Chinese travel to the U.S. is set to skyrocket, due to more lenient visa regulations and increased spending from a growing Chinese middle-class that is excited to visit America.
Alibaba Group’s travel division Alitrip looked to attract partnerships from U.S. tour operators, destinations and travel service providers at a conference Monday in Los Angeles espousing the business opportunity of increased Chinese travel to the U.S.
More than five million Chinese travelers will visit the U.S. in the year 2020, up from 2.6 million in 2015, according to U.S. Travel Association CEO Roger Dow, who spoke at the event.
Sherri Wu, Alitrip’s chief strategy officer, said that building partnerships with industry giants like Marriott International, Starwood Hotels and Resorts and InterContinental Hotels Group has let the company capitalize on the increasing number of Chinese travelers looking to travel to the U.S. A deal with AmericanTours International, a major domestic tour operator in the U.S., was inked at the conference.
Alitrip, which officially launched in October 2013 after being rebranded from Taobao Travel, is looking to position itself as a one-stop-shop for the Chinese traveler who wants more control over each segment of their vacation. By the end of 2015, the company reported working with more than 10,000 industry partners and having served about 100 million Chinese travelers.
Skift spoke to Wu about the dynamics in the Chinese online travel market, the challenges that Chinese travelers face when visiting the U.S. and why Alitrip’s marketplace model is valuable for American travel companies.
Skift: When people consider the Chinese travel market, Qunar and Ctrip are usually thought of as the most important players. How has Alitrip tried to become relevant in the Chinese market despite entering just over a year ago?
Wu: Even though we’re the young kid on the block, I will admit we’re very lucky to have Alibaba as a family because sometimes my feeling is we’re a start up. But we’re a start up that doesn’t worry about where the paycheck is coming from, where the resources are coming from and everything. We naturally have 400 million users in our system already. For everyone else, you have to buy that traffic. That’s why I think the journey is not easy for us to find the right partners because people have questions about who Alitrip is.
The second thing is how they can approach Chinese market. It’s a huge market but it’s not easy market to crack. We have seen so many large U.S. merchants try and they’re not very successful. Luckily, Alitrip is a very different model than the other models. We’re not traditional OTA, we’re a marketplace platform. Essentially, we provide a technology platform, marketing platform, a billboard for their outreach.
Skift: So basically, you partner with companies to let them sell their inventory on your site. But you’re not really making an investment in their product or bringing any inventory onto your books. You’re usually just providing sales support, right?
Wu: Yeah, we don’t really keep the inventory. On the other hand is the merchant has the right and ability to decide, for instance, what kind of pricing they want to use, how they want to reach out to their customers and how they want their brand to appear. I think traditionally some of those things have been a struggle for [direct channels] and the traditional online travel agency model in China.
Skift: It certainly can’t hurt that you have access to all the users of Alibaba, China’s biggest e-commerce site. How does Alitrip use user data and other information to encourage Alibaba users to try Alitrip?
Wu: There are a few advantages in there. The first thing is that our system is built on Alibaba system so essentially in the base layer, we share everything the family has. If we have 350,000 annual active purchasers, then they have those as well. We don’t directly market to them, to be frank, because we don’t want to bombing them with information they don’t need.
However, we do know their past shopping behavior, what is they want, their purchasing level, their shopping habits, all these kind of things. We can make sure that once they come over, no matter the mobile device or desktop environment, they see the product which is relevant to them. Personalization is something embedded into our platform already. Because we have [this customer information] already, we can help our merchants really have high conversions.
Skift: On 11/11, basically the Chinese equivalent of Black Friday in the U.S., you guys ran out of U.S. inventory. There are a number of U.S. tour operators and tourism boards here today at this conference. How crucial are these partnerships to where you’re looking to take Alitrip? The focus on travel to the U.S. must present a certain challenge.
Wu: We found out that the U.S. was our most popular product during the 11/11 event. Literally by eight or nine o’clock in the morning, we had run out of the products already. If we had more, we could sell more. That’s the reason that pushes us to have these kind of outreach conference. We believe that if we find more partners, and have more high-quality products, we can help both merchants and our customers as well.
Skift: Let’s talk a bit about the travel booking habits of the Chinese consumers. Your model lets your users essentially create custom travel packages, combining inventory from companies across the travel spectrum. What sort of trends are you seeing in what the average Chinese traveler wants in their experience?
Wu: Today, we are already the largest travel package sellers in China. We sells lots of those traditional bus tours. Chinese people still favor that product. What we also see is that even those customers have new demands. They come over [to the U.S.], lets say for a week. They may take the bus tour for three days, but for the rest of the time they want to do something on their own. We want to make sure they can use our platform to find those things and to plan their trip.
In our mobile app, we put the destination together for them with products related to their past experiences and searches together, so they don’t have to go to other places to do the [travel discovery]. Now they can buy it in one place. Then they can also share immediately with their companion, the whole group people wants to travel. They don’t have to create another tour or try to organize the whole thing.
With all these things put together, we need more products because we’re not directly operating [the trips to the U.S.]. Our traditional tour operator in China, they don’t have access, lets say, to rental cars once I arrive in the U.S. So do I need a huge bus or do I want a private car just for my family? Where can I find a Chinese guide?
Where can I find the best restaurant? Today, some people who are comfortable go to Yelp to find it. But the majority of [Chinese travelers] probably don’t even know what Yelp is or what TripAdvisor recommended. We hope moving forward that we have this information in one place so they pull us up, they’re like okay, I know what to do. There’s a few restaurants around here, what’s their scores? Where should I go for dinner? That’s our goal. That’s why we need more of the partners that are here today.
Skift: My understanding is that brick-and-mortar travel agencies have been crucial to Chinese travel, traditionally, because of visa issues and also the challenge of packaging foreign vacations. How do you assess your market penetration in China, and how access to online shopping and information is changing how Chinese people travel?
Wu: One good thing about China that the base [of travelers] is so huge. Even today the online travel percentage is still low in China, less than 30 percent. But because we have a huge base, we already have a big audience to satisfy. We actually found out the traditional travel agencies want to grow their business faster [by going online]. Today, they can reach their neighborhood through word of mouth, but they also know there is a larger audience out there who try to use their service. Essentially, our platform gives them an easy place to get online because they don’t have to create their own website from scratch and do these things.
That is why we feel there is an opportunity for us to truly help Chinese travel industry to become more online, move more into the e-commerce world. I think the challenge for us today and for our audience is probably that there’s too much information. There’s so much user generated content out of there today; everyone has a different opinion. We need to combine the user generated content and professionally generated content together because the Chinese consumer wants to see both.
Skift: Being a part of Alibaba means you can offer the company’s mobile payment service, which essentially allows users without credit cards to make larger purchases. How crucial is this type of arrangement to selling travel, which can be one of the largest purchases a consumer makes?
Wu: I will say that is probably one of the most critical factors for Chinese consumers. There’s a few reasons for that. One is that not too many people in China have a credit card because traditionally they think using a credit card is like living on borrowed money. That is very hard for traditional Chinese people to accept. They don’t want to owe anyone any money. That is also why they have such a high disposable income on their hands because they’re always saving. The second thing is even if they have credit card it’s still an issue because they have a pretty low credit limit.
What happens, especially in travel, is that when they want to buy an expensive ticket, they have to either pay it off immediately, which is a hassle, or call the bank to raise their credit limit, which is another hassle. If they have the Alipay, it becomes convenient for them because Alipay has no chargebacks. It’s direct connected with a bank account so it’s more like a debit concept. We know the customer will always pay. Also, Alipay is fully integrated into the mobile. That is something which is amazing in China.
Those kind of things have become so easy for Chinese consumer. Working with us, that solves the issue for the merchant as well because they don’t have to implement any [billing or transaction policies]. We have the standardized checkout cart, using any payment means the consumer wants to use.
Skift: Looking ahead, what are your goals for Alitrip in 2016?
Wu: We’re very young. For the last year, we focused on the domestic business. We focused on building up our infrastructure, the architecture to work with all kinds of industry verticals very well. At this point, we’re very ready to expand. We signed a contract with Marriott, globally. We’re working with all kinds of different international airlines: KLM, Air France, Air Asia, Cathay Pacific. We feel like we’re ready and the Chinese consumers are fully ready. The most important thing is that there’s not enough products for consumers. We believe that with our model, we’re most fit to put all those kind of different suppliers together. Essentially for these different merchants, it’s great because it’s an extra market for them as well. For us it’s excellent, because no one has those products today in the Chinese market.