05 January 2010

Investing in the growth of travel in China

By Maggie Rauch, China TravelDaily

After a four percent drop in 2009, travel bookings in China will grow by five percent in 2010, projects a new PhoCusWright report, ââ¬ÅâœEmerging Online Travel Marketplace in China.ââ¬~

The same report predicts that travel will expand to become a $65 billion industry by 2011, and that 20 percent of that market would be online.

Where opportunities lie in that growth, and what kinds of companies might be positioned to seize them was one topic of discussion at the recent China Travel Distribution Summit.

ââ¬ÅâœYou can see that online booking is growing, and people are ready to travel,ââ¬~ said Sandeep Bahl, general manager of China for Delta-Northwest Airlines, adding that he expected support from Beijing to boost the market.

ââ¬ÅâœThe government in China has recognised tourism as a pillar.ââ¬~

Online booking may be growing, but it is still difficult for a well-established foreign company to make its mark in Chinaââ¬â¢s online travel space, experts at the conference said.

ââ¬ÅâœEvery single Internet company that has entered the China market has failed.ââ¬~ says William Bao Bean, a partner at venture capital firm Softbank China & India Holdings.

Fritz Demopolous, founder and CEO of Beijingââ¬'based travel media site Qunar.com pointed out that Chinaââ¬â¢s market-leading sites for general search (Baidu), travel booking (Ctrip) and travel meta search (Qunar) are all local companies that were first movers in their space.

All three had thrived despite the entrance into the market of competitors that were big-time leaders in the United States and globally.

Demopolous said Expedia owned online travel agency eLong.com, but had only been able to corner 10 percent of the market, compared to 57 percent for Ctrip, according to iResearch.

ââ¬ÅâœI donââ¬â¢t think thereââ¬â¢s one company that has done well, but thatââ¬â¢s not to say that looking forward, a foreign company may not do well.ââ¬~

As Demopolous explained, a successful online venture required capital, technical knowledge and local expertise. Chinese companies had access to as much capital as a foreign competitor, he said, and the proliferation of open source technology lowered that barrier to entry.

ââ¬ÅâœIn the consumer internet space, knowledge and capital are free flowing,ââ¬~ Demopolous said. ââ¬ÅâœDomestic companies arenââ¬â¢t at any disadvantage at all online. Itââ¬â¢s a pure execution game, a numbers game.ââ¬~

Cyril Ranque, vice president of the partner services group for Expedia Asia-Pacific, spoke at the Shenzhen conference about some of the challenges Expedia faces in China.

ââ¬ÅâœItââ¬â¢s all about making it relevant for the local market,ââ¬~ he said. ââ¬ÅâœFor multinationals like us thatââ¬â¢s hard to do, because weââ¬â¢ve been successful by rolling out processes and systems.

ââ¬ÅâœAnd whatever we know from the outside that has worked to expand in the western world is not going to work here.ââ¬~

Ranque added that Expediaââ¬â¢s plans in China were long term, a position the company has backed up by expanding its China portfolio beyond eLong.

This year, via TripAdvisor, it purchased travel meta search site Kuxun.com and set up a review site called Daodao.com. It also brought its corporate travel practice, Egencia, to China two years ago in hopes that Web-based corporate travel planning would grow.

Corporate travel is an area where there is some unmet need, said Softbankââ¬â¢s Bao Bean.

ââ¬ÅâœThere is opportunity for helping companies save money and cut down on employee fraud and get the best price,ââ¬~ he said.

Adaptability and willingness to really listen to local partners were keys to realising return on investments in Chinaââ¬â¢s travel industry, said Bao Bean.

ââ¬ÅâœIf you try to control from abroad or put in international systems, you will have a distinct disadvantage in the Chinese market.ââ¬~

And for companies entering China via mergers and acquisitions, he advised: ââ¬ÅâœMake sure you donââ¬â¢t buy the whole company. Make sure the people running it stick around.ââ¬~

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