At WiT Singapore 2018, Maggie Rauch, senior director of research at Phocuswright spoke of the different worlds emerging between Asia and the rest of the world, or specifically how China is creating its own post-mobile ecosystem.
Addressing the ‘Power Paradox’, which is also the theme of the Phocuswright Conference in Los Angeles from November 13-15, Rauch said the theme was apt as “it’s so resonant and important to where we are in online travel today.”
The Paradox: Travel’s biggest have never been bigger and huge players dominate with much market power held by just a few. Dominance defines the state of things, and global travel has not seen major disruption for some time and it is hard for small players to see a way in.
However, the powerful knows this paradox best and as they grow, their growth slows.
“We know size encumbers, speed wins and the Next Big Thing comes often from unseen origins,” Rauch pointed out. “So these global players need to constantly adapt to go to new places in order to maintain growth and survive.”
She cited Expedia and Booking Holdings (formerly Priceline) as what she meant by ‘dominance’. About five years ago both these companies accounted for less than half of global OTA bookings. However, through acquisitions and organic growth they have now doubled their share of OTA bookings.
The travel funnel has changed too – companies that focused on transactions have moved up to search and companies in search have moved closer to transaction. Sitting on top of these is one power player – Google that owns access to travellers globally and it is hard for small players to compete online with Expedia’s and Booking’s ability to spend on Google.
Maggie Rauch revealing the Power Paradox in travel. (Image credit: Corinne Wan)
Turning to Asia, Rauch said Ctrip is in “really a powerful position”. Since 2011 China’s largest online travel agency has grown its share of global OTA bookings nine times. “And that doesn’t include Skyscanner, only China business.” (Ctrip bought Skyscanner in late 2016).
On Baidu, Rauch said the Chinese internet search giant could not now be considered the “Google of China” as it is losing its grip on the top of the funnel. Its advertising revenue have plummeted and it does not have the gatekeeper role in China that Google plays elsewhere.
“Instead Chinese travellers and consumers are spending time on messaging and social apps and e-commerce apps, and they have incredible reach and engagement.”
This trend has led to travel companies in China not thinking about the funnel anymore, instead looking at the entire life cycle – from dream to search to shop to buy to experience and back to dream again.
Rauch said Expedia and Booking apps are built for travellers who are ready to book or compare specific products.
However Fliggy (formerly Alitrip), the online travel platform owned by Chinese retail giant Alibaba, and Ctrip apps are built for the whole travel cycle where users can search, plan, book, experience and share. The apps also know where the users are and deliver via push notifications, which Chinese consumers are accustomed to, relevant recommendations as well as videos and discount coupons.
Inspiration and itinerary apps are a vital part of China’s travel ecosystem. Mafengwo, a Chinese travel social networking website that enables users to share travel experiences with each other, has 100 million monthly active users (MAUs). This is about 10% of WeChat MAUs, low by comparison but engagement that any travel brand would be happy to have.
Content is also what travel companies in China are going after. This was behind the acquisition of US-based travel planning and local discovery app Trip. com (formerly Gogobot) by Ctrip.
In China, the behemoths are also fighting it out to be thought of as true travel brands. Fliggy, with Alibaba’s might behind it, and Meituan, Tencent-backed group buying website for localised consumer products and retail services with an “incredible high frequency reach”, are competing with Ctrip.
“Their challenge is to be thought of as a travel brand and to operate in a complex space effectively, but have yet to make a massive dent,” said Rauch.
However Ctrip is not sitting back. It is fighting for the entry-level travellers, which is the motivation for the 7,000 retails stores, and is discounting at a very low end of hotel bookings.
“At the same time it is building a moat around the more experienced travellers, partly with technology and also with services, data driven product innovation and, more recently, a loyalty programme,” said Rauch.
She said it was interesting that when travel brands in China try to be all things to travellers, two companies, which are making a “ton of noise” in this space about coming to China, sell only one thing – rooms. She was referring to Airbnb and Oyo, India’s largest hospitality company, which claims to have 87,000 rooms in China, while Airbnb offers “1.5 things” with experiences added.
Rauch noted that when talking about global power playing across online travel, there is no ignoring that the company with the biggest influence in this region, Ctrip, “is not only outside of Google reach but is also moving very quickly into a post search and post funnel era.”
It is also competing on its own turf with two very dynamic competitors. “How Ctrip fights that fight and its approach beyond its borders will have huge implications within Asia and beyond.”
• Check out Phocuswright’s “Power Paradox” conference here
• Watch Maggie Rauch’s full presentation at WiT Singapore 2018
• Featured image credit: Shoot My Travel