This article was published on October 1, 2013

The online travel industry in China is booming, as China’s largest US IPO in 2 years shows

The online travel industry in China is booming, as China’s largest US IPO in 2 years shows
Kaylene Hong
Story by

Kaylene Hong

Kaylene Hong was Asia Reporter for The Next Web between 2013 and 2014, based in Singapore. She is bilingual in English and Mandarin. Stay in Kaylene Hong was Asia Reporter for The Next Web between 2013 and 2014, based in Singapore. She is bilingual in English and Mandarin. Stay in touch via Twitter or Google+.

Chinese tourists may be notorious worldwide for their unsavory behavior such as spitting, talking at the top of their voices in public, pushing and not queueing up, and even scribbling on a 3,500-year-old temple in Egypt.

Yet despite ugly scenes at the hands of tourists, the Chinese travel market is booming — it has become the world’s number one tourism source market in terms of spending last year, after splurging a total of $102 billion, according to the United Nations World Tourism Organization. The number of Chinese traveling overseas has also grown from 10 million in the year 2000 to 83 million in 2012.

A Xinhua report notes that tourism in China has gone through “dramatic changes” over the past few decades. In the 1980s, tourism was a privilege for only a few in China, mainly foreigners and overseas Chinese, but now many Chinese who travel are from the newly-rich middle class. And there are many of them, considering that China has the largest population globally with more than 1.3 billion people.

China tourists Burberry

Baidu-controlled Qunar files for IPO

It therefore isn’t any surprise at all that Chinese search giant Baidu, which is obviously keen on having a slice of everything online that presents opportunities, already controls online travel service provider Qunar after forking out $306 million in 2011 for a majority stake in the site.

And today Qunar has filed for an initial public offering seeking to raise $125 million — the biggest US listing by a Chinese company in two years, according to Businessweek.

In the filing, Qunar reported sales of $58.5 million for the six months ended June 30 and a net loss of $2.8 million during the period.

New Chinese tourism law will boost online travel services

Online travel services are set to go through an even greater boom in China as a new law kicks in today in the country, which bans the “zero- or negative-fare tours” offered by travel agents, Xinhua reports. These tours are basically sold at or below cost to attract travelers, who are then made to buy goods or tip tour agents.

As prices of these package tours spike — Xinhua is already reporting that tour prices, especially those for Hong Kong, Macao, Thailand and Malaysia, have shot up — it is likely to draw customers away who will naturally try to seek alternatives.

This is where online travel sites can easily step in to offer customers more control over their travel plans — be it via package tours, or simply offering free-and-easy options such as booking a flight or hotel.

One of these Chinese online travel service providers, Ctrip, has been reporting solid financial results to date. In Q2 2013, it reported total revenues of CNY1.3 billion ($215 million), an increase of 28 percent from the same period in 2012. It predicted that for the third quarter of 2013, net revenue growth will continue to grow at about 20 percent-25 percent on-year.

Chinese e-commerce giant Alibaba has also hopped onto the online travel bandwagon, as it revealed earlier this year that it has invested in outbound travel site for an undisclosed amount, seeking to boost its travel offerings on marketplace site Taobao.

Macau's Booming Gaming Industry

Mobile is the new trend for online travel services

Earlier this month, Ctrip revealed that mobile is becoming its key booking platform. At its peak, Ctrip’s mobile app contributed to over 40 percent of total hotel booking transactions, exceeding the percentage of bookings from its websites and call centers.

As of June 30, 2013, Ctrip’s app passed 50 million downloads. In Q2 2013, more than 20 percent of the company’s hotel booking transactions and around 15 percent of air ticketing purchases were made via its app.

This is not surprising considering that China is the world’s largest smartphone market, and many Chinese are increasingly accessing the Internet via their mobiles first and skipping the desktop experience entirely. With all the time spent on mobile, making their travel plans and booking flights, hotels or tour packages via mobile apps is becoming more commonplace.

It seems that the Chinese are not likely to slow down their traveling plans anytime soon, as more newly-wealthy middle-class people gain the financial power to explore the world. It is therefore an opportune time for online travel sites to capitalize on the country’s tourism industry, described by Chinese Vice Premier Wang Yang back in May as a “golden phase of development with vast potential.”

Leave the policing of Chinese tourists’ behavior to the authorities — already the new tourism law dictates that tourists need to behave in a “civilized” manner, as “uncivilized behavior” abroad harms the country’s image, People’s Daily reports.

Headline image via Roberto Schmidt/AFP/Getty Images, other images via Getty Images and Getty Images

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