Ctrip.com (CTRP.NASDAQ) has long held a comfotable, top spot in China’s internet tourism market. As the country’s largest online travel agent, the company reported total revenues of US$129 million in the third quarter of 2010 – a 48% increase from the same period in 2009. Its nearest competitor, eLong (LONG.NASDAQ), reported sales revenues of only US$22.1 million in the same period.
But the online travel war is just beginning. According to a report by iResearch Consulting Group, total online sales of flight tickets, hotel services and package travel products were on course to reach about US$700 million in 2010, an increase of 27% year-on-year. The figure is expected to rise to US$1.32 billion by 2013.
A number of new players are emerging, hoping to cash in on the travel market boom. China’s largest retail website Taobao.com, a unit of Ali-baba Group (which operates a B2B business, Alibaba.com, 1688.HK), joined the fray in May 2010. By providing a platform enabling smaller ticket agents to sell online, Taobao launched an online travel channel that offers services for air tickets, hotel bookings, transportation services and destination information.
Meanwhile, Shenzhen-based internet conglomerate Tencent Holdings (0700.HK) opened a travel portal, go.qq.com, which offers flight reservation and hotel booking services for a network of nearly 500 cities. US-based online tourism agency Expedia (EXPE.NASDAQ) – which currently operates in China through partners including eLong, travel review site Dadao.com and hospitality search engine Kuxun.cn – also plans to invest at least US$50 million in China by the end of 2011, and is seeking new acquisition targets.
“The new players are stimulating competition in the internet travel market,” said Zhu Jingbo, product manager of Netease (NTES.NASDAQ), a leading Chinese web portal which operates a flight booking service at jipiao.163.com. “Online travel sales are shifting from a monopoly to competition, and this is a good thing for customers.
“Compared to the rest of the world, China’s online travel websites still lack experience.”
Racing forwardTo get ahead of other competitors, travel websites are not only focusing on how to improve services, but also how to differentiate themselves. As a result, many companies are trying to offer new products and tailoring their business strategies for niche markets.
Taobao, for example, allows users to pay using Alibaba’s online payment tool “Alipay.” It also started a new buyer-protection policy that offers a refund for international ticket sales in dispute. The hope is that these added services will entice customers away from Ctrip and other competitors.
Online travel agency Donkeytrip.com, which launched last year, specializes in providing booking services for travel between Europe and China. Many of Donkeytrip’s customers are Chinese students in Europe who are looking to fly back to China, said Patricia Chen, the website’s marketing manager.
“Chinese consumers show different behavior when they’re buying a plane ticket online. They want to feel like they are engaged in a relationship with the agency they’re purchasing from,” Chen said.
“I think the main challenge will be if there are too many similar websites in the market. You really need to stand out and actually have some selling points that are unique.”
Another website, Byecity.com, specializes in outbound travel, providing a range of services including global hotel reservations, visa applications, tourist information and European train reservations for Chinese consumers. While these services are complex and require more resources than single products such as flight bookings, Byecity’s Shen Tongyan believes niche services are the way forward.
“The competition among online air ticket portals is based on how efficient their operational systems are, whose prices are lower and whose commission is higher,” Shen said. “In the long run, if the price war continues and they spend a lot on marketing their websites to differentiate, they still may not be able to get a high return.”
As such, travel websites may be hard-pressed to compete against Ctrip or eLong’s current online dominance, but there is certainly room to grow in special tourism services.
Despite the growth in internet travel sales, China still has one of the lowest levels of online travel penetration in the world. According to US-based research company PhoCusWright, about 70% of trips in the US were booked online in 2009, compared to 14% in China. While that figure is expected to double in 2011, the low use of online bookings means that internet travel firms still have a long way to go.
Many Chinese consumers, for example, prefer to book trips by going to a travel agency with which they’ve established a relationship. To help attract more customers online, Chen stresses the online travel industry must gain people’s trust. “If websites have a good reputation, then people will buy their flights and book hotels online. Chinese consumers are still looking for a relationship with their website or the people who run it. They want real confirmation and real customer service from travel sites,” Chen said.
This includes providing order confirmations over instant messenger programs like QQ or MSN, where consumers can see the online travel agent in their personal contact list.
Chinese customers, after all, are just looking to book their holidays and business trips in the most simple and secure way possible. “Online travel websites are not becoming competitive because they’re important, but because online technology is important in our lives today,” Shen said. “By using the internet, the travel industry can work more efficiently and gain more customers than ever before.”
You must log in to post a comment.
Yes, I would like to receive emails from China Economic Review. (You can unsubscribe anytime)
Copyright © 2018 SinoMedia Group Limited All rights reserved