ChinaTravelNews, Nicole Sy - Part of a three-part series, ChinaTravelDaily takes a look at the travel and tourism industry’s brands that made it to BrandZ’s 2015 Top 100 Chinese brands. BrandZ is one of the world’s top brand valuation firms, with their definitive brand valuation methodology combining “extensive and on-going consumer research with rigorous financial analysis.”
Part three looks at travel agencies, with two making the list. Ctrip, China’s largest online travel agency (OTA) leads as the 44th most valuable Chinese brand, followed by CITS, an established State-Owned Enterprise (SOE) travel agency, at 93.
“Leisure travel continued to drive category growth, even as business travel slowed because of government austerity measures,” according to the report. Travel Agencies as a category grew 48 percent in value compared to last year’s numbers, helped by both domestic and outbound Chinese travelers, and facilitated by increasing the amount of business conducted online.
According to the World Tourism Organization, “China led the world in the growth rate of overseas travel, with spending by Chinese traveling abroad increasing 16 percent through the first months of 2014,” the UN agency said.
Ctrip.com was founded in 1999 and is China’s largest OTA. It “primarily targets frequent independent travelers in China who do not travel in groups,” as reported on their corporate profile. “These travelers form a traditionally under-served yet fast-growing segment of the China travel industry.”
Ctrip has a brand valuation worth $1.2 billion, and grew an astounding 71 percent in brand worth from last year’s valuation. It was second only to Chinese Internet giant, Tencent in terms of highest brand growth year on year, and helped drive overall growth of the travel agency category.
It greatly benefited from its investment in online infrastructure with its mobile app downloads reaching 600 million by the end of 2014, according to their annual financial statement. 2014 was also a year of high-flying investments for Ctrip, with highlights including a $500 million investment from the world’s largest OTA, Priceline, with another $250 million announced in May this year. It also bought a 37.6 percent stake in major Chinese OTA competitor, eLong, from world travel giant, Expedia for about $400 million, also in May.
Coming in as the 93rd most valuable Chinese brand, CITS is valued at $215 million, though its brand worth fell 15 percent from last year, when it was at $252 million. Founded as China International Travel Service in 1954, it was one of China’s first travel agencies catering to overseas tourists. To meet today’s travelers’ changing expectations, CITS focused on turning around its traditional travel agency approach into a more digital experience. The 122 CITS branches are now unified with a website in five languages, plus Chinese.
“CITS also enhanced its product offering for Chinese customers traveling domestically or abroad,” according to the report. “It expanded its business of expediting visa applications, with an initial focus on Korea.”
The Financial Times reported that Chinese visitors from the mainland to South Korea soared, “up 58 per cent to 516,787 last month against the year before, according to the Korea Tourism Organisation.” Visits to Japan also jumped almost 160 percent in February this year, as calculated by the Japan National Tourism Organization.
A mixture of cultural trends and currency fluctuations, for Korea and Japan respectively, has helped boost numbers of Chinese travelers to neighboring countries.
Both travel agencies, Ctrip and CITS ranked in the Top 20 travel groups for 2014, with operational revenue the basis for the China Tourism Academy and China Tourism Association-written list. Ctrip took the top spot while CITS was the seventh-ranked.
A notable trend in the category is the switch to mobile. The BrandZ 2015 report notes “mobile phone users totaled over 1.2 billion, 92.6 percent of China’s population at the end of August 2014,” and “smart phone users would total 480 million in 2014,” according to China’s Ministry of Inudstry and Technology (MIIT) and the China Internet Network Information Center (CNNIC), respectively.
More than 70 percent of transactions were made on Ctrip’s app during Chinese New Year, an opportune time to travel for most Chinese, writes to their 2014 Financial Statement. Mobile internet usage also surpassed PC internet usage for the first time in 2014, CNNIC reported.
Although CITS’ presence in the digital landscape is not up to par with Ctrip’s, it partners with various other OTA to use their platforms and to offer their services to travelers. In a way, it acts as a supplier of trips and tour packages through another viable online channel.
But communicating digitally with consumers is not as simple as having an online platform. “While the mobile opportunity is enticing to most, brands shouldn’t start with the channel,” says Dan Ingall, managing director of communications agency, JWT, Shanghai. “Start with the consumer and a timeless brand idea, still the best source of sustainable differentiation,” he says.
President of global media agency, Maxus, China, Annie Hsiao agrees there is much more strategy necessary to succeed in today’s world of digital communications. “Middle-class consumers are more information savvy. They’re making their own judgment about brands they prefer, and not just blindly following the trends and promotions,” she says.
Hsiao says brand trust in an age of transparency is difficult but vital for brands. Trust certainly played a role for both Ctrip and CITS, listed as the third and fourth most trusted brands in China, respectively, as measured by BrandZ. Hsiao recommends honesty and transparency to build trust. “In this challenging environment, where empowered consumers have great influence over a brand’s success or failure, it’s critical for brands to build trust,” she says.
Ctrip rose ten spots up from being the 54th most valuable Chinese brand in 2014, and continued to grow in value, growing an impressive 47 percent from 2013 to 2014, to a valuation of $718 million. Meanwhile, CITS fell more than Ctrip rose, tumbling 11 ranks from the 83rd most valued Chinese brand last year, with a valuation of $252 million. CITS was a new entry in 2014’s list, as it was the first year BrandZ expanded from studying the Top 50 brands to the Top 100 Chinese brands.
The gap between Ctrip and CITS widened this year, now 49 ranks apart, whereas last year, they stood closer at 29 ranks apart.
With the industry’s trend looking towards going mobile and never looking back, Ctrip looks poised to continue to grow on their digital home turf though they must have a consistent brand voice changing consumer tastes can relate to. Meanwhile CITS will have to work hard to conquer the new battlefield, which may not necessarily just consist of having a website.