China online travel sales hit $9 billion in Q1, attraction segment hots up

With the number of online users increasing in China, and users travelling both for domestic and international trips more and more, it shouldn't be of much surprise to witness $9 billion in total sales for the first quarter of 2014.

iResearch, a China-based research company, reports the $9 billion in sales is an increase of 17.2% year-on-year but a decrease of 0.6% quarter-on-quarter.

According to iResearch, this growth is driven by two factors:

Hotel and flight ticket sales during China Spring Festival
Competition in the attraction ticket business among Ctrip, LY.com, and Lvmama

Recently, Qunar revealed that it hit a record high of 250,000 flight bookings in a single day during the New Year holiday, this is an 85% increase compared to the 135,000 tickets that it sold in a single day during Chinese New Year 2013.

When it comes to the attraction ticket space, a number of events happened in the Chinese travel industry.

According to iResearch, Ctrip provided 50% to 100% cash rebates for more than 5,000 entrance tickets on PC and mobile app. Also, Lvmama had a “0 Yuan” entrance ticket during China Spring Festival, and LY had cash discounts.

Other notable events in this space include LY and eLong's shortlived "strategic partnership" that enabled eLong to become the exclusive supplier of agency hotel and group-buying hotel inventory for LY in mainland China, and LY to be the exclusive supplier of scenic attraction ticket inventory for eLong.

But, just after 40 days from the announcement, both companies cancelled the agreement without stating a reason. It should be noted that Ctrip invested over $200 million in LY.com a few days before the agreement was cancelled.

Among the $9 billion sales for the first quarter, online travel agencies contributed to $0.48 billion, an increase of 17.7% YoY, according to iResearch.

Among the OTAs, Ctrip was leading the market (by revenue) at 51.9% share, followed by eLong and LY.com at 9.3% and 6.2% respectively. Interesting to note that with Ctrip's investment in LY.com, Ctrip became the second largest stakeholder in LY.

iResearch says: