Think you know about China and its development as a powerhouse in the global online travel space now and in the years to come?
The sixth edition of PhoCusWright's China Online Travel Overview report talks about emerging travel trends, projected booking details for 2015, online penetration for each of the sectors in travel, and a heap of other eye-watering statistics for the country.
Below is a high-level excerpt from the report.
In 2012, China surpassed Japan to become the largest market in Asia with $96.2 billion in travel bookings. The controlled strengthening of the Chinese Yuan against the US dollar makes growth appear slightly faster when measured on a dollar basis.
By 2015, when 24% of China’s travel bookings will be transacted online, penetration will still be trailing compared to India, Japan, and Australia/New Zealand.
Chinese travel companies remain highly focused on the domestic market. Because, the opportunity for growth at home remains very attractive.
Suppliers are doing a better job than ever of selling directly to consumers, but intermediaries still account for the majority of China’s travel bookings.
Not all is rosy in the intermediary world, middlemen are losing their share to suppliers, but still posting big increases in bookings.
Online travel agents
In 2012, OTAs’ gross bookings, including those fulfilled through call centers, represented 11% of the overall market, slightly more than their share in 2011. But, OTA growth decelerated from 49% in 2011 to 39% in 2012.
Ctrip leads the OTA market in China by a huge margin, followed by eLong. Ctrip is the also third largest OTA in APAC.
In the recently held quarterly earnings call, eLong's CEO announced that the company's focus will continue to be on hotel bookings. eLong does not offer packages and follows an online-first strategy, processing only about one fourth of bookings offline.
Vacation package purchase incidence is high among Chinese travellers – about one in three booked a vacation package in 2012, nearly twice as many as in the U.S.
The new intermediaries
Qunar leads the metasearch market in China. The website also has the ability to fulfil a booking there by posing a threat to OTAs in the market.
Metasearch grew faster than any other online travel category from Q2 2011 to Q2 2012, jumping from 28% to 38% of online travel traffic. Metasearch is also the biggest source of leads for Chinese OTAs and suppliers.
Online shopping mall sites like Taobao, 360buy, and Dangdang.com allow travel providers and other retailers to accept bookings and transactions. These new intermediary sites are important to OTAs – shopping malls represent more than a quarter of Ctrip’s source traffic.
Taobao and 360buy now host providers of air, hotel, train tickets, car rental, packages and theme park tickets.
Consumers are becoming more comfortable to buy travel through these sites; travel transactions booked through Taobao doubled in 2012.
Airlines are still adding capacity, and both suppliers and intermediaries are benefiting from high consumer demand. Competition is stiff, however, and is keeping ticket prices flat.
China’s online air revenue will double from $10.1 billion in 2012 to $20.1 billion by 2015. Supplier direct share of online air revenue was up to 57% in 2012 from 51% in 2010.
Carriers have invested in the online booking experience and gotten more proactive, offering web-only fares and special promotions.
GDS and connectivity
For Chinese carriers, electronic transactions, ticketing, settlement functions and information still flow through the state-owned TravelSky.
Due to the technical limitations of the system and TravelSky’s decision to keep its systems closed (rather than offering an API), it poses a giant obstacle for innovation and limits what travel companies can do to improve shopping and booking.
The lodging segment now accounts for 29% of the overall travel market. Vacation rentals sites like Tujia have entered the scene, and a handful of Airbnb-like peer-to-peer lodging sites have also cropped up.
Call center and walk-up bookings remain the most popular channel for lodging sales, especially for the many small and independent properties that lack a web presence.
The China Railway Corporation (CRC) offers direct online booking through 12306.com. Several intermediaries like Tieyou, including OTAs, online shopping malls, make train tickets available as well.
Moving more sales to the mobile channel is a natural next step for this simple travel product, and CRC has also contracted with Alipay to provide a mobile booking platform.
From a negligible level in 2012, China’s online rail penetration will reach just under 10% by 2015, when online gross bookings will reach $2.4 billion.
Self-drive trips are becoming more popular, prompting growth among car rental suppliers with little attention from intermediaries.
Just 7% of car rental bookings were made online in 2012, but that proportion is growing fast and by 2015 the online penetration will be 13%.
But, car rental will still represent less than 1% of the online travel market in 2015 where the majority share will be grabbed by air and hotels.
Mobile penetration among travellers has reached 98%, and the number of people accessing the internet via mobile surpassed desktop in 2012. By 2015, more than one fifth of online travel bookings will be mobile transactions.
OTAs and metasearch sites have created apps that offer more choice and better functionality than supplier apps do. The platforms of choice thus far are iOS and Android – Windows phones are supported by very few travel providers.
While the mobile channel is on fire and last-minute bookings are common in China, suppliers are cautious about offering last-minute mobile deals.
Social media and online reviews
Traveler reviews are a crucial element of the online research process in China.
Traffic to review sites is growing rapidly – In Q2 2012, Ctrip-owned review site Lvping's traffic increased 41% YOY, attracting an average of 2.6 million monthly visitors and surpassing Daodao to become the country’s leading review site.
NB:China image via Shutterstock.