Alipay has 700 million customers. There were 83.2 million outbound trips in 2012 and Chinese travellers spent US$102 billion overseas. 98% of Chinese travellers, totaling 295 million, own a smartphone.
At every conference, staggering numbers about the Chinese market are thrown at you. On their own, numbers are just numbers though and it is only when you are in the thick of it that you live the size and might of this market.
You live it at the airport as you watch the numbers at immigration and customs. You live it on the streets and highways as you watch all manners and sizes of vehicles fly by. You live it because everything seems louder, noisier, brighter, crowded-er (sorry no such word but fits this context).
I’ve just wrapped up two days of China’s largest online travel event, Travel Distribution Summit themed “Waves of Transformation”, and good on Charlie Li (pictured left), the founder, for creating the flagship event in this space. His numbers grow every year – nearly 800 delegates, about 50 sponsors – a reflection of the growth of the market.
As he told me, “It’s the timing, everything is growing and changing so fast.” According to PhoCusWright’s China Online Travel Overview, Sixth Edition, the online leisure/unmanaged business travel market is growing faster than the total travel market and is tipped to grow 27% in 2014 (vs 10%) and 30% in 2015 (vs10%), while mobile travel bookings will grow from 7.9% share of total online travel market to 21% by 2015.
Mobile certainly dominated the agenda and while some welcomed it, others resented it. “We came to learn about online, not just mobile,” said an OTA representative. But I guess you can’t run away from a phenomenon that is transforming customer behaviour in the world’s largest market.
And it’s not only happening in China. According to Groupon Travel Asia Pacific head, Sean Seah, 50% of Groupon’s $6 billion transactions worldwide happens on mobile. Facebook’s Head of Travel Lee McCabe says mobile traffic has surpassed browser visits.
eLong’s CEO, Cui Guang Fu, in his presentation, talked about a 100% mobile strategy. “Mobile is the future, the technology to go with.”
Five years ago, he said, PC sales were growing five times faster than call centres. In the second quarter of this year, eLong saw 20% of total bookings happening on mobile and “it’s growing five times faster than PC sales”. Up to 30% of mobile bookings on eLong were for hotels within a 30km radius and up to 65% were for same-day bookings.
This shift towards mobile, he said, would create “organidational and technological challenges” and eLong had set up a US$100 million fund to support development so that it can become “the expert in hotels, the bridge between hotels and customers”.
Other players betting big on mobile include China’s GDS, Travelsky, which has launched a highly popular consumer app that gives flight information and alerts, and meta-search-turned-OTA Qunar, which will be looking at including real-time imaging and videos of hotels, and extending beyond hotels to other services such as activities and spas on its apps.
Pictured: Yeoh Siew Hoon moderating a panel at TDS. From left, Stan Van Roij (INFOR EasyRMS), Adrian Currie (booking,com), Sean Seah (Groupon Travel Asia Pacific), Tai Parata (Abacus International) and Jason Yap (Travelzoo Asia Pacific)
A couple of hoteliers I spoke to were concerned about this push towards mobile which was accelerating last minute bookings. “It’s very bad for revenue management,” said one hotelier.
Adrian Currie, managing director Asia Pacific of booking.com, said that one reason why mobile is so huge in China is due to the vast domestic market, and that travellers are therefore familiar and comfortable with booking rooms at the last minute. “You wouldn’t do same-day booking in cities with tight supply like Singapore or Hong Kong or Tokyo, and you wouldn’t do it for leisure trips overseas,” he said.
He also questioned why hotels would encourage last minute bookings by offering lower same-day rates.
The other big trend is a more intense focus on outbound. While there are many players who have already cropped up in the space, I met many more who are getting into it – so expect this to be the new battleground.
Currie said booking.com was seeing a growing trend of Chinese outbound business – with bookings happening for up to 100 different destinations in a month, evidence that travellers are fanning out more and more.
As Jason Yap, CEO of Travelzoo Asia Pacific, observed, “There isn’t yet a single player that has aggregated outbound travel content for the Chinese traveller and I think the one that manages to do this, and specialises in, say South-east Asia, would do very well.”
Seah said Groupon would be looking at doing promotions and deals targeted at the Chinese outbound customer.
But it’s not all rosy. The Chinese hotel market is softening, impacted by both official austerity measures and oversupply. The drop in f&b revenues is prompting hotels to look at room revenues and that’s good news for companies like INFOR EasyRMS whose managing director, Stan van Roij, said it’s when markets are soft that hotels should look to revenue management to increase yields.
The question as to why Chinese OTAs aren’t expanding across the region was also raised. According to latest figures, Expedia’smarket cap is US$7 billion and Ctrip’s US$6.4 billion, leading Travelzoo’s Yap to ask, “it’s not that far behind, so why isn’t Ctrip expanding like Expedia?”
Perhaps the answer is simple, China is big enough but Yap said with Chinese travellers fanning out across the world, it made sense for a player like Ctrip to go where their customers are going.
For Yap, regionalisation of online travel is the trend he’s watching in the next 12 months and he hopes China will play a greater role in shaping and influencing that trend.
And perhaps it will. After all, if Asia-based brands such as India’s Makemytrip, Japan’s Rakuten Travel and Australia’s Wotif andWebjet are venturing beyond their borders, why shouldn’t Ctrip and other Chinese travel brands?
And one could certainly argue that China’s mobile first model could work well for markets such as Korea and Japan – whatever pans out, you can bet it will be interesting times ahead.
