Everybody is talking about the huge opportunities presented by the Chinese online travel market, but some players are faring better than others. Pamela Whitby takes a look
International hotel brands have had a presence in China for over ten years but it seems they really are struggling to adapt their business models and strategy to target the fast-growing and rapidly changing domestic consumer.
"International brands are at a crossroads in China," says Joseph Wang senior director, hotel business at Qunar, "and they have to change their strategy which is very difficult."
One of the problems is that these brands have spent the last ten years trying to raise their profile among Chinese consumers but in spite of this many people still don't know the difference between a Sheraton or a Hilton. Part of the problem is that these brands have failed to put enough time, effort and budget into their online platforms - which is a rapidly growing market. In fact today most new Chinese customers will turn to the likes of Ctrip, eLong or Qunar first to book a hotel, rather than going direct.
The reason for this is simple: they are doing a much better job than the big hotel brands at marketing online to consumers. Just six months ago eLong started a price war, which involved offering customers 10-15% cash back for booking an international brand on its site; Ctrip then responded with a massive investment in R&D.
So while in other markets top international brands may generate 50% of bookings from their call centre or brand website - and have relatively strong control of their pricing strategy - in China, says Wang, it is the completely the opposite. This has to change and hotels really do need to rethink these partnerships with Chinese OTAs and meta-search players if they are going to survive. Not only does this mean putting more money into television and newspaper ads or billboards at airports, it means allocating more budget to search engines or other channels to drive direct bookings from new Chinese customers. An indication of the seriousness of the situation is that occupancy rates of international chains - at 35% - are at an all time low. And to complicate matters further the new government has put a cap on government officials splashing out on luxury meetings. "It is a very hard time for big brands," says Wang.