Saturday, October 13, 2007

The Coming Boom in Online Travel in China

The China Web2.0 Review blog recently covered several new Chinese travel sites, comparing them to some of the more popular US travel sites.

Comparing Some New Chinese Travel Websites

The author of that blog post concludes that "Overall, None of these websites seems really impressive. They are still far behind Ctrip on user base. I think adding more innovative ideas like personalized travel plan similar to what Yahoo Travel and TripHub did may help them gaining ground in the online traveling market."


I have an article in this month's (Oct 2007) issue of the Far Eastern Economic Review. Unfortunately, my article (titled "China's Growing Wanderlust"), cannot be seen without a paid subscription. One of the topics that I cover in that article is the state of online travel in China. A few points that I make are:
  • Although online travel bookings in China grew 72 percent in 2006 to over 2.75 million bookings, valued at 1.54 billion yuan (US$204 million), it pales in comparison to the US, where the online travel market generated revenues of US$83 billion in 2006.
  • Chinese consumers have been wary of both online transactions and the use of credit cards (both on- and off-line).
  • Chinese travel agents discourage online bookings because they pay higher credit card fees online (1.0%) compared to in person (0.1%). So the approach to online travel in China is to direct the public to call centers for information and bookings, and to travel agency offices for cash transaction.
  • Successful online travel agencies in China negotiate special travel packages at favorable prices that are attractive to the middle and upper classes, who are also more willing to use credit cards and pay a little more for the convenience of online travel bookings.
  • The biggest online travel agency, by far, in China is Ctrip.com, which accounted for 54.2% of online sales in 2006, followed by eLong.com with 17.8 percent of the market. Expedia.com owns 52 percent of eLong.com, but also has its own China website this year.
Although struggling now, many expect China's online travel market to explode in the coming years as more people enter the middle class and the use of plastic (credit cards) becomes more widespread. -- With trends like that, no wonder that the Shanghai stock market is booming these days!

6 comments:

Jackson said...

Thanks for the details on the economic review.

Once the credit card companies realize the interchange fees they can grab from merchants (really consumers), the more they will start advertising on travel sites like these (if they're not doing it already).

I'm not sure what its like over there but consumers don't know about the credit card fees in the US or at least the amount that's going to the credit card company. The travel agents in China discourage online booking because of the fees but do Chinese consumers understand this concept of interchange fees? (I know way to much about this from my work with Unfaircreditcardfees.com)

Alan A. Lew said...

So perhaps travel agencies can offset some of the "interchange fees" through credit card advertisements. Do online business sectors do that in the US?

I found this note on your website interesting:

"Visa and MasterCard charge Americans among the highest credit card interchange fees in the world, averaging close to two percent per transaction. The fee averages less than one percent in most other industrialized countries, such as the UK (0.7 percent) and Australia (0.50 percent)."

Jackson said...

I'm sure the card companies advertise on the high traffic travel websites. The small businesses/sites get hurt the most by these fees as a result.

The fees in Australia and the UK are are based on what it actually costs to process the transaction, which is exactly what we're looking to achieve. Instead, Visa and Mastercard charge an outrageous fee so they can market to students and send out junk mail.

Takei Tiger said...

i am not sure who to email. so i'll just make a comment here.

i made a list of web2.0 travel sites that you might be interested in.


http://startupcenter.blogspot.com/2007/10/online-travel-organization-sites.html

btw I linked to your blog because i find it quite insightful.

taige

Alan A. Lew said...

Thanks, Takei Tiger. Good luck with your Silicon Valley adventure.

young said...

Hicafe.cn is a startup travel 2.0 community site based on the emerging need of Chinese young generation. It offers both one-stop travel tools and location-based social networking service. The founder Young is a former exceutive of the largest internet firm (QQ.com) and wireless portal (3G.cn). He is also a veteran backpacker and met his Korean backpacker girlfriend in Yunnan in 2005. Their travel love story made him to plan Hicafe in 2006 and start up in 2007. Hicafe is quickly popular by word of mouth and mouse and has attracked over 2 millions visiters and over 100,000 register users at the end of October in 2008. Young and his team are striving to build the largest travel2.0 community in China just like the sucessful site www.wayn.com in Europe.

Hicafe has the vision of the largest social networking site and travel2.0 community for all Chinese backpackers. Based the special needs and using habits of the Chinese backpackers, hicafe offers both the WIKI tool for the first-hand travel guides and a vibrant community where the Chinese users can create their travelblogs and make new friends based on where they plan to go, and inquiriy, discuss and share their travel experience. Users are able to create a profile, plan and log their trips, to locate other members based on location, and create the own friends groups. Meanwhile, Hicafe also acts as the independent marketing platform for the travel service providers such as airtickets booking, accomodation booking and travel search engine,etc.