Many China travel observers believe that Ctrip is in an unassailable position. The team at Tuniu would disagree. They are taking aim at Ctrip and Qunar. What makes Tuniu different? It focuses on leisure travelers. Ctrip and Qunar do not. This article appeared in the China Morning Post July 17th…….Will the dolphin beat the cow? Will the camel get the hump?……Read on……………
Chinese online travel agent Tuniu takes on Ctrip, Qunar in flight bookings market
Tuniu Corp, a Chinese online leisure travel company, has set its sight on the flight booking business, tapping into a field dominated by leading players Ctrip and Qunar.
“For the next few years, we expect our air ticketing business to see a fast growth rate in both domestic and international flight bookings,” Tuniu’s president and chief operation officer Yan Haifeng told the Post in an interview in Beijing.
As China’s top website for package tours, Nasdaq-listed Tuniu has stepped up its expansion in the flight and hotel bookings business since the beginning of this year.
The company said air ticket transactions on its online platform grew about 13 times in the second quarter of this year from a year ago. Hotel bookings in the second quarter increased 22 times from the same period of last year. Despite the rapid growth in this segment, the contribution of the flight booking business is still small compared with Tuniu’s core package tours, Yan said.
“With a faster growth rate compared with our peers and the huge potential, we expect our market share to increase significantly in the future,” he said, without providing any figures.
The prospects for China’s air travel booking market is promising amid a rapid growth in outbound travel. The price competition among online travel agencies was fierce until the merger of Ctrip and Qunar last year, which formed a new dominant force in flight and hotel bookings.
Tuniu is differentiated from other competitors as it targets leisure travellers, Yan said.
“Many of our peers focus on business travel which is different from leisure travel destinations,” he said.
“From our experience in package tours over the years, we have more resources and an established network in booking hotels and flights in destinations for leisure travellers,” Yan said.
The travel agency negotiated closer tie-ups with airlines this year, he said. Leading airlines including China Eastern Airlines, Air China, Hainan Airlines and Capital Airlines have opened flagship stores on Tuniu’s platform, while a number of airlines are preparing to join the platform, Yan said.
HNA Tourism, a subsidiary of HNA Group which controls Hainan Airlines, announced a US$500 million strategic investment in Tuniu in November 2015, becoming its largest shareholder.
As Chinese airlines scrap commissions for travel agencies in order to boost direct sales, profit margins in the air ticketing business for Tuniu and other players come under pressure.
“Although airlines want to increase their direct sale channels, they still need a number of other channels to get access to more customers,” Yan said.
Flight and hotel bookings are the services that can benefit the company’s existing package tour business, he said.
In the first quarter, Tuniu posted a 62.8 per cent year on year increase in revenue to 2 billion yuan (HK$2.3 billion), however, its net loss for the period more than doubled to 539.5 million yuan from 233.1 million yuan in the same period last year. Separately, Ctrip reported a first-quarter loss of US$244.8 million.
“We are optimistic that online travel agencies will turn to profit next year after some reshuffles and consolidations in the industry,” Yan said.
Price competition has come to an end because of the dominance of Ctrip and Qunar that will help improve profitability of existing players, he said.
“The investment spree in the online travel agency sector has cooled down as the capital market has become more rational. The competition will become less fierce,” Yan said.