Everybody is talking about the huge opportunities presented by the Chinese online travel market, but some players are faring better than others. Pamela Whitby takes a look

International hotel brands have had a presence in China for over ten years but it seems they really are struggling to adapt their business models and strategy to target the fast-growing and rapidly changing domestic consumer.

“International brands are at a crossroads in China,” says Joseph Wang senior director, hotel business at Qunar, “and they have to change their strategy which is very difficult.” One of the problems is that these brands have spent the last ten years trying to raise their profile among Chinese consumers but in spite of this many people still don’t know the difference between a Sheraton or a Hilton. Part of the problem is that these brands have failed to put enough time, effort and budget into their online platforms – which is a rapidly growing market. In fact today most new Chinese customers will turn to the likes of Ctrip, eLong or Qunar first to book a hotel, rather than going direct.

The reason for this is simple: they are doing a much better job than the big hotel brands at marketing online to consumers. Just six months ago eLong started a price war, which involved offering customers 10-15% cash back for booking an international brand on its site; Ctrip then responded with a massive investment in R&D.

So while in other markets top international brands may generate 50% of bookings from their call centre or brand website – and have relatively strong control of their pricing strategy - in China, says Wang, it is the completely the opposite. This has to change and hotels really do need to rethink these partnerships with Chinese OTAs and meta-search players if they are going to survive. Not only does this mean putting more money into television and newspaper ads or billboards at airports, it means allocating more budget to search engines or other channels to drive direct bookings from new Chinese customers. An indication of the seriousness of the situation is that occupancy rates of international chains – at 35% - are at an all time low. And to complicate matters further the new government has put a cap on government officials splashing out on luxury meetings. “It is a very hard time for big brands,” says Wang. 

Doing the bare minimum

With the number of domestic travellers in China expected to rise to 3 billion over 2012 there is everything to play for at home. However, Western brands have some way to go to tap this market. According to a new report by L2, a think tank for digital innovation, international brands in China are failing to do even the minimum required to attract the burgeoning domestic market online.  Marriot, for one is the only Western brand, to accept UnionPay credit cards, the only domestic bankcard organisation in China. Incredibly, not one of the brands accept the two most popular Chinese payment solutions: faipiao and Alipay. Hotels are also missing a trick when it comes to the burgeoning outbound market as 18% of hotels don’t translate their international property pages into Chinese.

These are not the only missed opportunities. Sina Weibo, China’s answer to Twitter, has a hotel booking application but none of the Western brands use it on their main web page, says L2. And while close to 100% of global hotel brands are on YouTube, only five update accounts on YouKu, the second biggest video site in the world. Since watching videos is the number one online activity for the more than 500 million Chinese, this seems business suicide.

After all, as Wang points out, customers increasingly turn to social media and especially review sites to help them with their decision-making. This is particularly true of the leisure traveller.

There are lessons from Chinese international brand, Shrangri-La-Hotel Group which is doing a better job at engaging Chinese customers online. It has the largest following on its Sina Weibo and Youku accounts of any hotel brand, a Chinese iPhone app that hosts competitions, and the only iPad app in the Chinese iTunes store.

Huge opportunities

For Wang, not focusing closely on an online strategy is a no-brainer.  “In China there five times more travel accommodations (around 300,000) than there are in the US or European market but just 10% of these are currently online,” he says. That represents a huge opportunity over the next five to ten years for the travel industry – namely to help hotels get online, get customers to find them, negotiate the best deals with online travel agents and boost conversions, he says.

This is a priority for Qunar right now – working out how to tap the huge market of B&Bs, new resorts and mid to upscale hotels in upcoming areas like, for example, Dali that are not yet online.

In order to provide a total solution to hotels it’s really important to know the Chinese consumer inside out. Some, he says, turn to meta-search or OTAs to book, others call direct and there are those that will join a hotel loyalty club and stick to one brand.

There is also a clear distinction to be made between business and leisure travellers. Chinese business travellers book in three major ways. First they call a friend or colleagues in another city to ask them where to stay, secondly they turn to Ctrip or elong. Finally they will use a mobile phone to find and purchase the best last-minute deal. Leisure travellers are completely different, explains Wang, and there are two main types. The first books three to four weeks in advance and will look for cheapest deal, even if that means a saving of two or three dollars. The second group will turn up at the destination first, and visit hotels one-by-one. “These are two completely different groups of people, and they need to be marketed to differently,” says Wang.

For business travellers, Qunar uses mobile channels to make last minute and they implement early bird or prepaid deals to target the leisure traveller. It is important to understand that business travellers are more location sensitive whereas leisure consumers are more price sensitive, he stresses.

One thing is certain: with 90% of hotel accommodation not yet online, there is everything for the travel industry to play for. As Wang point out: “In China anything is possible.”

For more insights into the Chinese market join us at the Travel Distribution Summit Asia in Singapore (May 28-29)