Travel industry tipped for a big leap in China in the wake of major events
The continuing fillip to consumer power, reduction in technology costs and easing of entry barriers are some of the global trends paving way for new business models including ones in the online travel distribution. (8/29/2007)
China is no different when it comes such trends. And significantly, the spate of major events in the form of the Beijing Olympics 2008 and World Trade Expo in 2010 among the others in the years to come will further boost the mentioned trends and propel the online travel distribution to a new high, shared Johan Svanstrom, Expedia Asia Pacific Managing Director Hotels.com and Distribution Marketing during the third edition of EyeforTravel’s Travel Distribution China being held in Shanghai.
A major catalyst for change in this market is the continuous economic growth with an emerging middle class population, increasing disposable income and Chinese RMB appreciation and free exchanges between RMB and foreign currencies.
The pace with which these trends are shaping up may vary in China, said Svanstrom, while speaking at the inaugural session `The Future of Travel Distribution in China’. Accordingly, the maturity level of different models in online travel distribution varies vis-ŕ-vis mature markets in the same business. But considering the fact that the way young generation is being educated about such events and the role of international relationships, and the relaxation in regulatory issues such as opening of skies, such developments are expected to take the travel market to another level, he said.
Till a couple of years back, the profile of Chinese consumer was mainly described as one who needed assurances for transactions online, booking method being inclined towards call centre and preferred payment method being cash.
On major changes witnessed in online booking and buying process, it is being acknowledged that the Chinese economy and the Chinese consumer are evolving towards maturity. Offline bookings still account for the lion’s share in China, but online transactions are growing quickly, as is readiness of Chinese consumers to use credit cards. During the same session, referring to the Beijing Olympics 2008 and World Trade Expo in 2010, Teddy Zhang, President and CEO, Hubs1 said the government-led events cause industry structural changes.
On dynamics of travel distribution in China, Zhang referred to distribution being dominated by few third party intermediaries; Distribution companies branching out to be brand operators; Consolidation of travel suppliers; The co-existence of brick-&-mortar model and point-&-click model; Emerging distribution infrastructure.
Zhang added that the future of distribution would be impacted by: technology, consumer behaviour (cell phone empowered consumers, price loyalty vs. brand loyalty and last-minute booking pattern), organisational specialisation and collaboration, and government regulatory impact.
Specifically talking about forthcoming Olympics, he pointed to information being asymmetric between travel suppliers and demand sources, room blocking, competition between hotel suppliers and alternative products, the mix of domestic travelers vs. international travelers and leveraging the emerging travel distribution infrastructure.