The price war of ticket and hotel booking is eroding the profit of OTAs (online travel agents) in China. The growing outbound travel market has become their new battlefield.
According to National Business Daily, American hotel booking website Hotels.com announced a new Chinese website name called “Hao Ding Wang” on March 5 in 2014, focusing on outbound travel hotel booking. Their Chinese website and mobile app had launched a new booking page.
China became the world’s biggest source of tourist in 2011. According to UNWTO (United Nations World Tourism Organization), China outbound traveler was estimated to break 100 million in 2014. The rapid developing outbound travel market represents the growing demand of outbound travel service. It creates new opportunities for OTAs at home and abroad.
Last year, Elong launched China’s first international hotel booking app, followed by Ctrip, Qunar and Qyer.
Ctrip cooperated with famous international hotel suppliers such as Booking.com and Agoda, to offer the best price options on its website. Qunar announced working with its competitor Ctrip. Qunar would do SEM (search engine marketing) on Qunar platform for Ctrip’s business information including hotel, air ticket and vacation travel. Recently Ctrip said there would be further cooperation with Qunar. Alibaba also invested more than 10 million dollar on Qyer for outbound travel business. At present, the relationship between OTAs is co-competition.
Zheng Rongfeng, the head of Aiyou.me said, “The booming China outbound travel market caught the eye of domestic and foreign OTAs, entrepreneurs and investors. Hotels.com is not the first one launching Chinese website; HRS has done this before and even launched an AR (augmented reality) booking App. But these foreign agents have been faced with the problem of adaption. They failed to provide services suited Chinese consumers, especially the service of phone call consulting and online payment.”
So domestic OTAs started to cooperate with foreign OTAs or large international hotel groups, represented by Ctrip’s cooperation with Booking.com. However, the efficiency of such cooperation still needs to improve.
Wei Changren, CEO of Ctcnn.com believed that outbound traveler would demand more personalized service of international hotel booking, as self-tour became popular. He said the cost of signing a contract with an international hotel was quite high, so most domestic OTAs chose to cooperate with international OTAs. The different ability and standard of domestic OTAs led to varying competitiveness.
Industry insiders said although foreign OTAs intensified the competition, they also brought opportunities of learning for domestic OTAs. “After several years of exploration in China market, domestic OTA giants have the advantage of better local service. They know about Chinese travelers, and they have more convenient payment channels. Ultimately, domestic OTAs will own more market share, persuading foreign OTAs to work with them.” said Zhen Rongfeng.