Tourism boom
Online companies from China are cashing in on surge in outbound travelers
Online companies from China are cashing in on the surge in outbound travel.
We use the crowdsourcing method to gather and share the travel experience.” Zhang Pinghe, chairman and CEO of the website Shijiebang.com The potential market is huge and only if we provide the right and good quality services can we hope to attract enough users.” Hu Jie, owner of website Xianlvke
Julia Yang, a 29-year-old Beijing resident, remains unruffled when her friends and relatives ask her about the preparations for her forthcoming trip to Europe during the Spring Festival.
Yang said that she is not unduly worried as she has already made all the necessary arrangements including travel, stay, sightseeing and other leisure activities with her mobile phone.
“It is very convenient to work out overseas travel plans nowadays,” Yang said adding that, “there are various websites and applications that can provide virtually any kind of travel and tourism related services.”
Yang says some of these services could range from hotel room bookings, car rentals, local guides and restaurant recommendations, while there are several others who specialize in niche, tailor-made services.
“My parents, who are traveling with me are making their first overseas trip and they cannot believe that it is possible to make all the arrangements in advance,” she said with a smile.
Yang’s testimony does come as sweet music for online tourism companies as the sector is witnessing a flurry of activity to coincide with China being one of the largest source markets for outbound tourism and spending. Not surprisingly, the boom has transcended to the companies that provide personalized and specialized tourism-related services, said industry sources.
Apart from additional investments by existing companies, the tourism sector is also fast becoming the sector of choice for prospective entrepreneurs, thanks to the promise of quick, steady returns.
Booming market
Over 19 billion yuan ($3.081 billion) was invested in tourism-related companies during 2014 and most of the investments came from entrepreneurs targeting the niche segment of specialized services, according to data from CTCNN.com Inc, a company that tracks the online tourism sector.
Even as competition in the niche market is intensifying with the presence of small players, the bigger companies are also charting strategies to grab or retain market share, the sources said. Travel services company Ctrip.com International Inc is currently the market leader with a market share of about 54.3 percent in 2014.
Hu Jie, who used to work with a web portal, is one of the entrepreneurs who has tasted success in the industry. Hu left his job last year to start his own website — Xianlvke — to provide overseas guide booking services for Chinese travelers.
“Finding the right tour guides who understand the needs of Chinese tourists has always been a gray area in overseas markets. Most of the tourists find that they are unable to communicate with the tour guides they chance upon and as such often end up missing several unique experiences,” he said.
Hu says the idea for Xianlvke, which is Chinese for fresh traveler, came from his trip to Europe in 2012. During that trip he had met a local councilman in Zurich, Switzerland, who took him to the city hall and introduced him to the mayor. “It was an amazing experience and I don’t think any travel agency would provide such attractions,” he said.
He said that during his trip to Europe and from the warm interactions that he had with local people, the idea of providing such specialized services to other tourists took shape.
“I realized that I could set up a platform to introduce the local guides to travelers, so that they can have unique experiences during their trips,” he said.
Xianlvke currently has about 2,000 local guides registered with it and most of them are from Asia, Europe and North America. Travelers can also talk to the local guides through the website and peruse the comments uploaded by other travelers.
“The relationship between the guides from Xianlvke and the travelers are more personal, rather than being just a business,” Hu said.
Travelers pay about 1,000 yuan per day directly to the guides on average and the website does not charge anything at present.
Hu said his company hopes to make profit from other related businesses in the future, including scenic spot tick- ets, concert tickets and even hotel bookings, as the travelers will have other needs during the trip after the guides make special travel plans for them.
“The potential market is huge and only if we provide the right and good quality services can we hope to attract enough users,” Hu said.
Xianlvke is still in its early stages and has about 10,000 registered users. But the company already got several millions of yuan as angel investment in 2014, showing the confidence of the investors in the success of the business. Hu said that he plans to use the investment to make further progress in his business, such as launching mobile phone applications, this year.
Besides local guides, Chinese travelers can also enjoy tailor-made trips from some Internet companies without extra fees, since the traditional travel agencies usually charge high prices for tailor-made products.
Niche offerings
Shijiebang.com, another online travel agency, was set up in 2012 and aims to provide tailor-made travel package for users by sharing the travel experiences.
“We use the crowdsourcing method to gather and share the travel experience,” said Zhang Pinghe, chairman and CEO of the website. About 2,000 to 3,000 experienced helpers from all over the world are registered on Shijiebang.com and it already has about 4 million users currently.
Like Xianlvke, Shijiebang’s helpers are also experienced local residents in Europe, the US as well as Australia and their thorough knowledge about the spots are rewarding for travelers.
Citing an example, Zhang said, he prefers to live in a hotel with a convenience store nearby when he travels, but most of the traditional travel agencies or tourism guidebooks do not provide this information.
“In this case, we need local residents with rich travel experience for consultations,” Zhang said.
Like Xianlvke, Shijiebang helpers also answer the travelers’ questions online and make specific plans for them, but they usually do not meet them in person.
The helpers get paid by Shijiebang according to the services provided. The travelers only pay for the travel package, including hotel, air tickets and other products, rather than for the consultancy service. “The consulting service could be sold, but not for now,” Zhang said.
The company plans to charge maybe 10 percent of the whole package cost as consulting fees in the future, Zhang said.
“We need to spend time to spruce up our services and reduce consumer complaints before we can start charging for services,” he said.
Even as companies like Xianlvke and Shijiebang are expanding their tourism products, other are deepen- ing their existing products.
Zanadu, an online travel agency that focuses on boutique and luxury hotel booking, is planning to use the surge in outbound tourists to offer fresh and unique travel experiences.
“Zanadu’s goal is to bring unique experiences to Chinese travelers,” said Wang Yang, chief operating officer of the company.
The company is clear about its target consumers, most of whom are urban elites and sophisticated travelers, Wang said, adding that most of them live in first- and second-tier cities and are frequent overseas travelers.
Total spending by Chinese outbound tourists stood at $140 billion in 2014, an 8 percent year-on-year growth, according to data provided by the China Tourism Academy.
For companies like Zanadu, however, it is not the consumer that is the problem. Instead, its concern is more about resources as its target hotels are all luxury and boutique ones.
In order to reach out to its target hotels, Zanadu seeks partnership with boutique hotel associations and also participates in major industry events, Wang said.
Since the website is relatively wellknown within the high-end travel industry, some hotels come to Zanadu directly, he said, as the website is also a channel for the unknown hotels to market their products in China.
Zanadu has already made a profit in 2014 from hotel bookings, sales of travel products and packages as well as advertising, although making profit is not its only goal at present, Wang said.
Even as companies scramble to provide the right kind of services to attract outbound tourists, industry sources said most of the issues are often those related to service information and local guides.
The market potential for niche services is huge considering that the total number of trips made by Chinese tourists exceeded 100 million person-trips last year, experts said.
“Bright prospects exist for niche tourism-related companies,” said Wei Changren, general manager and chief analyst of CTCNN.
Customer retention
More Chinese travelers will choose the self-guided way to travel abroad, Wei said, and they will also need specialized services ranging from hotel bookings to scenic spot tickets.
However, such enterprises should also develop only at a reasonable speed rather than expanding rapidly, the sources said.
“Retaining market share is important for all online travel agencies, but it also needs huge investments,” Wei said.
Several online travel agencies have already spent huge amounts and made considerable efforts to retain customers.
The sales and marketing costs of Ctrip, China’s largest online travel agency in terms of market share, was about $97 million in the third quarter of 2014, a 25 percent year-on-year growth.
Smaller companies, who do not have so much of capital, will need to spend more time to grow customers and to provide unique services, the sources said.
On the other hand, the existing enterprises should try to enlarge their products to get more business once they have achieved a reasonable scale.
After two years of development, Shijiebang is now coming out with some standardized tourism products, based on its user preferences.
“We use the popular items among users to develop standardized products, as it helps save human resource costs,” said Zhang from Shijiebang.
Online travel agencies must explore various options to retain existing users, said Wei from CTCNN.
Tourism products are not items of daily consumption, he said adding that it is not uncommon also for Chinese residents to visit overseas destinations. “The only difference is that the usage levels are relatively low. If online agencies do not offer multiple choices, customers will go to those who do so, Wei said.
“The niche market is a good start, but in order to cut costs and get more users, the enterprises still need to continue expanding,” he said.