The travel demand of Chinese people has kept ballooning with the increasing standard of living, and the traditional travel agencies can no longer satisfy the consumers’ demand. As a result, online travel booking has gradually become the choice of a majority of consumers due to its favorable prices and personalized travel routes.

In 2008, China’s online travel booking market scale totaled RMB2.98B, while the data from Analysys International shows that the figure grew by 8.5% in Q2’09 over the previous quarter and by 13% over the same period last year.

As is known to all, Ctrip.com is the bellwether in China’s online travel market, closely followed by eLong.com and Mango.com. The three operators combine to take up over 70% of the online travel market in China. However, compared to Ctrip.com, which takes a lion’s share of 50%, eLong and Mango still lag far behind. The remaining market share of less than 30% is split among ET Solution (China), Auyou.com, 17u.cn, Tuniu.com, Qunar.com, Lotour.com, and other websites.

Overall, the business model of Ctrip.com may be boiled down to an online hotel and air ticket distribution platform. The business model of Mango.com belongs to the online service offered by the traditional travel service provider (China Travel Service (Holding) Hong Kong Ltd.), while Auyou.com is a website under the flag of China CYTS Tours Holding. In addition, the online travel platform modes include the B2C mode adopted by Lotour.com and 51766.com and the B2B mode employed by 17u.cn. These websites usually start business with travel information, and then do the online travel supermarket business. Of particular note is that the travel vertical search websites, including Qunar.com and Kuxun.cn, have also attracted enormous attention.

In 2008, 17u.cn obtained a capital injection, and has become the only travel e-commerce platform with two platforms - the B2B platform for enterprises and the B2C platform for travelers. Wu Zhixiang, CEO of 17u.cn, once worked for Alibaba.com. He cleverly combined the e-commerce mode of Alibaba.com and the travel industry in pursuit of change and innovation in many aspects. So far, 17u.cn has cooperated with more than 40,000 travel service providers in China.

Similar to 17u.cn, Tuniu.com has also had its unique way - selling complete travel routes on the Internet - while many websites have followed suit to implement the call center + Internet mode adopted by Ctrip.com and eLong.com. In reality, the online travel booking is relatively easy to make a profit from the hotel and ticket reservation, and thus adopted by Ctrip.com and eLong.com. The travel route reservation as the main profitability mode is still rare in the industry. As a result, Tuniu.com has no physical stores of traditional travel agencies but owns complete routes, featuring low price and material benefits of the online marketing while being more vivid and detailed than the hotel + ticket mode. This is also why the investors favor Tuniu.com, which has begun to make a profit.

Additionally, Qunar.com has also implemented a unique mode among its like - the search engine service provider in the online travel booking industry, so it is an information service provider, rather than a service commodity provider. The business model of Qunar.com is very clear - that is, the search advertisement word and agency distribution income. Its success lies in two aspects: first, it owns some technical advantages. Its back-end search capacity is unquestionable, and the webpage interaction and UI are also excellent with the extensive application of the Ajax technology; second, ‘where to go’ is a driving force along the industrial chain in the industry, and the comparison search engine has a vast space of survival.

At present, there are also some other active websites in China’s online travel booking market, such as Lotour.com, 51766.com and 9you.com. Basically, they have started with travel information, and then developed the booking business. For example, Lotour.com was formerly the travel channel of Sina.com. Their business model is mainly based on advertisements. Moreover, hotel and ticket reservation also contribute to their profit, supplemented by the membership fees and commissions paid by travel service providers. However, few of them have made a profit through the travel route reservation. The contraction of the advertising business in recent years has imposed a negative impact on their income to some extent, while the profit size largely depends on the scale of hotel & ticket reservation.

The author believes that travel is a lifestyle, which involves a process of cultivation. Go2eu.com is such a good example. It has instilled a concept of cheap travel among consumers to realize the most comfortable travel in the most cost-effective way. The investors are now paying more attention to their investments in travel websites, as the domestic online travel booking market still fails to realize the standardized reservation and the explosive profit growth. At the same time, many travel websites are exploring their development direction, and are in the process of transformation.

In the past decade, China’s travel industry has developed at an extremely fast speed. We believe the listed travel companies like Ctrip.com will not be the last one. The online travel booking market is set to embrace a promising future.

Source: Zero2IPO (October 15, 2009)