Analysys analysis:
According to the Quarterly Monitoring Report on China’s Online Tourism Market for Q2 2016 published by Analysys Industry Database most recently, the market size of China’s online tourism market for Q2 2016 reached RMB179.37 billion, an increase of 66.0% compared with the same period of last year, and an increase of 11.1% compared with last period.
In Q2 2016, the transaction size of China’s online tourism market embraced a notable growth compared with the previous quarter. The market still stood at the period of fast growth:
1. From the perspective of industry chain, the internetionlization of tourism industry has been deepened constantly.
Boasting long chain and diversified structure, there are multiple links of information exchange and fund turnover. Internet as an accelerator of information and transaction plays a role in expanding coverage of users and reducing the marketing costs on channel terminals, and also plays a role in enhancing the efficiency of industry chain and reducing time and information loss on resource terminals. In Q2 2016, online tourist vendors further strengthened the offline business system building; for example, Tuniu increased the number of its offline stores. By the end of June, the number of offline stores has exceeded 180; offline service operators strengthened the application of Internet technology; for example, TransAsia Airways, Jeju Air and other foreign-funded airline companies joined the flagship store of Qunar.com, Huaqiang Fangte and Ali Trip established the cooperation on future scenic spots, etc. Through analysis, Analysys believes that the upgrading & transformation of tourism industry chain by the Internet has been deepened from channel terminal to resource terminal, with the online and offline integration and industry chain integration being the prevailing trend.
2. From the perspective of market, the horizontal and vertical integration of vendors’ resources was deepened continuously.
Q2 2016 witnessed Tujia’s acquirement of Mayi, Xinmeida’s investment in Biqu365, M&A of CITS by China Travel Service (HK), HNA’s acquirement of the business of Carlson Hotels, acquisition of Home Inns by Beijing Tourism Group, and other resource integration; meanwhile, in the longitudinal direction of industry chain, Ctrip became a shareholder of China Eastern Airlines and created O2O service system in collaboration with Travel Ask, and LY.com acquired Wing On Travel; Analysys insight shows that large tourism platforms strengthened their core competitiveness by the integration of foreign and domestic resources, so as to address the competition among tourism enterprises at home and abroad.
3. From the perspective of capital, the market of outbound travel became a sector attractive to investors.
In Q2 2016, both the number of financing cases on tourism market and the size of financing decreased compared with last year as the capital tended to cooling, but outbound tourism was still a sector attractive to investors, attracting more than half of investment, including ITOURS and Detour dedicated to customized travels, RRUU and Tripvip specializing in free travels, Shijie99, Huizuche, and Wkzuche devoted to transportation, etc. Analysys insight shows that the outbound tourism market saw a fast growth in both size of tourists and amount of consumption, but the resources and service layout of China’s tourist enterprises at foreign destinations hardly meet the needs, exposing many blind spots of service. Meanwhile, large platforms expanded the layout of their overseas market in recent years. Benefiting from various factors i.e. large market size, small competition and rising scale of free travel users, the venture vendors witnessed a huge development space.
In terms of market segment, online transport booking still contributed most to the transaction size, accounting for 73.2% in Q2 2016. After the merger of Ctrip and Qunar.com, market competition was reduced, and synergy effect of resources was enhanced. Airline companies witnessed a remarkable performance in direct-sale strategy, with the profits rising somewhat. The overall transaction size was enhanced under the promotion of seasonable growth of order volume. Meanwhile, bus tickets and other emerging business saw a fast growth. Tuniu, Lvmama, LY.com and other vendors expanded their layout of bus tickets. Shanghai Xicui, which specializes in the business of self-service ticket collecting machines for passenger stations under Ctrip. The growth of bus tickets becomes a market highlight of the second quarter and in future.
The accommodation booking accounted for 17.3% of overall transaction size of Q2 2016. In terms of online market, the market concentration has reached a higher level after Ctrip acquired eLong and Qunar.com. Ctrip is hardly challenged due to its competitive advantages in channel terminal. Therefore, Meituan, Ali Trip and other competitors mainly focused on the upstream of industry chain, and got through the information flow and transaction flow between hotel operators and online booking platforms and users by technological means; for example, Ali Trip and Beijing Tourism Group established Weilai Hotels Co., Ltd. by joint venture, providing information-based solutions for small hotels; Jointwisdom Information, a listed company under Ctrip on NEEQ, which will continue to invest in the construction of hotel information system.
In Q2 2016, the transaction size of China’s online holiday travel market accounted for 9.5%, and industrial consolidation was deepened constantly. In terms of offline situation, China Travel Service (HK) and CITS reached the agreement on merger, UTS Travel made strategic investment in SIRIUS, expanding its layout to the retail market in Yunnan; regarding online situation, LY.com acquired Wing On Travel, improving its market layout in North China; Ctrip launched Special Travel, increased its investment in tourism market and achieved its integration with offline stores of Travel Ask to create the O2O business system, set offline stores and boost the offline layout. Meanwhile, main vendors invested more in segmentation of theme products; for example, UTS Travel launched the customized tourism brand UDZ.COM and the bus tourism brand U-BUS. Analysys analysis shows that the ecology of online holiday travel market presented a multi-level and three-dimensional development trend, with product quality and services tending to high quality experience. Under the background of overall fast growth of China’s tourism industry, the high quality holiday travel experience will constantly promote the development of online holiday travel market.
Ctrip kept ahead from the perspective of market layout. In Q2 2016, Ctrip (online transactions of Ctrip.com, excluding Qunar.com and other holding companies, the same below) and Qunar.com totally accounted for 55.8% of transactions. In terms of business growth, Ctrip maintained a fast growth in transportation and other brand products, driving the growth in overall transaction size. In the opinion of Analysys, Ctrip and Qunar.com have difference in core competitiveness and strong complementarity. The Ctrip’s positioning to high-end users and the platform positioning of Qunar.com built the three-dimensional business structure. Viewed from the business integration effect in the first quarters of 2016, the operating costs declined overall, the size of operating incomes grew fast, contributing to the rise of overall gross margin; regarding the external environment, the variable factors influential to business development decreased: on the one hand, the intensity of market competition declined compared with the past; on the other hand, the reform on agency market by airline companies has basically drawn to a close. Since July 1, the fixed ticket agency fee superseded the incentive policy of “before-ticketing rebate + after-ticketing rebate”. The market is fully ready for new rules. On the premise of prominent effect in internal integration and steady external environment, it is expected that the system of Ctrip will further achieve the transition of reducing losses and turning loss into profit in the third and four quarters.
Ali Trip contributed 15.2% of trade share in Q2 2016. As an e-commerce platform, Ali Trip forms the development highlight created through technical innovation plus eco-system by the aid of financial, marketing, logistics and other supporting resources of Ali Group, e.g., Ali Trip and Huaqiang Fangte reached an agreement on building the future scenic spots, and building Future Hotels Co., Ltd. by joint venture with Beijing Tourism Group, and so forth. Ali Trip promotes the information-based, network-based and intelligent transformation of scenic spots, hotels and other core tourist resources through building the grassroots transaction system, and forms a three-dimensional eco-system with the online trading platform, securing a huge space of imagination.
Analysys insight shows that China’s online tourism market presents a remarkable centralization trend. Major online tourism vendors integrate resources horizontally or vertically in the industry chain by means of investment, acquisition and strategic cooperation, speed up the integration of channels and resources, and enhance the operating efficiency; meanwhile, the market competition will no longer be limited to single dimension, but to present a three-dimensional competition layout, as the networking tendency of industry becomes remarkable, the online and offline boundary is increasingly blurring, and traditional tourism groups are more enthusiastic to reform their business and operating system through the Internet.
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