The Future of the Chinese Online Travel Market

Emerging markets provide opportunities for businesses to find new growth. However, when said emerging market is also the most populated country in the world, the opportunities are even more lucrative.

This, according to recent research on the online travel market in China, shows an opportunity for the two largest Chinese online travel agent (OTAs)—Ctrip and Qunar—which control 5% and 3% share of the overall travel market respectively, to take a major portion of the opportunity at hand.

A Conundrum: An Emerging Market with Maturing Trends

The report, shared by Tnooz, comes from analysis completed by Macquarie Group referencing company information, government and private sector bodies research, and its own proprietary findings.

Macquarie estimated that:

“China’s online travel market revenue [will] grow at 27% over 2014-18F, vs 13% for the overall travel market, with online penetration rising from 9% to 15%.”

Further, citing investment from both domestic and foreign players, Macquarie shared five reasons that China provides an interesting dynamic as a market that’s both maturing and emerging:

• Foreign players’ consolidated presence in China and closer tie-up with Chinese
  companies (Priceline’s strategic partnership and investments in Ctrip)
• Consolidation among online players (Ctrip buying into eLong)
• Integration of offline tourism resource with online distributions
• Consolidation initiated by offline companies (Wanda investing $500 million into ly.com)
• Integration of offline and online agencies (Qunar  investment in Travelling Bestone)

The Hotel Booking Opportunity for OTAs

The one thing that allowed OTAs to flourish in Europe, fragmentation among hotels, is the largest opportunity for OTAs. In China there were more than 13,000 star-rated properties in 2013, and there are also another 13,000 or so economy hotels – branded chains which are not star-rated as such.

As a quick rule of thumb, the economy hotels are more likely to be interested in direct bookings than the star-rated ones but not exclusively. And a lot of the star-rated properties need help with their PMS/CRS IT set-up as well as distribution.

So for OTAs with some hotel expertise among their investors, this is a massive market to go after – by revenue, online accounts for only 21% of the entire Chinese hotel market.

Conclusion

With e-commerce leaders like Tencent and Alibaba investing in OTAs, a rapidly growing middle class, and an increase in travel both domestically and internationally, the Chinese OTA Market is set for an exciting period of growth.

For more information on the Chinese traveler and the OTA market in China, check out these related resources:

• China’s online travel sector becomes a game of musical chairs [Tnooz]
• Ctrip Sees Second Quarter Revenue Jump 47%

Oxford Economics Report: The Future of Chinese Travel: The Global Chinese Travel Market