Things are at a different scale in China and this fact was hammered home when on my walk to the venue for the 12th TravelDaily Conference & Digital Travel Show (CDTS), I encountered a giant giraffe at the road crossing.
There were some clear messages at the conference – growth is slowing, but travel players remain bullish; competition is rising, but incumbents remain bold; the big are getting bigger, but the small are undaunted; global brands have learnt their lessons and are playing it humble, and China has become their laboratory on how to innovate and create products for a mobile world; and everyone’s after the 400 million millennials, “quality travellers” born in the 1980s and 1990s.
Here’s a summary of what I heard at the conference:
1. Ctrip get over the humps, pushes internatonalisation
Growth is slowing but there were constant reminders that a 6% GDP growth is still better than the 2% in Europe and it’s certainly not deterring the growth ambitions of Ctrip.
Jane Sun, Ctrip
CEO Jane Sun said the goal was to grow four times that of the industry average of 10-12%. “So long as there’s GDP growth and rise in disposable income, the prospects are bright,” she said.
She’s bullish on rail which, with its broader and faster network, is now able to cover two-thirds of where Ctrip customers want to go. Its high speed rail packages have unleased hidden demand which is why Sun said it was essential it kept innovating in products and tech.
While she acknowledges the last two years have been difficult with changes in the macro environment and tougher trade actions by the US government, she remains bullish on internationalisation.
The international ticketing business is strong and sizeable, and it is seeing direct bookings on the Skyscanner platform. “In the past, the traffic was redirected to other sites but now customers see our products and they don’t need to be redirected to other OTAs.”
Ctrip’s philosophy is for acquired brands to maintain their own culture. “We acquired them because of their uniqueness. Travel Fusion, for example, is a wonderful business. They were doing 30% growth and now they are doing 100% growth. There’s never a need for a meeting of board members.
“Gareth (Williams, co-founder of Skyscanner) is a tech geek and he’s been very careful about finding a successor. Brian (Dove, CEO) used to work with Gareth at Microsoft and has followed Gareth and I have full confidence in their leadership.” (Williams recently handed the CEO reins to Dove while he took on the chairman’s role).
One area Ctrip has invested in is customer service particularly its SOS Assistance service where, after a crisis, in seconds, it knows where it customers are, within minutes, its staff are in contact with customers and within 24 hours, the customers are flown back. “This service has gained a lot of customer satisfaction,” said Sun.
The challenge facing Chinese companies’ internationalization drive though is language. “Our employees are Chinese, they speak Chinese, so language is an issue – unlike Booking.com whose employees are more international. But we need to follow the footsteps of our customers.”
Competition is rising though, she acknowledges. The day she spoke, Meituan Dianping, whose app is used by more than 300 million people and which wants to be the “app for everything” for China, made its debut on the Hong Kong Stock Exchange and on the first day of trading, its stock ended the day up 5%, giving it a market valuation of about $50 billion.
“We do welcome strong competitors because they make us stronger,” said Sun.
2. Global brands stay humble and learn from China
During the panel I moderated, it was interesting to listen to three major European brands which are giants in their home markets acknowledging the lessons they’ve learnt.
The newest to enter the market in 2016, Thomas Cook, took two decisions that have helped it greatly, said Alessandro Dassi, CEO & general manager of Thomas Cook China. It built a tech team in China which allows it to scale faster and it decided to distribute through Taobao, which has become its biggest sales channel.
From left, Gino Andreetta, Club Med; Marsha Ma, Booking.com; Guido Brettschneider, TUI
Club Mediterranee is developing mobile products in China which are then being adapted to other markets. Because Chinese consumers are so open to change, managing director of Club Med Greater China Gino Andreetta said it was a good market to test products and then roll them out in other markets which are behind in mobile.
Andreeta, who moved to Shanghai in 2015, said the brand has found its place with Chinese millennials who were looking for experiences, a concept he said Club Med pioneered. Most popular were snow and mountain experiences.
TUI, which recently renewed its partnership with CTS forged in 2003 till 2033, has been in the market longest. It started off as an inbound business, but CEO of TUI China Travel Guido Brettschneider said it was building up its outbound business and while other players are targeting younger travellers, he said TUI would go after the older retirees.
Marsha Ma, managing director, China, Booking.com, who worked at Tencent, Alibaba and Microsoft before joining the OTA, has been clearly brought in to build the brand in the domestic market. She signed a strategic partnership with Spring Airlines, under which both parties integrate their platform resources as well as have a co-branded aircraft, and Ma said this has been a highly successful brand activation, with plans to partner other airlines.
Alessandro Dassi, Thomas Cook
As she spoke, I was reminded of what Glenn Fogel, CEO of Booking Holdings, had said on this same stage some years ago – that he didn’t consider to have won in China until it grew its share of the domestic market. Ma’s appointment is clearly a step in that direction as she brings local knowledge and branding savviness to the business.
Asked what lessons Chinese brands could take from Western companies as they expanded beyond China, Dassi observed that it was probably harder for Chinese brands to internationalise than the other way round.
Just as Sun had observed in her earlier comments about language being an obstacle, Dassi said one challenge was the corporate culture. “They have the appetite to expand but not the capabilities yet.”
Sebastien Gibergues, vice president, online travel Asia Pacific, Amadeus said because China has its own unique ecosystem, some Chinese companies may struggle to export their models to other markets. “The important thing is to empower local management teams,” he said.
There’s also of course the issue of data privacy and regulations that exist in other markets that may not exist in China, and Chinese brands will have to heed those regulations which may slow them down.
3. The next wave in Chinese outbound – niche tours, holy places and socialised travel
Gang Chen, co-founder and CEO of Mafengwo, the brand that’s gained a strong reputation for creating a new kind of content for the millennials, said Chinese outbound travel was entering a watershed moment – switching from a sellers’ to buyers’ market.
Gang Chen, Mafengwo
While the supply side was being homogenized and standardized, buyers were becoming fragmented. “If you stick to the sellers’ market mindset, you will find it hard to survive,” he said.
Specialisation and individualization will become important, and products have to be differentiated. He singled out the trend of emerging niche tours such as the “Anime Pilgrimage” in which Chinese youths, inspired by the anime movie, Slam Dunk, flocked to the Kamakurakōkōmae Station, causing consternation among locals living in the area.
Mafengwo’s data for the first half of this year showed that while growth to traditional destinations was 56.3%, the growth to “holy places” was 135%. “People now have different motivations to travel, they don’t go to famous attractions, they travel because of comic books, games, movies, soccer games and cooking shows.” The other trend he pointed out was the KOL effect where a single celebrity can propel a place to stardom.
When Mafengwo ran an event in Beijing, where it showcased content generated by its users about destinations around the world, more than 110,000 people visited the event. “People are travelling for unique reasons and this will disrupt our supply chain and reshape our industry.”
The third trend is socialised travel where people with like-minded interests travel together. “It’s not where you go but who you go with,” he said. “The next 10 years will see travel creating a new generation of services to cater to the new demand.”