China´s position as a powerful emerging economy and home to 1.3 billion people with increasing access to wealth has made it a dynamic backdrop for travel growth and innovation. Online travel penetration in China will increase to 14% in 2009, up from 11% and will continue to grow in 2010. The total Chinese travel market, however, will contract in 2009, only slightly outperforming the total Asia Pacific region which is projected to shrink by 6%.
China, is one of the world´s great untapped markets. Sheer market size paired with increased wealth and consumerism is what started the original travel boom in China. Internet penetration in China is only 18% and yet, even at this low rate, there are more Internet users in China than in the U.S. This, combined with China´s skew toward intermediaries (63%, vs. 36% supplier direct in 2008), means there are billions of dollars to be made online.
Despite clear demand for their products, OTAs face challenges in China. Lack of standardized distribution and difficulty scaling operations are just a few of the hurdles that face those eager to tap into a market that is still subject to substantial regulation. Ultimately, the market is dominated by a few private companies that have developed recognized consumer brands, customized technology solutions and the scale to reach a broad audience. These companies spend most of their resources on aggregating inventory from multiple providers in an effort to provide breadth and choice.
"The emergence of new local entrepreneurs and increased global attention spurred by the events like the Beijing Olympics and Shanghai Expo (2010) will serve as a catalyst to open up the Chinese market," explains Ram Badrinathan, PhoCusWright´s general manager, Asia Pacific. "The Beijing Olympics caused e-ticketing in China to spike from 10% to 98% in five months. These trends will ensure that online travel opportunities will continue to grow in China."