Taking off with online distribution in a big way but with feet firm on all channels
Bearish sentiments have gripped the travel industry globally for quite a while now. But despite the global recession, the online travel marketplace in China is growing rapidly.
Chinese travel companies including online intermediaries are seeing early signs of recovery in the economy. Although there might be some uncertainties in the near-term, from a long-term perspective, it is largely believed that the fundamentals are healthy for the growth of the Chinese economy.
PhoCusWright recently affirms such belief. The firm projects that online travel revenue will increase by 19% this year.
In its first-ever online travel China report, PhoCusWright underlined that China’s online travel space is estimated to be US$6.9 billion, accounting for about 11% of the country’s entire travel market. The online channel is expected to continue on a strong growth trajectory, and by 2011 will account for about 20% of the total market.
An established company like Hilton Worldwide continues to build its online distribution capabilities in China.
“We have looked carefully at our brand websites and major opportunities in this context. One result has been the recent launch of our new Chinese website, which enables visitors to book our hotels online, which now complements our existing Chinese web pages,” says Philippe Garnier, VP Sales - Asia Pacific, Hilton Worldwide.
With this initiative, travellers in China can now enter Chinese text online, and can complete the entire booking process in their own language.
Considering the challenging economic climate, the companies have been re-examining various aspect of their business. Customer acquisition is being minutely scrutinised. And tailored solutions such as these, according to Garnier, are the ways in which the company ensures a focus on point of purchase and enhances the customer experience.
While online may be gaining in prominence, Garnier says its not only about online distribution but also ensuring optimal results are achieved across all the channels.
“We cannot decide how consumers buy, but we can ensure that wherever they do, our products are consistent in their pricing and presentation, and that they are easy to purchase and are located with distribution channels with whom our customers want to engage. There is no doubt that online growth will continue be very strong in China so we will keep a close watch on this, however at the same time, we will ensure that we continue to have well executed presence in all other market segments and channels too, because to focus only online would be a mistake,” said Garnier.
Overall, Hilton has a fairly consistent approach towards its distribution initiatives.
Firstly, Hilton has developed a set of contracts which help the company in engaging with its distribution partners throughout the industry. Secondly, Hilton has made improvements to the technology through which its partners connect to its central reservation system with investment in the developing an XML technology for example. Thirdly, Hilton has a set of internal best practices across the organisation, which ensure that it sustains its ties with distribution partners and that its brand is represented appropriately – be that from the branded website www.hilton.com or through third party distribution.
Online travel agencies
Online travel agencies have delivered strong results in the second quarter of 2009.
In Q2, Ctrip’s net revenues grew 27% year over year and net income grew 33% year over year. By the end of the second quarter of 2009, Ctrip had reached to 7.5 million active customers compared to 5 million by the same period of last year. In the hotel business, Ctrip’s hotel reservation revenues amounted to $33 million for the second quarter of 2009, representing a 16% increase year-on-year and a 21% increase quarter-on-quarter.
Also, online agencies continue to take initiatives that have already resulted in stimulating demand.
Another player, Expedia’s eLong, too, is making progress. The company, in September, shared that it has increased hotel coverage to approximately 7,800 hotels from approximately 5,500 a year ago. eLong has also partnered up with hotels.com this year to support the hotels.cn website.
Garnier says it is clear that OTAs definitely add value.
“As distribution partners, they complement our brand websites and help us expand our distribution reach. For the consumer, they can provide further perspectives on a destination or hotel that they may not otherwise have considered, helping add to the plethora of information the modern traveller can now access before embarking on their travel,” said Garnier.
Importantly, Garnier says online channels do not allow hotels to compromise their rate strategy, they simply display and offer what the established system or indeed hotel has approved and agreed together.
“Any transgression from this is not in line with an OTA’s agreed role and represents a breakdown in the supplier-OTA relationship. At Hilton, we consider our contracts, provision of easy to use technology and close relationship with our distribution partners as key. This is how we ensure that our products are available at consistent rates to all of our guests, whatever channel they chose to book through. This way we ensure that all guest access the best available rates for the stay they wish to make. After all, it benefits no one for pricing to be erratic and only serves to frustrate travel agent, hotelier and traveller alike,” said Garnier.
Garnier says it is always more profitable to retain existing customers rather than to spend extensively on attracting new customers to replace those who have left a brand behind.
But to achieve this, working on brand presence to retaining customer loyalty remains critical, and one area where this can be effective in terms of cost and delivery is online. Whether focussed on brand websites or online distribution partners, there is a growing drive towards online. This medium is not only cost effective, but also provides customers with a true picture of rate and inventory as well as a complete fairness of choice.
“At Hilton, we have a very well evolved customer loyalty programme, Hilton HHonors, which enables customers to save points and miles for future redemption in our hotels and with airlines. Hilton HHonors recently conducted research in five markets in Asia on the topic of loyalty and found that 69% of travellers in China were feeling ‘as loyal’ or ‘even more loyal’ to brands in response to the economic downturn, largely influenced by the presence of effective loyalty programmes,” shared Garnier.
Survey participants were also asked if they would choose a specific hotel even if they knew it was more expensive than the next, but would accrue them personal loyalty points. Almost half (47%) of all travellers surveyed agreed that they would, this figure rising to 67% in China, showing that engendering loyalty can indeed bolster a business.
Hotels are trying to exploit the potential of mobile phones, too.
As per the estimates, the market in China already has 702 million mobile phone users.
Hilton already has mobile-specific versions for its brand websites in the US and in the UK.
Garnier concluded on an optimistic note.
“Given the success of our new booking engine in the Chinese language we predict that mobile bookings may be the future for this dynamic marketplace, too. After all, China is one of the earliest adopters of such mobile technologies so what better region could there be to engage with such cutting edge developments?”
Mr. Philippe Garnier will join the panel discussion of hotel distribution on the upcoming TravelDaily China Travel Distribution Summit which will take place at Interlaken OCT Hotel Shenzhen from Dec.2 to 3, 2009. For more information, please visit the website at http://www.traveldaily.cn/aclick/215.html