Ctrip gears up for tougher battles in hotel contracting in Asia
The leading OTA acknowledges that signing of direct contracts with hotels isn’t a straightforward task in overseas markets. But the team is expanding in early days of Ctrip’s globalization.
ChinaTravelNews, Ritesh Gupta - Big Chinese online intermediaries are diligently pursuing new opportunities as part of their respective growth strategies. And strengthening of international hotel content via direct contracting deals is a part of this plan.
Take the case of Ctrip.com. The leading OTA, which had only 20-odd employees as part of its international hotel contracting team located outside China around the same time last year, has now expanded to seven offices in six countries in Asia – Singapore, Thailand, Malaysia, Indonesia, South Korea and Japan.
“Today we have 50 overseas employees as part of our hotel contracting division. We have two offices in Thailand – Phuket and Bangkok. We had opened an office in Bali earlier this year. For other markets, we have staff in our corporate headquarters. The approach is to evaluate top outbound markets, and Asia definitely stands out as far as Chinese travellers are concerned,” shared Ctrip’s John Zhong.
The OTA has also been looking at efficient management of hotels’ inventory. Ctrip, which has been working with 16 channel managers to access the inventory of overseas and Chinese hotels, recently completed XML integration with eRevMax. This move is part of Ctrip’s stronger revenue generation plans for South East Asia, the US, and Latin America. From hotel’s perspective, such two-way integration paves way for better control and also curtails time spent on managing rates and inventories.
Responding to preferences
A major role of this team is to identify properties that Chinese travellers are likely to book.
“When our team interacts with an international property, a critical aspect is to make sure our bookers appreciate the listing. This is important for us as 90% of our customers are Chinese travellers,” said Zhong.
Zhong explained that a key OTA differentiator is Ctrip’s “Chinese Preferred Hotel” program. The hotel contracting team ensures that the content is tailored as per the preferences of travellers. Delving into this, he added: “Chinese travellers love to shop – more than 40% of Chinese tourists indulge in shopping - so aspects like vicinity to shopping areas is quite important.” Every detail is considered, including what’s preferred and what isn’t. “When one considers a destination like Bali, while Australians have bars, night clubs etc. high on their agenda, Chinese would like to opt for beach side bookings. There is disliking too. For instance, Chinese don’t like to visit Pattaya in Thailand much,” shared Zhong.
As for the age-group, Zhong mentioned that a majority of bookings are done by 30-39 age-group. “But in terms of the fastest growing age-group, it has to be 20-29 years. It grew 50% year-on-year last year. This group is educated, very confident. Also, it should be noted that 70% of travellers belong to the FIT category and remaining 30% now belong to organized tour groups for all the bookings, including ones via online reservations and traditional agency channel,” said Zhong.
Even as Ctrip.com analyzes its booking data for trends and preferences, going isn’t straightforward when it comes to commercial tie-ups.
It should be remembered that these are early days of globalization for Ctrip, as Zhong puts it. And this brings along with it certain hurdles.
“The awareness of Ctrip as an OTA is quite high among five-star and four-star hotels. But there are economy or low-end market properties that need to be explained the utility of partnering with a brand like Ctrip for Chinese audience. Our team at a local level is engaging hotel companies and properties in workshops, and other initiatives to make sure local hotels understand the strength of Ctrip,” said Zhong. This is a crucial part as Ctrip isn’t ready to give any leeway to a competitor like Qunar. “Qunar, too, has focusing on strengthening its direct contracting network. Qunar, which started as a meta-search engine, deals with a variety of suppliers and wholesalers. And we are ensuring that the battle in terms of offering an attractive price deal is won by us. We aren’t ready to leave anything when it comes to price war.”
Ctrip provides its extranet, E-booking, for overseas hotels to upload price, inventory and availability on to the OTA’s website. There are four language versions – Chinese, English, Japanese and Korean.
As seen in the domestic market, Ctrip is open to increasing its room inventory via pre-purchases of hotel inventory in overseas markets, too.
The company tends to go for guaranteed room allotments in the domestic market, too, paving way for Ctrip to sell rooms even when they are in high demand and provide instant confirmation. Zhong acknowledges that hotel reservations has become a highly competitive category, and this means intermediaries attempt to gain guaranteed access to rooms during the peak season in advance. Of course, the risk element is much higher, but if forecasting is spot on, then the OTA stands to gain in the marketplace. The key is here to manage the demand forecasting plus optimize yield management. In such cases, revenue generation on a gross basis corresponds to sale price of the room nights sold to customers, and the cost paid to the hotels for the hotel rooms is marked as cost of services.
Best foot forward
Ctrip.com has exclusive deals with Booking.com and Agoda.com. The properties listed on these OTA sites have exposure on Ctrip.com. So how does Ctrip.com display results that match the buyer’s intent. Zhong said the best results are shown, according to the “different scenarios”.
Zhong explained that even as Ctrip is pursuing a larger network as part of its direct contracting, there isn’t any fixed target. The team is continuously looking at demand pattern, and trends in outbound travel. And this is going to the drive the expansion of this division.