Mergers and acquisitions among traditional travel agencies are gathering steam, evident by GZL allocating funds for acquiring Guangdong and Shanghai tour operators and accelerate innovation of its business models for products in the value chain. According to its director Jianxu Lu, it will open product centers in Guangdong and use restructuring investment and resource control to achieve the targeted acquisitions.
Group tour market shrinking
The group tour travel market has been gradually shrinking as independent travel becomes increasingly popular. “Fewer travelers are joining tour groups these days. Statistics show only 1.98% of customers sign up for group tours and only 2% of travelers stay with their groups upon arriving at a destination,” said China Tourism Institute director Bin Dai.
iResearch data shows that the turnover of China’s online travel market in 2013 was up 29% y-o-y to RMB220.46 billion, of which RMB131.83 billion was expenditure on air tickets, RMB48.54 billion was on hotel transactions and RMB30.30 billion was on holiday bookings. Revenues generated by OTAs alone will reach RMB11.76 billion and is projected to grow to RMB465.01 billion by 2017 with 20.5% compound growth. By contrast, China Tourism Institute data show that China’s tour operators generated RMB176.211 billion from domestic travel, down 6.19% y-o-y. Outbound travel income was up 23.62% y-o-y to RMB115.719 billion, while inbound travel income dropped 4.32% y-o-y to RMB27.015 billion.
“The biggest problem is that we are getting more and more out of touch with consumer needs,” said Taiwan’s top tour operator Lion Travel’s general manager-marketing management planning Hsien-Hsiang Chen. “Nowadays many customers have even more access to information than tour operators, so it’s hard to satisfy them with only ordinary tours. The industry must gradually come closer to the customers’ lifestyle and diversify like a department store to reduce reliance on traditional tour business.”
GZL to expand by acquisitions
GZL’s Mr.Lu thinks that the company is too localized and its tour destinations lack variety, giving it little advantage outside of the region. “In the future we will make acquisitions to expand from Southern China to first- and second-tier cities in Eastern China, Xian, Shanxi and develop nationwide reach. On one hand we will bolster our network of existing commissioned agents and attract more agents to sell our products, and on the other hand we will also bolster our partnership with wholesalers and look into licensing product production to them according to our specifications and quality standards, ” he said on December 10.
GZL will also open an online platform to present tour products of other operators and offer suppliers O2O support channels.
Tourism industry capital funding
Guangzhou Lingnan Group has also set up a fund for to improve resources allocation, leverage mutual advantages, broaden cooperation and assist in the corporate and market development of the tourism industry, according to its director Jing Feng.
An informed source said this tourism industry fund is modeled after the Shaanxi Tourism Investment Fund and its focus is capitalization of assets, expansion of funding channels and obtaining more cash flow. The Shaanxi Tourism Investment Fund was recently established by a joint investment of the Shaanxi Province People’s Government, Shaanxi Tourism Group, UN Development Bank, Pingan Bank and the CITIC Group.(Translation by David)
