Watch out, Ctrip! Small players to emerge as strong rivals in China’s online travel markets
China’s economic downturn doesn’t seem to have dampened Chinese people’s passion for travel. An official report estimated a revenue of RMB four trillion (USD 608 billion) for the Chinese travel industry in 2015. With the surge of mobile internet, China’s online travel market is growing bigger and bigger.
Altogether, Chinese people own 1.28 billion mobile devices as of the end of 2015, according to a report from TalkingData, a Beijing-based mobile data analysis agency launched in 2011.
Out of the 1.28 billion devices, travel apps have been downloaded on 400 million. The report shows that among all mobile device owners, nearly 74% are in the post-80s generation. The mobile-savvy younger generation is making more and more travel bookings online, especially via mobile devices. Their preferences and habits for making travel decisions are shaping the online travel market.
Three markets for online travel
The online travel market mainly consists of three sectors: transportation, accommodation and vacation products.
According to TalkingData, there were three main trends and challenges in these markets in 2015. Airlines started to cut travel agency commissions and detach from OTAs to expand their own apps, Airbnb-like short-term accommodation providers lead by the “sharing economy” model are setting up independent reservation platforms, and apps providing personalized travel choices including outbound trips and short-distance getaways are mushrooming.
Online transportation booking
Air ticket booking forms the majority of the online transportation booking market, and is relatively mature. Dominated by several giants, Ctrip, Qunar and Alitrip (a subsidiary of Alibaba Group), this market accounted for 69.4% the total transaction volume of China’s entire online travel market in 2014, according to a 2015 report from Analysys.
According to the TalkingData report, airlines are strengthening their controlling rights by cutting commission fees for online agencies and promoting direct sales on their own mobile apps. As of December 2015, China Southern Airlines, Shanghai-based low-cost airline Spring Airlines and state-run Air China have topped the list of most-downloaded apps from airlines and all have witnessed a growth in downloads, compared with data from December 2014.
Online accommodation booking
Ranking second is the online accommodation booking market. According to Analysys, this market took up 18.7% of the total transaction volume of China’s online travel market in 2014. Notable players in hotel booking are Ctrip, Qunar, Alitrip, and eLong, which previously belonged to Expedia but whose biggest shareholder is now Ctrip.
The Chinese hotel market is divided into several types, including economical chain hotels, mid-priced hotels, and luxury starred hotels, and is not dominated by any of these classes. Because of this, other online agencies are able to grab a piece of the online hotel booking market. This includes Meituan, China’s largest group-buying platform, which focuses on mid- and low-end hotel booking, Zhuna.com, Youtx.com, owned by China’s leading real estate platform Fang.com, and Kuxun.com, a sub-brand previously owned by Tripadvisor that was sold to Meituan last year.
A group of new players are entering this market in 2015, thanks to the “sharing economy” model introduced by Airbnb that swept the whole world. Non-standard accommodation (homestays, short-term apartment rentals, etc.) is growing its own booking platforms. The most-downloaded apps according to TalkingData are Tujia.com, the chief rival of Airbnb China, Mayi.com, a subsidiary of China’s leading classifieds site Ganji.com, and Zhubaijia.com, a platform founded in 2012 for Chinese people to book accommodations outside of China.
Online vacation booking
Apart from transportation and accommodation, vacation products including sightseeing reservations and tour packages have not been prominent in the past two years, only accounting for 11.9% of the total transaction volume of the online travel market in 2014. However, it is the most promising and also very likely to see the most intensive competition in the following years.
First, the use of mobile devices is booming in China, and so is the desire to travel and the income to fulfill that desire. 2015 witnessed 4.12 billion trips made in China, according to the China Tourism Academy. Secondly, the younger generation, which is in favor of more personalized and diverse choices, is growing. It is now into backpacking, outbound travel, DIY tours, themed travel, and such localized travel services as hot springs, scuba diving and sky-diving.
In this sector, the top destinations are still dominated by Qunar and Ctrip, which mainly provide high-end business travel packages. Qunar was acquired by Ctrip from Baidu last October, and Ctrip has received investment from Priceline. Other players that shouldn’t be ignored are Alitrip, LY.com or Tongcheng, Tuniu.com, Lvmama.com and Wanzhoumo.com.
LY.com, a travel site concentrating on serving outbound travelers, has Wanda, China’s largest real estate group as its primary shareholder and funds from Tencent and Ctrip. Tuniu.com, a close rival of LY.com, is a travel site focused on tour packages, cruises, road trips, daytrips, and company outings. JD is the biggest shareholder of Tuniu.com. Lvmama is one of the largest DIY travel and tourism sites in China, selling Asia-based sightseeing tickets, visa services, resort vacations, and cruises. It received investment last January from Jinjiang International, one of China’s largest tourism conglomerates. Wanzhoumo.com is a newly-emerged travel app that concentrates on weekend leisure trips to neighboring domestic cities.
Despite the fact that dominant players are in fierce competition to split the travel market, online travel communities geared towards backpackers and self-guided travelers including Mafengwo.com, Qyer.com and 17u.com are getting more popular with the younger generation. Qyer.com received USD 60 million from one of China’s leading international travel companies Utour in January. 17u.com is a subsidiary owned by Tongcheng Tech.
Danielle Li | @Lzw_macazv | February 06, 2016 10:16 am
Danielle Li is a writer at AllChinaTech. She holds a master’s degree in Translation and Interpretation from the City University of Hong Kong and previously worked as an English Teacher. She’s into startup development and trendy apps. Follow her on twitter: @Lzw_macazv.
