6 Chinese OTAs trapped in price war
China's OTAs are in a "industry-wide loss-making era" as each company tries to undersell rivals and capture the market.
President Xi Jinping said during the Asia-Pacific Economic Cooperation meeting in Beijing on Nov 9 that the number of outbound tourists from China will exceed 500 million in the next five years. By then, more than one third of Chinese will travel overseas each year.
The year 2014 also means a lot for China's tourism industry as the number of outbound tourist departures from the Chinese mainland has exceeded 100 million within a calendar year for the first time, according to China National Tourism Administration.
While the growth pie is big and luring, the road to a slice of it might be thorny and costly for China's online travel agencies (OTAs).
Analysts have predicted that China's OTAs have entered an "industry-wide loss-making era" as Ctrip.com, the largest Chinese online travel agency by market capitalisation on NASDAQ, predicted it would make a loss of more than 400 million yuan ($64.6 million) in the fourth quarter of this year.
The other three Chinese OTAs, which are also listed on NASDAQ, have already announced losses for the third quarter of this year.
Even under such a difficult circumstance, online travel agencies, listed or hoping to be listed, have waged a price war for the upcoming Double Twelve tourism promotion festival on Dec 12.
This festival is also a key occasion "created" by travel companies to stage the year-end promotion, similar to the "Single's Day" shopping festival of the online retail industry on each year's Nov 11.
Let's take a look at the major "warriors".
Liang Jianzhang, CEO of Ctrip, announced on Dec 3 that the company would spend 1 billion yuan in the price war, rolling out 10 million products with zero profit.
For the Double Twelve festival specifically, the online travel agency has rolled out a "travelling around the globe by spending only one yuan" programme. There are 16 overseas tourist destinations for prospective vacation-takers to choose. A total of 12,120 persons can be the lucky ones to win this "one yuan ticket".
Tuniu, which made a loss of 10.34 million yuan in the third quarter of this year, has filed to the US Securities and Exchange Commission for a up to $100 million new share issuance plan.
Analysts said this fundraising plan is for the price war. Tuniu has prepared 12 kinds of tour packages for those planning for a vacation to grab beginning 10 am, Dec 12. The destinations are mainly in Asia, such as Jeju Island and Seoul in South Korea. Tuniu promised the prices to be "the lowest on the whole Internet".
The lucky one who succeeds in 'grabbing' a four-day package tour departing from Shanghai on Jan 14, 2015, to Jeju Island only needs to spend 798 yuan. But Tuniu did not say how many people can win the "grabbing" game.
LY.com, an online travel agency that was set up in 2004, has spent 120 million yuan on its overseas tour services and cruise travel tour services, aiming to surpass Tuniu.
Aoyou.com, an online travel agency listed in Shanghai, will cut 1,000 yuan from the whole price for a family who has a child under 12 years old and who book designated tours between Dec 10 and Dec 19.
The whole price needs to be above 10,000 and the family needs to be among the first 1,000 families that have booked.
Lvmama.com, an online travel agency targeted at self-guided tourists, announced that it has gained a credit line of 10 billion yuan from three banks.
This online agency has begun to pre-sell about 20 types of overseas tours for those who book via Lvmam's smartphone app before the end of Dec 12. The destinations rang from America to Turkey to Sri Lanka.
For example, one can buy five-day transportation service and hotel stay in Thailand at only 187 yuan if he or she books before Dec 12.
Trip.taobao.com, affiliated with the Alibaba Group, will hand out 1,300 plane tickets costing one yuan from 10 am to 10 pm, Dec 12.
For Dec 12, LY.com, has rolled discounted prices for spring, skiing and other entertainment.
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