Thanks to the expansion of wireless networks, the spread of 3G mobile phone coverage and the affordability of smartphones, the number of Chinese mobile internet users ballooned to 500 million in 2013, according to the China Internet Network Information Center (CNNIC).
The rise in number of mobile internet users has led to an explosion in mobile travel bookings since apps were first introduced in 2010. For instance, the largest online travel agency in China, Ctrip, reported in the first quarter of 2014 that mobile devices accounted for over 40% of gross bookings.
While mobile bookings are high, CNNIC reports that only 9.1% of mobile internet users utilized an app to make a mobile booking in 2013. This penetration is likely to increase, particularly as new internet users forgo making a booking on a desktop PC, instead using a mobile device. Knowing that the future of travel bookings will be on mobile devices, the three main players in this very fragmented market are stepping up their investment in technology and marketing.
|App Downloads (cumulative)||Mobile Contribution||Business Model|
|Qunar||200 million||31.7% of revenues||Metasearch/OTA|
|Ctrip||120 million||Over 40% of gross bookings||OTA|
|eLong||60 million||40% of bookings||OTA|
Source: Company reports
Notes: As of first quarter 2014
The Blueprint for Mobile Success
The battle for mobile bookings is intense. Alex Wong, Senior Analyst at iResearch, a research firm specializing in China’s internet industry, notes that to be successful in the mobile realm, companies must continually update their apps so as to offer the best user experience, ensure that supply is ample and accurate on the app and promote the app relentlessly.
The top three players in China’s mobile travel market, Qunar, Ctrip and eLong, are following these strategies, sacrificing margins to make the necessary investment in technology and marketing for their mobile businesses to flourish.
Although Qunar operates mostly as a metasearch engine, it is increasingly processing transactions through its app to improve the user experience. The company continues to add new functions to existing apps, such as voice recognition. It also created the New Destination services group to expand the supply of attractions, tours and dining options on its app. In 2013, Ctrip enhanced its app to include car rental bookings and simplified the process for hotel guests to extend their stay. It also launched a corporate travel app that same year.
eLong’s overall strategy is to be the biggest player in mobile hotel bookings. To reach this goal, the latest version of its app includes last-minute hotel bookings, group buying and location-based searches. Its app now offers ticket booking and WeChat payment, which allows consumers to pay for goods using the messaging service. The company also launched a US$100 million innovation fund in 2013 to invest in mobile travel products.
While good user experience, robust supply and marketing are critical to the mobile channel’s success, these companies have been engaged in a price war on hotel bookings, which has contributed to the strong growth in mobile hotel bookings. For Ctrip and eLong, mobile is now the most important booking channel for hotels and eLong’s main strategy is to become the largest booker of hotels in the mobile space.
Who Will Triumph in the Mobile Space?
Although all companies are investing heavily in the mobile space, Joseph Xiao, Regional Manager of Greater China for HotelsCombined.com, points out that “mobile is a rapidly growing market, so there is enough room for everyone. It is important that online travel retailers adapt to the changing environment in order to satisfy their users and grow their market share”.
While all players are likely to grow their mobile businesses as the overall market expands, it is unlikely that the rankings of the major players will change. Each player has a differentiated business model. The scale of Qunar and Ctrip ensures that they will continue to be the market leaders. Although Ctrip has narrowed the gap between itself and Qunar in terms of the number of mobile app downloads, Ctrip is not likely to surpass Qunar – Qunar’s price comparison capability appeals to a larger number of travellers thanks to the wide range of prices found in China.
However, Ctrip’s wide range of products and high-quality customer service will see it remain a strong competitor. On the other hand, eLong is at risk of becoming a niche player as it is focused on hotel-only mobile bookings and has significantly fewer resources to compete against its larger rivals.
Euromonitor International is the world’s leading provider for global business intelligence and strategic market analysis. We have over 40 years of experience publishing international market reports, business reference books and online databases on consumer markets.
We deliver market research solutions to support strategic planning for today’s increasingly international business environment. Our research offers in-depth market analysis on consumer goods and services industries worldwide, as well as economic, demographic and socio-economic data and insight on countries and consumers.