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Travel Agencies: Value increases sharply as more Chinese travel

Acquisitions add new capabilities and customers

 

With a 57 percent increase in value, the travel agencies category was the second fastest-rising category in the BrandZ™ China Top 100, after education. The increase followed a 46 percent rise a year ago when travel agencies and education tied for leadership in category value appreciation. The purchasing power and spending priorities of China’s expanding middle class drove the expansion of both categories.

 

Along with Qunar, a newcomer brand, the online site Ctrip again propelled the travel agency value rise, increasing 36 percent in value on top of a 32 percent increase a year ago. Qunar is a travel booking website that Ctrip acquired from Baidu. Caissa, a newcomer to the travel agency category a year ago, declined in value. It is owned by the same corporate parent as Hainan Airlines.

 

As the country’s economy strengthened, Chinese continued to travel. According to the China National Tourism Administration, outbound tourism increased 5.1 percent to 62.0 tourists visits during the first half of 2017, and inbound tourism rose 2.4 percent to 69.5 million trips. Domestic tourist trips rose 13.5 percent for the first half of 2017.

 

Ctrip, which is partly owned by Priceline, has assembled a broad assortment of services to focus primarily on Chinese travelers. Along with flights, Ctrip can arrange ground transportation, hotels, restaurants, and tourist attractions. It expanded its range with several acquisitions, including Trip.com at the end of 2017, when it also made a major investment in the home booking platform Tujia.com.

 

With its prior acquisition of Qunar, Ctrip secured its dominant position in China. Air ticket sales more than doubled after the 2016 purchase of UK-based Skyscanner, which is expected to enhance its site with travel recommendations and reviews from the Trip.com site.

 

This period of sharp growth also brought increased regulatory attention and competitive pressure. A government ruling required online sites to stop including certain add-on purchases, such as insurance, with air ticket sales. While these add-ons do not amount to substantial value, they are high margin.

 

Attracted to the massive growth potential of the travel agency business, Alibaba rebranded its travel site, Alitrip, calling it Figgy, and designing it to appeal particularly to young people. Alibaba also entered a partnership with Marriott. Tencent began to leverage China’s robust outbound tourism market with WeChat, targeting international advertisers who want to reach Chinese traveling abroad.