By Mary Li, Founder & CEO at Atlas
Before the pandemic, China was the world’s biggest outbound tourist market in terms of visitor numbers and spending power. It’s no wonder that the much-anticipated announcement, allowing China’s travelers (and China’s travel agents) to further reconnect with the world, has caused a lot of excitement in the industry.
China’s OTAs have not only survived three years of isolation and business downturn, but they have reinvented themselves and found new, innovative ways to reconnect with their customers. Gary Bowerman summarized some key strategies applied during the pandemic in his recent article for Phocuswire: ‘Chinese OTAs reframed their business models by expanding their customer bases in lower-tier cities, supporting user-generated content, and investing in intelligent booking, marketing, and membership benefits tools’.
At Atlas, we have been supporting our China OTA clients in navigating this challenging landscape, and we recognize that without a solid infrastructure and adaptive business models, such rapid and radical transformation would not be possible. Due to my background in China’s travel tech industry, I often find myself answering questions about how China’s business differs from the rest of the world and what companies across the world need to know to formulate their China strategy. I always emphasize that the first step is to understand the distinct nature of this market, its unique features and mindsets.
To help the travel industry learn more about the DNA of China’s travel market from the OTAs perspective, I have summarized some of my decades’ worth of observations below.
Different Talent Pool
First of all, when we talk about China, we’re speaking of a market that is relatively young in the global travel scene. Unlike other countries where air travel was already well-established, in the 1990s China’s aviation industry was in its infancy, with airports and airplanes being a rarity. When I was in college in 1991, I was one of the few students among 10,000 in my college who had the privilege to take a flight from my hometown to school. It was a significant cost for my parents, and there was only one flight per week.
When rapid economic growth paved the way for the aviation sector to expand, the modern history of China’s travel market had begun.
China’s relatively late entry into the aviation industry had an important outcome. The lack of experienced travel experts pushed the industry to welcome young professionals from various backgrounds, including technology, eCommerce and finance. This diverse talent pool unburdened by legacy thinking led to the formation of a unique market and a completely different take on travel.
Tip one: Think like an outsider and hire for diversity, not just because it’s the fair thing to do, but because it ensures diversity of ideas – that’s how innovation thrives. While it’s important to have industry and market specialism, it’s equally important to bring in people from different backgrounds and experiences – people who are unburdened by legacy thinking and can challenge your perspective.
Optimization and standards
The industry grew slowly at first due to limited internet access and a lack of trust in online transactions. However, significant investments from the Chinese government in the country’s civil aviation industry eventually helped improve the infrastructure for travel and tourism. Supported by the growth of China’s outbound tourism market, OTAs started to develop.
It gained momentum in the mid-2000s with the emergence of major players such as Ctrip and Qunar, who focused their efforts on the efficiency and scalability of their business models. The industry’s major players leveraged their roots in eCommerce to construct platforms and ecosystems that had the capability to serve China’s unprecedented customer base.
Between 2010 and 2013, most Chinese OTAs were still relying on call centres (some of them had up to ten thousand employees). To make it easy to implement, replicate, and scale their operations, major players recognized the need to standardize processes. Each and every process in booking, selling, and servicing was defined, described, and implemented to enable smooth operations.
This trend quickly transformed the industry and laid a strong foundation for its further growth.
Tip two: To scale ahead of the pace of change, you’ve got to have the foundations in place. At Atlas, we’ve invested heavily in our infrastructure (so our clients don’t have to) and we are now able to scale up our platform within 10 minutes, to accommodate our customers’ growth. If you could achieve your growth goals, would your platform be able to keep up?
Bonus Tip: Despite the relatively low cost of human resources at the time, China recognized the importance of automation early – they adopted new technologies to create efficiencies faster than most. Keeping up with the advancements of tech and remaining open-minded to what it may do for you not just now, but it the next decade is fundamental to survival in these fast-changing technological landscapes.
Tech, Data and Traffic
Supported by clear standards and efficient operational models, China’s OTA industry continued to mature and harness the potential of the China travel market. Technology was the driving force behind this progress, with talented software engineers building platforms to serve such a vast market. Alibaba Group’s strategic investments in travel tech, such as Beijing Shiji Information for big data in hotels and retail, and Aslan for flight data processing, propelled China’s travel industry even further into the realm of data and technology revolution.
The widespread adoption of smartphones and apps reshaped the tech landscape in China. Unlike some markets where PC usage is substantial, China embraced a mobile-first approach. With mobile app usage increasing each year, travel agencies had to adapt as well.
OTAs in China focused on building eCommerce-like platforms and harnessing the power of consumer behavior insights to drive decision-making. Data has become an asset, and China’s OTAs have transformed into traffic distribution channels. The primary concern of China’s OTAs has shifted to calculating ROI from traffic costs and converting it into revenue. They extensively analyze big data and conversion rates, prioritizing the understanding of traffic gateways, promotional strategies, target personas, audience demographics, and their preferences.
The rise of super apps in China marked a shift in consumer behavior by providing a range of services in a convenient and integrated way. For Chinese consumers, travel became a service that they prefer to purchase just like any other product – efficiently, quickly, and within the same super app they use for other needs. (By the way, the continuous rise of super apps around the world – particularly in Southeast Asia and Latin America – makes China’s market an invaluable source of business insights and know-how).
To compete in this highly competitive market, OTAs in China prioritized efficiency and scalability. This is why major industry players are likely to collaborate with other vendors who are more skilled in specific areas, rather than developing their own unique products. As a result, their focus has shifted from customer service to managing vendor quality and the supply chain.
Tip three: Follow your customers. I’ve had a lot of discussions with travel businesses outside of Asia about the inevitability of super apps in their markets. Some are open to it; others believe it simply won’t happen. Either way, knowing your customers, following their needs and adapting to their real-time behavior is the only way forward. Whether you like the distribution channel they choose or not, you’ve got to be prepared to move with the market.
With Chinese travelers returning to the global stage, there is a great opportunity to turn to each other, learn, and explore ways to partner and collaborate to better serve travelers worldwide.
Rooted in eCommerce and technology, China’s travel industry differs vastly from the rest of the world. The emphasis on infrastructure and efficiency, driven by data and consumer insights, has enabled China’s OTAs to withstand three years of isolation and find alternative ways to satisfy their customers within national borders. The successful survival of China’s travel industry is a testament to the importance of building a strong foundation that would enable your business to quickly adapt, pivot, and scale.
Do you think that you can adapt some of these strategies in your business? If you found this blog valuable, please feel free to share it with your network – the better we understand different business models in travel, the better we can enable people to explore the world!