurs. Some work hard for years, toiling with little to show, while others hit the jackpot after just one or two tries. For Klook, it all started with a trip to Nepal.

In 2013, Eric Gnock Fah and Ethan Lin, two investment bankers born in the 1980s, planned to travel to Nepal and were disappointed at the lack of convenient booking services. That got them to thinking, and they saw an opportunity to fill a market gap.

Too young to worry about failure, the pair acted immediately, defying their traditional parents who wanted them to keep their stable and well-paid investment banking job. Eric would later explain: “I only have one life, and I wanted to start a business and have no regrets later.”

Acting on that instinct, he quit his job as an analyst at Morgan Stanley and sold his home on Hong Kong’s trendy Hollywood Road to raise money to start the business. Fellow traveler Lin similarly quit his job at Citibank, and found another partner in Bernie Xiong. The trio set up Klook, which means Keep Looking, in 2014.

The company is an OTA that provides overseas travel services mainly in the Asia-Pacific region. It uses a social media element where travel-oriented key opinion leaders (KOLs) create their own trips with different activities and itineraries, and recommend things like transportation, accommodation and fun activities and provide booking services to customers.

Waiting for IPO window

The trio’s bet paid off big time. Despite stormy times during the pandemic, Fah, who serves as the company’s COO, said in a recent interview that Klook’s performance has improved notably this year as people resumed travel post-Covid. He said the company recorded the best results in its brief history, with total bookings approaching $3 billion. That helped to drive it to its first-ever profits. 

As the good times returned, market rumors began to circulate that Klook was preparing an IPO to raise $300 million to $400 million, building on Eric’s earlier words that the company is prepared to list in the U.S. or Hong Kong.

Such a move looks aimed at capitalizing on a strong rebound for global tourism, which has now recovered to 80% of pre-pandemic levels, according to a recent report from the World Tourism Barometer published by the United Nations World Tourism Organization. The report also pointed out that the number of global tourist trips reached 235 million in this year’s first quarter, up many-fold from the same period last year. 

Meanwhile, the World Travel and Tourism Council’s recent World Economic Impact Report 2023 predicts that global spending on tourism will total about $9.5 trillion this year. The momentum is expected to continue for the next two years, fueled partly by big events like the Paris Olympics next year and Expo 2025 Osaka in Japan.

But many others are also hoping to take flight with the travel boom, including global names like Expedia and TripAdvisor (TRIP.US), as well as local leaders like Taiwan’s KKday, as well as China’s Trip.com, Tuniu (TOUR.US) and Fliggy.

Three strategies 

In the face of such stiff competition, what does Klook have up its sleeve to gain an upper hand? The company plans to spend its recent big new fund infusion on product innovation, as well as expansion of its KOL community and use of artificial intelligence (AI) to set itself apart.

Klook has been focusing on technology, including digital content creation from the traveler’s point of view, believing that Gen Z travelers rely heavily on social media in making their trip plans. At the same time, it also plans to boost its efforts at improving the booking experience to attract new customers and increase their loyalty.

During the pandemic, Klook invested considerable resources in helping its merchants to digitally transform and expand their service offerings to include such extras as car rentals and outdoor experiences. 

Finally, Klook plans to devote more resources to its Klook Kreator program that allows people to design travel content and share information through personal experiences of travel KOLs. It will also deploy more targeted digital marketing strategies to increase conversion rates.

Klook certainly isn’t alone in many of its strategies, including its plans to use AI more aggressively in the future. As part of that effort, Klook recently partnered with Google Cloud to incorporate AI elements, such as automatic translation, automatic content generation and customer service chatbots, into its platforms.

With those three major strategies to set itself apart, Klook’s next big trip could quite well take it to the major capital markets, where its story could get a boost from the strong post-pandemic rebound in global travel.

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