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Boom time for online travel firms

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Chinese tourists walk up the stairs of Wat Phnom pagoda in the capital. The Chinese accounted for 32.4 per cent of all tourists to the Kingdom in the first eight months of last year, marking an increase to more than 1.2 million. AFP

Boom time for online travel firms

China’s online tourism sector is witnessing a boom, and firms in the business are growing rapidly, on the back of Chinese wanderlust.

To exploit the emerging opportunities, online travel agencies (OTAs) are offering new, customised products and services.

They are encouraged by the fact that last year the market scale of OTAs reached 1.08 trillion yuan ($160 billion), adding 30 per cent year-on-year and hitting a record high, according to a report released by market consultancy ASKCI Consulting Co.

Last year, Chinese travellers spent $762 per person abroad, exceeding the $276 spent by non-Chinese travellers. By 2023, Chinese travellers are expected to spend nearly $1,334 per person annually on overseas trips, according to a report released by the Chinese Academy of Social Sciences this month.

Sensing a maturing market, existing players have started consolidating or expanding their operations. In fact, the market itself is seeing a bit of restructuring as the number of players gets rationalised, with a few major firms set to dominate proceedings from now on.

Five OTAs hold the key to the fortunes of Chinese tourism as they command a collective 80 per cent market share.

Ctrip is the industry’s main player. In October 2015, it swallowed up Qunar, a travel firm that was beginning to find traction.

According to consultancy Frost & Sullivan China, Ctrip and Qunar combined command a more than 60 per cent share of the OTA market.

Alibaba-owned Fliggy, Tongcheng-Elong Holdings Ltd, which is backed by Tencent, and Tuniu Corp are the other three big players. Ctrip also holds stakes in Tongcheng-Elong and Tuniu.

Last year, Ctrip further extended its operations and expanded its distribution across the sector. Its total sales revenue jumped 30 per cent over 2017 to reach 690 billion yuan, it said.

“By reinforcing their moats, industry leaders will become even stronger, and the sector will present a higher competition threshold, and the market centralisation will become more obvious,” said Frost & Sullivan China president Neil Wang.

“The business model of the online travel sector in China boasts high gross profits and high user stickiness. Traditional offline travel agencies are seriously homogenised and their user stickiness is lower.

“In the future, more offline tourism businesses will turn to online operations, with an aim to achieve better integration and utilisation of industry resources, and provide more convenient and efficient services to consumers.”
OTAs are setting up offline stores as well to expand their presence and attract more consumers.

Ctrip said it plans to set up more than 8,000 physical stores across China, including in smaller towns and counties, this year.

“Chinese consumers are spending increasingly more money on services. Tourism is the mainstay of consumption of services. Tourism is becoming a main driver of China’s economic growth,” said Ctrip CEO Sun Jie in an open letter in late December.

More diverse experiences

She said during the period of macroeconomic adjustment, the tourism industry can buck any possible slowdown by driving a trend of rapid growth as consumers are more willing to take a break and travel around the world.

She said she is optimistic about the growth potential of the tourism industry in China.

China Tourism Academy director Dai Bin said Chinese tourists are seeking more diverse experiences while travelling abroad.

Middle-class consumers, the core group of the outbound tourism market on the Chinese mainland, are more willing to slow down the pace of life and enjoy in-depth and tailored travel experiences, encouraged by their growing spending power and evolving tastes.

“More Chinese travellers prefer independent and flexible trips, instead of travelling with tour groups. Besides, those who spend a lot of money shopping account for only a small portion of the total now, and more people are willing to experience local events, food and culture,” he said.

This trend, however, has created certain challenges for OTAs. Rapid growth has led to shortage of skilled manpower. Qualified tourism professionals are few and far between.

To customise tours as per travellers’ needs and preferences, OTAs need skilled professionals with a penchant for creativity or imagination, comprehensive knowledge of visit-worthy places and a good interpersonal vibe, besides traits like patience, customer service outlook and the ability to read, write and speak multiple languages well.

Wang of Frost & Sullivan said tourism professionals also need to provide guidance proactively, help with bookings, and deal with sudden changes in travel plans or itineraries – all with an intent to create rich tourist experiences, complete with local lifestyle events.

“Travel customisers need to master professional knowledge, foreign language skills and good service literacy. At this stage, professionals with comprehensive abilities are quite scarce in the sector,” he said. CHINA DAILY/ANN

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