It was interesting to see the contrasting styles of China’s top two online travel leaders on display at the Phocuswright conference in Los Angeles – Ctrip’s James Liang’s soft spoken, assertive, almost professorial-like tone vs Qunar’s CC Zhuang’s confident, aggressive and “we will solve whatever problems come our way” approach.
James Liang is soft spoken, assertive with an almost professorial-like tone.
Liang started off on a humble note saying that China’s travel market is still one third the size of US and that its per capita is still less than a tenth of the US. “There’s still a lot of room for growth,” he said.
And what room – the sweet spot is in China outbound which will grow at 20-30% a year. Citing historical examples, such as Japan, when per capita GDP growth exceeds US$8,000, he said China was about to reach tipping point and this would lead to “explosive” outbound travel.
It is at this point that the leader of China’s largest online travel company and fifth in the world by valuation got into stride because this is where he sees Ctrip setting the pace.
Internet penetration is rising. There are 632 million Internet users and 46.9% of Chinese people are pure mobile. “This is very exciting for OTAs – from zero percentage of bookings two years ago to 50%. All our products in the last two years have moved to mobile.”
Generally, the higher the value of transactions, the lower the percentage of mobile transactions – ranging from 70-80% for trains and buses to half for hotels and cruises being the lowest.
But scale is what Ctrip has – 1m transactions a day. Its objective is to have product coverage and stickiness in a single app – it’s achieved 200 million downloads.
“People download once and they buy multiple products. The money we spend to get one download, we can sell more products, so we get higher ROI on our marketing dollars,” said Liang.
Its IT team of 1,500 engineers comprise top class talent from Silicon Valley. “In mobile design, we are ahead in design and functionality of any OTA in the world,” he said.
Liang reiterated what the C in Ctrip stood for – Customer – and it has 10,000 staff in customer service, something that sets it apart from other online travel companies.
He then talked about his personal mission of unleashing Innovation 2.0 at Ctrip. “When I returned to Ctrip as CEO (in March 2013), my question was, how do we stop Ctrip being disrupted? It was either to disrupt yourself or to invest in other disruptive companies.”
Asked later about Ctrip buying a cruise ship, Liang said the cruise market is promising. Cruise. “Now fewer than 10m people have gone on a cruise. We can combine the best of cruise standards worldwide with a Chinese tailored product, we want to build a successful cruise brand in China.”
Partnerships are also critical to growth as China outbound grows. Priceline’s recent $500m investment gives it a valuable partner. “We need each other. We may be able to source hotels in China and Asia but we need a partner worldwide. We have the best hotel products in China, we can help Priceline build their business in China.”
CC Zhuang is confident, aggressive and has a “we will solve whatever problems come our way” approach.
Qunar’s CC Zhuang meanwhile spoke about his strategy to be the one-stop solution for the total needs of the travel industry.
He’s developing products for the industry and is giving them away for free. His vision is to develop an open source community on the Qunar platform.
One product that’s doing well is his airline revenue management model. He described the success he’s having with domestic airlines in China, citing the newly-launched Qingdao Airlines as an example.
“They don’t have the system, they give us the inventory, we dynamically decide the pricing on our network, we optimise pricing based on search behaviour, we have all the information. Each flight is profitable and within six weeks, the airline was profitable.”
His plan is to control 30% of domestic airline distribution.
He intends to keep Qunar both asset-light and staff-light. “We simply squeeze out all inefficiencies. We have 500 people, we have a low cost staff base.”
Answering questions about competition and possible disruption from other players, Zhuang said that Qunar was confident of solving whatever problems came its way. He does not worry about the competition or potential disruption. “We have a mission, we have the talent and we are confident we will achieve it.”
On a personal note, he said he started Qunar to give himself a job. He and his wife he were living in the US then and his wife announced her decision to return to China. “She told me she was going back and it was up to me to stay or to return. I decided to return.”
He said he then had to find something to do and while he was Googling, “Kayak” came up in search terms. He decided to take the idea and launch it in China. Of course now, Qunar no longer looks like Kayak and the different paths both companies have taken would make an interesting case study on the differences between the Chinese and US market.
Certainly Qunar is performing well. In Q2 2014, it reported total revenues of RMB400.4 million (US$64.5 million), an increase of 127.3% year-on-year, the highest revenue growth rate in ten quarters.
Its bet on mobile is certainly paying off. Mobile revenues for the same quarter were RMB142.3 million (US$22.9 million), a growth of 511.8% year-on-year. That’s 35.5% of total revenues, compared to 13.2% in the corresponding period of 2013, a clear sign that mobile is reshaping China’s travel market.
On that point, at least, Liang and Zhuang both agree. It’ll be interesting to see which of the two take the greater leap forward beyond Chinese shores.
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