This month train stations and highways around China are
experiencing peak volume, as hundreds of millions of the country’s citizens
travel to celebrate the Lunar New Year Spring Festival.
The Year of the Pig officially began February 5, but Chinese
people celebrate it during a 40-day travel rush period known as “Chunyun,”
which this year runs from January 21 and March 1.
During that time the government estimates more than three
billion trips will be made, up 0.6% over 2018, with an 8.3% increase in train
trips and a 12% increase in air travel.
Growth in travel is not confined to this celebratory period,
however. Chinese people traveling year-round have made the country the world’s
largest outbound travel market - and it's only getting bigger.
The China Outbound Tourism Research Institute (COTRI)
forecasts an increase of 11% year-over-year in 2019 to a total of 180 million
border crossings from Mainland China, with 49% of those trips ending in Greater
China (Hong Kong, Macau and Taiwan) and 51% going to other destinations around
the world.
Both the air and accommodations sectors in China are experiencing
this growth.
According to IATA’s 20-Year Air Passenger Forecast, released
in October 2018, China will surpass the United States to become the world’s
largest aviation market by 2025.
And it is also the fastest-growing: By 2037, the Chinese
aviation market will have to accommodate 1.6 billion travelers, one billion
more than today.
To manage that increased traffic, China will build 74 new
civil airports by 2020, bringing the total number to 260, according to a report
from the Civil Aviation Administration of China.
The accommodations sector is equally active. According to
Phocuswright’s China Online Travel Overview, China’s hotel bookings (online and
offline), were valued at nearly $38 billion in 2016 but are expected to grow steadily,
reaching nearly $51 billion in 2022.
For the final piece in this month’s series on China, we take
a look trends and topics related to travel distribution in the country.
Mobile
The continual expansion of China’s travel industry is just
one part of the story – equally interesting is the story of where this growth is taking place.
The short answer is, of course, on mobile.
Phocuswright estimates by 2021, 46% of China’s overall
travel bookings and 85% of those done online will be done on mobile platforms.
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“China's world-leading mobile travel adoption reflects the
shape of retail more broadly in a country that has leapfrogged over desktop
online shopping. This is thanks in part to widely popular seamless payment
solutions and intense competition for consumers in an economy that has added
millions of shoppers in a short period of time,” says the Phocuswright report.
Dominating the mobile story for travel are five platforms – Ctrip,
Fliggy (Alibaba’s travel brand), Meituan Travel, Qunar and Tongcheng-eLong.
According to Trustdata, a Chinese mobile internet monitoring
platform, those five players accounted for 96.4% of the online hotel bookings
in the second quarter of 2018.
Meituan comes in first both in order volume and room nights,
capturing more than 46% of the market share.
In a statement released in January, Meituan says in the
first three quarters of 2018, more than 209 million domestic hotel room nights
were booked on the platform, an increase of 43.8% year-over-year and surpassing
the total number booked in 2017.
Part of the success of these platforms comes from the fact
that most are multipurpose, so Chinese consumers are turning to them throughout
the day to manage nearly every aspect of their lives - shopping, food delivery,
banking, entertainment, messaging, news, etc. - creating a captive audience for
cross-selling.
For example, Trustdata says Fliggy ranks first for “customer
stickiness,” benefitting from the large user base of TaoBao, Alibaba’s shopping
site that is the world’s largest e-commerce platform.
And Meituan says, “In
2017, over 80% of its new hotel-booking Transacting Users were converted from
Transacting Users of its core categories of food delivery and in-store dining.”
Ctrip, meanwhile, has found success with its specialization
in travel, offering a broad - and growing - menu of services.
The company
brought in $1.4 billion in net revenue in the third quarter of 2018, a 15%
increase compared to the same period in 2017 and up 28% from the previous
quarter.
“They are changing the shopping experience, so no longer is
it just booking a flight from Shanghai to San Francisco for instance," says Todd Arthur, vice president, Sabre Travel Network Asia Pacific.
"It’s
Shanghai to San Francisco and then connecting the traveler with unique opportunities
to book certain restaurants or to have a SIM card or to provide services or
experiences completely throughout the journey."
WeChat
And then there is Tencent-owned WeChat, the wildly popular
app that combines messaging, voice calling, social media and mobile payments in
one platform.
I think it’s best to call them digital travel agencies - DTAs - who are not necessarily just B2C, but they have a hybrid of a B2B2C model.
Ming Foong - Travelport
Brands can create “mini programs” on WeChat - in effect an
app within the app that gives the brand instant exposure to WeChat’s one
billion active accounts.
It’s a marketing channel that has been embraced by all the
biggest Chinese brands - Ctrip, Qunar, Didi, Mobike and Meituan to name a few - and Western brands including Marriott, Hilton, Royal Caribbean, United Airlines
and many others.
Shanghai-based hospitality distribution technology company
DerbySoft works with brands to create WeChat mini-programs.
DerbySoft CEO Ted Zhang says the platform can be effective in driving
bookings, but it requires much more effort than distributing through an online
travel agency.
“The hotel needs to be big enough and have lots of different
products to sell. Those products need to just be on WeChat, not on an OTA or
your website. The hotel also needs to really know how to promote WeChat. If you
just have it and wait for people to come to it, they don’t. And of course, your
WeChat design - you need help to make it attractive,” Zhang says.
“So for lots of hotels, it’s easy to work with OTAs, but much harder
to work with WeChat. Compared with Ctrip, WeChat is not even similar; it still
has a far way to go.”
Digital and data
Travelport’s regional managing director of Asia, Ming Foong,
says the unique characteristics of travel search and shopping in Asia and
particularly in China have created what he calls “a new breed” for distribution.
“I think it’s best to call them digital travel agencies - DTAs - who are not necessarily just B2C, but they have a hybrid of a B2B2C
model,” Foong says.
“We really honed into that. So we
started to work with agencies that are playing more of a conduit between
agencies themselves and consolidators or metasearch platforms or even digital marketplaces
such as e-commerce platforms that happens to sell travel products.”
Foong says Travelport’s focus is to add value for the many
different players in China’s complex travel ecosystem - the suppliers, the
retailers, the platforms.
“The need for data is massive; the need for processing power
is massive. That’s where we saw the opportunity,” he says. "We are a technology company in the travel industry."
Compared with Ctrip, WeChat is not even similar; it still has a far way to go.
Ted Zhang - DerbySoft
This focus on data is particularly applicable in relation to
air distribution in China - the country’s biggest segment for online bookings - since most content is still booked through the government-owned global
distribution system, Travelsky.
“A few years ago, there was an opportunity for the agencies
to apply to access carrier content through a foreign GDS, but the actual
process is pretty arduous and difficult, so the take-up rate was close to zero,”
Foong says.
“What we do is instead of relying on extracting value
through the booking … we partner with these platforms, providing them data that
they can then use downstream to create bookings.”
Another provider in this category is Chinese startup PKFare (check its pitch and interviews at The Phocuswright Conference 2018 here),
which provides content and technology to OTAs, travel management companies,
offline travel agents and tour operators.
PKFare uses machine learning to expedite and improve product
and content search results, to generate dynamic packaging products and to help
users find travel routes that minimize time and price.
And as the Chinese travel market grows, there will be even
greater demand for for accurate data, reliable technology and rich content.
“As a result, the infrastructure needed, the agency support
needed, the technology needed to really drive that has evolved and it will need
to continue to evolve to keep up with this marketplace,” Arthur says.
“[Also needed is] providing access to content globally. No longer
are travelers only going to Hong Kong or Southeast Asia. Chinese travelers are
doing exactly what we’ve seen in very mature markets - traveling around the
world - and as a result they need access to content that previously would
not have been available in China.
"And also, it’s not only people traveling
outside the market but also coming in. So it means ensuring we have the right
investment, the right partners and the right people to facilitate that grow on
both exit and incoming business.”