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Chinese Travel: Starting Online

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By: NMK Created on: April 25th, 2005
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Over the 'Golden Week' holiday last October, 101m Chinese travelled within the country, spending equivalent to $5billion. But only 0.9% book their travel/land tours and 1.4%, their air tickets online, reveals Profero's postcard from China...

Millions Of Chinese Travellers - But Anyone Online?

by Derrick Chiang, Profero

Consider this:

Over the National Day “Golden Week” holiday last October, 101 million Chinese travelled within the country, spending RMB 40 billion (USD 5 billion). Beijing itself received over four million domestic tourists during the seven-day period. More than half a million people passed through the Chinese capital’s train stations in a single day. One famous roast duck restaurant, Quanjude, served up 5,287 ducks on October 2 alone, a record for the 140-year-old establishment.

IDC estimates the size of the Chinese domestic market (airlines, hotels and travel/tours) is USD 45 billion in 2004, roughly two-and-a-half times the size of the outbound international market of USD 16.9 billion. The total size of the travel market is a relatively small compared to more developed ones in the West and Japan, but certainly nothing to sneeze at.

How do Chinese travellers book their travel?

The vast majority of domestic and outbound (international) travellers book through their travel agents, a reflection of the dominance of off-line agents in the market. MarketShare estimates only 0.9% book their travel/land tours online; 1.1%, their hotel accommodation; and 1.4%, their air tickets.

According to iResearch Inc., 543,000 travellers booked their hotel accommodation online in 2004. This number is expected to jump to 2 million in three years (bringing the penetration rate to 2.5%). In comparison, a mere 164,000 travellers bought their air tickets online, and an expected 675,000 will do so three years later.

So, what will bring travellers online?

iResearch found that in selecting a channel – online or off-line – for booking their hotel accommodation and air tickets, that channel must be fast and convenient; should offer instant confirmation; and is a trusted channel. Indeed, these are attributes of a good online travel service.

In addition, China Internet Network Information Center (CNNIC) found that by far, the most important attributes of an attractive website are that it is a trustworthy information source (44%) and that it has comprehensive, rich content (33%). Again, the issue of trust is brought up.

MarketShare reports that nearly all the top travel brands recognised by Chinese consumers are major foreign airlines and hotel chains. More than their Chinese competitors, they are well-positioned to promote the all-important trust amongst potential and existing customers, to entice them to come online.

For many Chinese, the Internet now acts more as a medium for disseminating information than a sales channel. Even then, less than 10% respondents of a survey MarketShare conducted in two of the most affluent and Internet-savvy cities, Shanghai and Guangzhou, say they browse online before booking off-line. An iResearch survey found most travellers are not aware that booking or information is available online, in the first place.

The good news, however, is that 40% of Internet users have shopped online in 2004, and 21% say they will definitely do so this year, according to CNNIC. Half of the online shoppers do so to save time.

All these findings suggest a plenty of room for growth. At present, even market-leader Ctrip.com, a Shanghai-based online hotel, air ticket and travel/tour service provider, gets only a third of its business from online bookings.

"There is plenty of room for travel and hospitality companies to grow their online business from the current low base. They will need to offer a reliable and engaging product to attract the young, affluent, Internet-savvy and well-educated consumers. That will prove to be the very catalyst the online travel market needs."
– Daryl Arnold, CEO, Profero

How does the future look?

Amongst the main reasons Morgan Stanley says China lags in e-commerce are poor credit or payment systems and low levels of trust. While 42% of all online purchases are made using credit cards or other bank cards, a quarter is paid for with Cash on Delivery, according to CNNIC. The big advantage travel products have over most other products sold online is that the former is not a physical good that needs to be delivered. With such developments like the advent of e-ticketing (paperless travel) – the International Air Transport Association calls for a complete elimination of paper tickets by 2007 – the travel industry is poised to ride on that advantage and offer their customers fully the convenience of online bookings.

As with all markets, security is a major concern. CNNIC reports one third of Chinese Internet users say security is the major factor holding them back from buying online. Major players in the travel market are doing their part to address this nagging issue. For example, Ctrip’s main rival eLong has just announced a partnership with Visa International to facilitate e-shopping and to provide an enhanced online security service at eLong.com. Eventually, travellers will gain enough confidence to book online.

The socio-economic trends also work in favour of the online travel services – the emerging middle class will drive the growth of the online travel market. BNP Paribas Peregrine estimates in 2010, there will be a total of 100 million middle-class families. Soon, many of these consumers will be able to afford more travel, both overseas and within the country. In fact, for many Chinese, a trip abroad is no longer an once-in-a-lifetime event.

Very importantly, many Chinese within this middle class – well-educated young adults – belong to the Internet generation. More than half (58%) of Internet users in China have received tertiary education. This segment of the population is already a major user of online services and in time, will show their propensity to use the online channel to arrange their travel.

(* Sources: China Daily, China Internet Network Information Centre (CNNIC), IDC, iResearch Inc, MarketShare, Morgan Stanley, People's daily)

About Profero

Profero is the leading independent full service digital marketing agency in Europe and Asia. Since it was founded in 1998 it has created and implemented over 4,000 campaigns for clients, more than any other agency of its kind. Profero specialises in advertising, web development, media buying and relationship marketing solutions. Its client base includes Apple, Ask Jeeves, Astrazeneca, Black & Decker, Central Office of Information, DaimlerChrysler, Lufthansa, Merrill Lynch, Singapore Airlines and Which?

New Media Looks East - 19 May event

Get all the angles covered on exports, expansion and the current conditions for digital companies in the Far East & South East Asia at New Media Looks East, Thursday 19 May, 1-4pm.

Comments

pierrejacques said:

trivago - taking the travel market by storm <p>&quot;There is plenty of room for travel and hospitality companies to grow their online business from the current low base. They will need to offer a reliable and engaging product to attract the young, affluent, Internet-savvy and well-educated consumers. That will prove to be the very catalyst the online travel market needs.&quot; <br/>? Daryl Arnold, CEO, Profero <br/> <br/>trivago compares prices from multiple sources. <br/> <br/>Our search engine helps people find hotels and package deals from travel suppliers all over the world. Unlike other travel search sites we are able to show you prices from different travel agents and supplier sites. This results in a better travel search experience, more complete search results and -best of all- savings for you. Rather than comparing prices from different sites yourself, let us do the work and save you time and money! <br/> <br/>Our search technology is designed for rapidly changing data. In contrast to traditional search engines (e.g. Google) that are built to handle fairly static information, trivago's search technology is designed to handle highly fluid data. In the travel industry, pricing and availability inventory change constantly. <br/> <br/>For example, hotel room suppliers often change their prices on a daily basis in accordance with fluctuations in their capacity. trivago?s search technology is tailored for such shifting in price and availability, enabling us to collect dynamic information from numerous sources in a way that conventional search engines cannot. <br/> <br/>trivago makes a highly individual selection a reality and as such is also a perfect Web 2.0 example. Its price comparison engine searches numerous other websites for the best deals available in real time. With trivago you can view a full range of hotels and package deals based on the exact criteria you have chosen. <br/> <br/>At trivago we strive to gather the best information on travel and destinations that the internet has to offer. Undecided as to where you'd like to spend your next vacation? Our travel guides provide helpful advice concerning geographical areas, [i.e. beaches, cities, the countryside], tourist attractions, and more. When it comes to finding the right accomodation for your travel needs, our database holds over 150,000 hotels. <br/> <br/>You can search them according to destination, or, to quickly find the hotel that matches your individual needs, simply pre-select your requirements from a list of over 200 criteria. Once you select a hotel, you will find plenty of useful information, including reports and evaluations by people who have stayed there. <br/> <br/>If you find something you like, we guarantee that our meta price search technology will find you the best deal for it. We achieve this by comparing prices from multiple sources and matching them to the hotel(s) you selected. This will ensure you the greatest savings possible. <br/> <br/>Now that you have found your perfect travel destination for the lowest possible price at trivago, there's nothing left to do but actually go there! We do however hope to see you at trivago again when you get back... <br/></p>

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