The news is sweet. Online travel is growing faster than the overall market and APAC remains a high growth market. However that didn’t stop Timothy Hughes, vice president marketing of Agoda, from reminding everyone “it’s a brutal market out there” and predicting a “bloodbath”.
Hughes said it was getting very much like “Game of Thrones”. (For anyone watching this TV series, into Season 5 currently, you’ll know it’s a brutal, merciless battle between different families to see who gets to sit on the Iron Throne.)
“It’s a very competitive space, everyone has noticed travel and everyone’s getting into it,” he said during a panel at WIT Japan & North Asia. “It’s going to get brutal.”
Timothy Hughes: Expect a brutal bloodbath like “Game of Thrones“It’s a very competitive space, everyone has noticed travel and everyone’s getting into it,” he said during a panel at WIT Japan & North Asia. “It’s going to get brutal.”
At the two-day event, which included a Bootcamp for start-ups, it is clear the online travel space is getting super competitive. Non-travel companies are getting into the space – Alitrip is now considered the third largest OTA after Ctrip and Qunar. Expedia has already surrendered in China, selling its stake in eLong to Ctrip and other investors. E-commerce platforms such as Interpark in South Korea and Rakuten in Japan are dominating travel, and giving traditional travel companies a run for their money. Then there are the non-travel brands to worry about – with Google being mentioned the most by speakers as the one still to watch and fear.
Global brands such as Booking.com, Expedia and Agoda are seeing huge growth in North Asia, helped by the rising tide of inbound tourism into Japan and the rise in intra-regional travel within the region – Chinese, South Koreans, Japanese and Taiwanese visiting each other’s countries.
Uber and Airbnb are also benefitting from the inbound tourism surge into North Asia as well as domestic travel and Alan Chang, managing director, North Asia for Airbnb said the company was seeing seven times growth in domestic travel in South Korea.
It is evident foreign brands have the advantage when it comes to inbound tourism given their ability to generate and scale demand from source markets. Among Japan’s top travel brands, Rakuten is stepping up inbound efforts and its travel division, which sees 4.6 million room nights per month of bookings (April 2015 figures), saw almost 70% growth in inbound, and travel chief Takanobu Yamamoto said this was where Rakuten Travel will be focusing on as it tries to scale demand from overseas markets where it has presence into Japan.
Takanobu Yamamoto: Focus on inbound
It is clear inbound will be the new battleground for Japan given that outbound travel is flattening out and as the Abe government pushes initiatives to grow visitor numbers from 13.4m in 2014 to 20m by 2020.
Start-ups are also upping the ante. Relux, a marketplace for ryokans and unique accommodation in Japan, is expanding into China, and hoping to ride on the new wave of Chinese visitors looking for different experiences in Japan.
Whether these younger start-ups will have more success than the more established companies – Ikyu had an unsuccessful foray into China couple of years ago – remains to be seen but it is evident that expansion beyond Japan’s shores continues to be a challenge. Trippiece, the social travel site, which expanded to South-east Asia is struggling with creating demand in markets outside its homebase.
Hyuk Park: It’s finally happening.
In South Korea, Hyuk Park, head of planning for Jeju Air, South Korea’s largest low cost airline, said, “It’s finally happening. Online travel is finally moving.” The airline, which turns 10 this year and is planning an IPO, is seeing strong growth in its international markets which now form 60% of its revenues. China and Japan are key markets.
Coupang, an e-commerce company founded in 2010, is providing to be a strong distribution channel for travel companies – and mobile is the game-changer in that market. Mobile in South Korea seems to be evolving in a similar way to China and Hyuk said that with 93% of Korean smartphone users using Kakao Talk, that messaging app has become a powerful distribution medium. Like the Chinese WeChat, It functions like its own version of the Internet within a smartphone including offering payment.
Interpark, the Korean e-commerce platform to whom travel is already the biggest vertical, is certainly seeing strong growth in mobile. According to Chris Lee, managing director, hotel business, in 2012, the web accounted for US$37.6m of revenues for Interpark while mobile contributed just $1.85m but in 2014, mobile is already at $50.01m vs web’s $52.29m, almost 50%, equivalent to China’s numbers. The numbers shared by Japan’s top travel brands showed mobile hovering at 20-30% in terms of channel share.
Chris Lee: Mobile is key to success.
“Mobile is the key to a successful online business in South Korea,” said Lee and the strong growth in last minute hotel bookings has prompted Interpark to launch Tonight Only in 2013, which now accounts for 15% of all hotel bookings.
Other last minute hotel apps have been launched including Daily Hotel which Lee said was “a successful last minute app chasing Interpark”. He also cited MyRealTrip, a peer-to-peer marketplace for tour guides and which won the WIT Japan Start-Up prize last year, as a good example of a start-up chasing the mobile market.
So with everyone getting into travel – from the world’s largest technology brands to local e-commerce platforms to start-ups – who will win? Travel specialists which have owned the market for the last two decades will have to dig deep and fight hard to keep their share, and it will be a question of where consumers ultimately choose to buy from. Will they buy from One-Brand-To-Rule-Them-All or Niche-Brands-That-Take-Care-Of-Me-Really-Well?
When another panel was asked which superpower they’d like to have to rule in the new dawn, the theme of this year’s WIT Japan & North Asia, Adrian Currie, senior vice president, corporate development, of Priceline Group, said he’d like to be a Hobbit. “No matter the odds, they stay focused on their goal. They may get distracted by the powers of the Ring but they fight their way through every battle and they get there in the end.”
Note: Top photo: Keith Melnick, President of KAYAK, opened the event talking about how KAYAK would be focusing on product and how the acquisition by Priceline is allowing it to focus on the longterm.
