Ctrip and eLong enjoy growth in China’s travel sales

Online consolidators Ctrip and eLong continue to steal market share from traditional agencies in China. William Bao Bean, research analyst of Deutsche Bank said that growth in online travel bookings continue as China’s domestic economy stays healthy.



The 4.4 million air tickets that Ctrip and eLong sold in 2005 are less than 3.4 percent of total passengers volume but are up from 1.6 percent in 2004. The Chinese, especially the university students and young professionals, are increasing their spending on intangibles such as travel, fueling e-commerce on the Mainland.



This demographic group is also choosing to travel by themselves rather than on group tours. For the fourth quarter of 2005, Ctrip had 1.7 million customers of which 80 percent were repeat customers. Government regulations, considered a strong barrier to entry for online consolidators is no longer, said Bean.



“The market is pretty much open...you need a licence but it’s not hard to buy a company that has one. Competition for Ctrip and eLong is limited in the medium term and the only potential threat is TravelSky and airline and hotels sites in the longer term.” Air travel and tours have been seen as the growth drivers for the industry and Bean predicts that more traditional travel agencies and global players will move into the e-commerce arena and set up operations to test the waters.



While Ctrip and eLong are both expected to dominate, another player to watch is the online branch of an offline Beijing agency called Yoee.com. In fact with strong cash assets, leading online consolidators may acquire travel agencies to strenthen their customer positioning, distribution channels and product offerings.



While still in the early stages of online payment, penetration of credit cards and e-ticketing will work positively for online consolidators.