When Alibaba Group Holding Limited ( BABA ) spun off its travel sites into a separate business called Alitrip in October, the growing importance of China's online travel booking market was highlighted. Alitrip combined national and international bookings for airplanes, hotels, cruises, package tours, and more from across Alibaba's key Chinese e-commerce marketplaces -Taobao, Tmall, and the Juhuasuan daily deals site.
It's not very difficult to see why the Chinese e-commerce giant, Alibaba, wanted to rebrand and refocus on its travel business.
According to online travel tracker PhoCusWright, gross bookings in China's online travel market reached $18.2 billion in 2013, making China second in the Asia-Pacific region only to Japan. He expects China to beat Japan by 2016.
Competitors take the Challenge
PhoCusWright is of the opinion that Alitrip's entry increases competition in the Chinese online travel market, given the fact that it is backed by Alibaba, which has a huge reach in the online marketplace.
U.S.-based Expedia ( EXPE ) is one of the world's top travel service companies. It has industry leading online brands like Expedia.com, Hotels.com, Hotwire.com and TripAdvisor under its belt. The company is increasing its investment in eLong ( LONG ), a Chinese online travel agency, to meet the new threat.
Priceline, which has been in collaboration with Ctrip since 2012, is also interested in its share of the pie. Earlier this year, Priceline reinforced its commercial partnership with Ctrip by investing $500 million in the company. Priceline expects the acquisition to broaden its presence in China, where it is currently under-represented in the accommodations space.
Qunar Cayman Islands, a metasearch travel website owned by China's search giant Baidu ( BIDU ) and Tencent saw its total revenue jump 107.8% year over year to $81.6 million in the third quarter.
Qunar's co-founder and CEO Chenchao "CC" Zhuang stated that he is not losing sleep over Alitrip, Ctrip's enhanced partnership with the Priceline Group and Expedia's aggressive investing in China's eLong.
Looking Ahead
According to the China National Tourism Administration, China tourism revenues increased 14% to $480.88 billion in 2013 from the prior year. International travel from China jumped 18% to 98.2 million tourists.
Boston Consulting Group predicts that by 2030, tourists from China will account for around 40% of outbound Asian travelers; taking 1.7 billion trips annually, up from 500 million trips taken in 2012, the latest year for which data was available. It predicts Chinese tourists will spend about $1.8 trillion on travel and tourism by 2030, nearly seven times what they spent two years ago.
So opportunities abound in the Chinese travel market and all the players will likely benefit.