By Ritesh Gupta

China’s e-commerce sector continues to shine. According to the Ministry of Commerce People’s Republic of China, the trade volume of China’s e-commerce in the first half year reached 5.66 trillion yuan, up 30.1% year on year. Online retail market reached 1.1 trillion yuan, up 33.4% year on year, accounting for 8.4% of the total retail sales of consumer goods of the first half year.

As for the online travel sector, the category is around 15 years old but still online penetration is being termed as the biggest opportunity.

As stated by Min Fan, Vice Chairman and President of Ctrip during the company’s second quarter earnings call, China has entered a golden era of the travel industry.

From 2013 to 2017, the compound growth rate of online travel revenue would be 21%, which is almost the same as the growth of the whole e-commerce market, according to iResearch.

Source: iResearch Consulting Group

So in this context, it doesn’t come as a surprise to witness the kind of sustained investment the travel e-commerce category is witnessing.

This approach is validated by the number of digital users who are counting on web and mobile channels for their travel shopping needs. For example, meta-search brand Qunar.com’s web user base grew from 110.2 million in 2011 to 234.2 million last year. Also, the base of mobile users increased from 4.3 million in 2011 to 53.8 million last year.

Improvisation

Intermediaries are currently focused on refining their offerings, and expanding their reach. And the bigwigs are also making big adjustments to their sources of revenue generation, defying the way typically the online travel industry has functioned.

“The structural change is that OTAs such as Ctrip are embracing open-platform strategies, and platforms like Qunar are becoming more like OTAs,” said Ming Zhao, founder and chief analyst, 86Research. “We are also seeing big OTAs trying to become one-stop travel service provider. They are investing in segments beyond hotel and air-ticketing. Also, a few small OTAs are focusing on vertical areas, e.g. Tongcheng.

Ctrip, which has a proven track record when it comes to scaling up with success, states its direct product in conjunction with its open platform product will result in varied choice for its users. For instance, Ctrip is focused on strengthening its transportation related offerings – optimizing the combination on air, train and bus components for travelling from one city to another. The objective is to serve proficiently travellers from the start to the last mile of their trips. As for the expansion of its distribution reach, the company’s open platform monthly transaction value reached more than RMB100 million in June. As for strategic alliances, Ctrip signed an investment pact worth US$200 million with Tongcheng Network that operates LY.com, and also became a strategic investor in Beijing Mind Education (the entity has served more than 700,000 travellers). Ctrip also acquired $15 million of online leisure travel company Tuniu Class A ordinary shares through a private placement concurrent with Tuniu’s IPO. Plus Ctrip led a $60m round of financing announced by car booking service platform Yongche.com late last year.

Referring to Ctrip’s investment in LY.com, Zhao said such moves reduce price war. “It helps in margin improvement.”

Next big frontier

“We think that the next big frontier for travel e-commerce in China will be the “weekend DIY tour” and O2O (online to offline, encouraging the online customers to visit the physical store),” said Leo Wang, chief strategy officer, LY.com.

Wang pointed out that currently the traditional travel agents are trying their best to get close to online and the OTAs are developing their offline market channel, for instance, the offline sales departments and experience store. “OTA are paying more attention to the tourist attractions ticket, train tickets, coach tickets and weekend DIY tours, and have stepped up their expenditure and strengthened their staff to exploit the weekend DIY tour market,” he said.

As for LY.com, Wang said the company is a one stop travel service provider that caters to travellers’ recreational travel demands through extensive products and convenient mobile app. “Our investments support operations encompassing hotels, airlines, tourists attractions, abroad travel agents, cruise company, weekend tour providers, and mobile app development and maintenance,” he said.

Zhao indicated that the next big frontier is outbound leisure travel. “We have seen a surge in this vertical, driven by companies like Tuniu (on organized tour), Shijiebang (self-assisted tour), etc.,” he said.

Start-ups such as Shijiebang are being supported by investors. Shijiebang, an outbound travel service platform, provides customized tourism services to Chinese outbound travelers.  The company attracted nearly $10 million U.S. dollars during Series A in November last year.

Product development

As Ctrip.com and LY.com pointed out, intermediaries are currently looking at fulfilling travellers’ overall trip needs. And this calls for sustained investment in product development. Most of the intermediaries are currently incurring expenditure on personnel cost (salaries, share-based etc.) and also technology-related expenses. Also, the growing travel e-commerce pie is resulting in higher sales and marketing expenditure.

Ctrip’s product development expenses for the second quarter of 2014 increased by 55% to RMB479 million (US$77 million) from the same period last year and 9% from the previous quarter, primarily due to an increase in product development personnel related expenses.

Even brands that aren’t currently profitable aren’t averse to prolonging their gestation period, and going ahead with aggressive expansion and product refinement.

Zhao said OTAs are investing aggressively on mobile (hiring engineers) and planning promotions on a regular basis. “Qunar increased 260 headcounts in product development during 1Q14, a majority of them for mobile.”

Referring to what it takes to invest in IT and setting up a data-driven infrastructure, Zhao said, “This kind of investment usually means adding more engineers, for example, engineers for mobile development. Ctrip’s expense on product development in 1Q14 increased RMB100 milloin compared to 4Q13, mainly due to increase of IT headcounts. According to Qunar, they also have engineers working on IT to enhance the level of automation in the booking process.”

ROI

Zhao said other than Ctrip.com, which is profitable at this juncture, most OTAs are in investment mode at this stage. “And we don’t expect them (other OTAs) to break even soon. The top priorities for OTAs are to adapt to changing user behaviour, gaining market share and growing new initiatives, instead of generating profits.” He added, “One change in the industry is that Ctrip has tried to invest in and collaborate with some rivals, which will result in less competition and hence good for profitability of the industry.”

So what would it take to succeed in the multi-channel, multi-device environment?

Zhao believes that the key lies in creating value for consumers, through price and service. “OTAs need to find niche areas to become leaders there, instead of fighting with big OTAs. For the multi-device environment, all OTAs should develop strong, meaningful apps, as well as leverage platforms like Baidu, Weixin, Qihu 360 and Taobao to their advantage.”

Ming Zhao, founder and chief analyst, 86Research and Any Wu, CEO of LY.com are scheduled to speak at the upcoming China Edge 2014 TravelDaily Conference, scheduled to take place in Shanghai (September 3-4, 2014).

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By Ritesh Gupta

Travel e-commerce category in China has proved to be a major conundrum for most of the intermediaries till date.

An intermediary has to sort out of a gamut of complex operational issues before it can achieve profitability. All multinational players acknowledge the same, as many have failed to make any serious dent. If one were to assess the situation today, the gap between Chinese OTA Ctrip and others depicts a clear trend. In fact, Ctrip emphatically states that its performance stands out for its 12% operating profit margin vs. heavy loss making by literally all its peers.

However, there are foreign entities that are ready to make inroads into China. Meta-search brand Skyscanner is one such organisation that is optimistic about replicating their success in China. The company, which recently acquired Chinese travel search site Youbibi, has been profitable over the years. Skyscanner self-funds all its growth. Last year Skyscanner saw EBITDA growth of 100% to £24.1 million.

Skyscanner, which recently completed three years of presence in the APAC region, intends to build on the momentum.

“In Asia Pacific last year, we saw monthly visits to our APAC sites grow by 141% with mobile visitor growth standing at 359%. Asia accounts for more than 20% of our overall traffic,” shared Andy Sleigh, general manager – APAC, Skyscanner. As for the APAC numbers, the sites see 7.5 million monthly visits, and growth in mobile visitors was over 350% last year.

The meta-search company set up a local office in Beijing in 2012 and has been operating Tianxun. “It’s a local offering that also brings Skyscanner’s international coverage to bear. The Youbibi acquisition has simply brought this to more focus as we move forward with our China strategy,” said Sleigh. He mentioned that the team has grown its China business – Tianxun – well over 100% year on year for the last couple of years. “But we’ve got a long way to go. We’re now at an inflection point where we can really start to take advantage,” he said.

Skyscanner chose to acquire Youbibi as the plan is to shape a “better product for the Chinese market, based on Chinese technology and built by Chinese travel tech specialists for Chinese travellers”, said Singapore-based Sleigh.

Advantage

According to industry specialists, the route taken by Skyscanner will enable it to counter product-related challenges such as the depth of content, and better comprehend cultural sensibilities, language-related nuances, local regulations and also strengthen supplier relations.

According to sources, a specialist like Qunar would cover over around 150,000 lodging options, including hotels, B&Bs etc. Other than inventory and availability of suppliers’ offerings, one also has to cope up with the issue of website accessibility in China.

Recently, a meta-search executive based outside of China told TravelDaily.cn: “One of the biggest challenges we faced was the recent GFW (Great Firewall), which completely blocked all Google services in China recently, and slowed down the Internet access speed into and out of China. Another was the complicated Internet connection within mainland China which slowed down the average loading speed of our site for our mainland Chinese users.” Overcoming this was a relatively slow process that involved purchasing additional CDN services dedicated to the market and ensuring that the team complied with all the local regulations.

Another area where Skyscanner would get a kick-start would be related to the concept of facilitated bookings where a user doesn’t leave the meta-search site and still completes the booking with supplier/ OTA has been prevalent for both flights and hotels here in China. While any non-Chinese meta-search entity brand that hasn’t focused on facilitated bookings would need to look into technology as well as regulatory licensing requirements, Skyscanner is in a position to leverage its association with Youbibi.

Monetization

The Chinese market is witnessing key players embracing interesting initiatives. Qunar has opted for revenue generation via its cost per sale basis, in addition to CPC and display ads. OTA Ctrip has gone ahead with its open platform model. “As Ctrip is moving forward on this model, the team is attempting to quickly shorten the gap on pricing advantage which has been existed between them and Qunar for long by consolidating the competitive offers from various suppliers, including travel wholesalers. This has posed significant challenges to Qunar as the meta-search brand has attracted a lot of price sensitive consumers over the past few years.”

As for Skyscanner, Sleigh said, “We believe our business model works.” He added, “For the past four years, Skyscanner has been roughly doubling in growth year on year. We’ve been profitable and self-funding our rapid growth for several years. Last year we grew revenue by 96% and EBITDA by 100%. We make our money through a combination of commission and advertising – I don’t see that changing in the short term.”

Multiple possibilities

The travel distribution landscape is evolving with mega strategic alliances between established OTAs and meta-search companies.

A section of the industry is already feeling the pressure. A meta-search executive said, “The formation of these partnerships could potentially put capital pressure on the very few remaining independent major meta-search players. It is important that these companies remain objective and fair.”

As for being impartial, Skyscanner stated that it displays “comprehensive travel options” and allows them to be compared by consumers in an unbiased and clear way so they can go on to book the best offer for their needs. “We won’t change this model,” said Sleigh. “We’re one of the few truly independent meta-search players left – we favour no one.”

Other than independent meta-search players, Qunar.com, too, needs to reassess its presence, especially outside China. As reported recently by TravelDaily.cn, it is learnt that Qunar is planning to set up a team that is going to target Taiwan, Singapore and Thailand for hotel inventory.

The likes of Qunar.com and Ctrip.com can also be counted upon for their supplier relations in the domestic market.

And then one can’t also ignore KAYAK’s attempt to target China with a local site. Also, now that The Priceline Group and Ctrip.com have expanded an existing commercial agreement, and with priceline agreeing to invest $500 million through a convertible bond, the industry would be keenly following how the two bigwigs go beyond cross-promoting their respective offerings.

“One can’t rule out the possibility of Agoda.com favoring KAYAK for listings, featuring lower price. China is a rate sensitive market, even a difference of US$1 can tilt the booking in favor of a particular website,” said a source, speaking of how the cut-throat competition might shape up.

All of this makes for an intriguing tussle indeed, and it would be interesting to see how Skyscanner takes on the likes of Qunar and KAYAK.

Skyscanner’s Andy Sleigh is scheduled to speak at the upcoming 2014 TravelDaily Conference in Shanghai (September 3-4, 2014).

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ChinaContact have been providing ongoing strategic advice, market research and marketing support to Skyscanner in China since September 2013. 

By Ritesh Gupta

TravelDaily.cn Correspondent

If there is one entity in the Chinese travel e-commerce category that stands out for its sustained investment, operational efficiency and profitability, then it has to be Ctrip.

Jenny Wu, chief strategy officer of Ctrip.com International

While international brands struggle to establish a feasible business model, Ctrip is persistently expanding its reach, with sustained product development and sales and marketing expenditure as well as strategic alliances.

As for the travel category on the whole, the online penetration is the biggest opportunity.

“As of now, online is accounting for around 10-15% of the total transactions in the travel category in China,” said Jenny Wu, chief strategy officer of Ctrip.com International. She expects this figure to rise up to about 20% over the next 5 years. “Relatively mature markets like the U. S. and Europe have over 40% penetration (for online transactions). There is strong potential upside in China that should take place.”

Strong foundation

Ctrip has built its business assiduously over the past 15 years.

“One of our strengths is independent quality assurance and six sigma quality management. It’s a procedure that defines our work flow. We delve deep into service issues and operational efficiency, there is no room for wastage of resources and capital. There is periodical scrutiny of each project, and the management is deeply involved inspiring teams, and different generations to work as a cohesive unit,” shared Wu.

She added, “Running an OTA business model isn’t a straightforward task, and it takes a profound vision and expertise to run a profitable OTA business. Travel service has proven to be a low-margin business, if we look at how traditional agencies operated over the years. But our margin has shown that we can deliver at a huge scale. So far we are still the only online travel player in China that has margins with all other peers being in heavy losses.”

Be it for it strategic alliances or organic growth, Ctrip.com is aggressively looking at refining its one-stop travel platform with addition of travel-related segments.

Take the case of how Ctrip is strengthening its transportation related offerings – optimizing the combination on air, train and bus components for travelling from one city to another. As shared by Ctrip, the statistics for the train segment indicated that the category witnesses two billion tickets on annual basis, and for bus, it is 30 billion tickets a year. Even as air tickets are currently driving the volume growth in the transportation ticketing services  (in Q2 it was 83% year on year), the plan is to strike a healthy combination in the long-run so that Ctrip could effectively serve customers from the start to the last mile of their trips.

Volume counts 

Market leader Ctrip is counting on 2014 as a year of strategic investments. The entity’s expansion plans and associated investment isn’t necessarily related to revenue generation in the current year.

Ctrip’s product development expenses for the second quarter of 2014 increased by 55% to RMB479 million (US$77 million) from the same period last year and 9% from the previous quarter, primarily due to an increase in IT and product development personnel related expenses.

The company asserted that its direct product in conjunction with its open platform product will result in varied choice for its users.

The operations are poised interestingly at this stage. While Ctrip won’t divulge much, but it is clear that the product mix is as diversified as ever. And with an extensive assortment of offerings, for instance, bus and train tickets being among the latest addition, how the volume-margin matrix is going to impact its financial results in the future is worth keeping an eye on. “Although we spent aggressively in the past two quarters in certain key areas, we still successfully achieved the industry’s leading profitability of 12% operating margins. Most of investments we are making are more related to our long term growth targets, rather than directly associated with revenues in the current year, associated costs and expenses are partly up front-loaded and we expect more revenues and operating leverage will gradually kick in later on.” Wu mentioned.

Ctrip points out that the introduction of bus, train tickets or visa-related services, or new offerings like student travel is resulting in brand stickiness. Ctrip recently became a strategic investor in Beijing Mind Education who has served more than 700,000 travellers. The investment enables Ctrip to further extend its user coverage to the people aged 3 to 18 years which could help cultivate a strong habit of using Ctrip from an early stage of a customer’s lifetime.The volume for booking visa applications through Ctrip’s mobile app has increased to five times its volume a year ago. Ctrip has also introduced overseas shopping service. It offers discount to Chinese travellers when they shop at overseas brand stores. The shoppers can get cash rebate from their spending overseas, and Ctrip is garnering commission from the merchants.

Also, the fact that the Ctrip mobile app downloads has now reached 200 million, growing at a rate of 67% quarter-over-quarter, it means the company would be in a better position to personalize and hence capitalize on monetization opportunities, say cross-selling.

As users rely on mobile apps for planning and booking, it means Ctrip would end up with itineraries that users end up booking. This data, if utilized proficiently, can pave way for strong affiliation with the brand and the company’s offerings. Ctrip is also ensuring that mobile customers are being lured into using the mobile portfolio. For instance, customers can avail Ctrip gift cards and manage their balance through the Ctrip mobile app. These cards are for travel products offered by the OTA, as well as third-party vendors such as restaurants.

Multi-channel strategy

Ctrip is clear that it just can’t afford to slip on the user experience, as well as after-sales service. One of the highlights of second quarter proved to be the chunk of transactions that were booked online or through mobile channels. This accounted for around 80% of Ctrip’s transactions.

In this context, Ctrip clarified that its call centre operations still remain a vital part of its multi-channel distribution mix. The company reckons that its call centre is more like an after-sales service avenue, and is still being counted upon as Ctrip’s key competitive advantage.

Competition

Every travel intermediary has different DNA, different advantages, said Wu.

“Ctrip.com stands out for its service, and operational efficiency. We are focusing  on delivering a one-stop travel service platform, and this is completely different from just directing the traffic as done by some distribution and marketing intermediaries,” said Wu, who mentioned that the company’s performance stands out for its 12% operating profit margin vs. heavy loss making by literally all its peers.

Being asked about her view on Qunar.com, Wu did mention that it isn’t easy for any IT-oriented entity to improvise and transform into a service-oriented model. “Ctrip is profitable, and proven its expertise time and again. Our accelerated growth rate, strengthened market leadership, and stabilization of margin all indicate this,” said Wu who has been Ctrip’s chief strategy officer since November last year and before that she was the company’s chief finance officer for about two years.

Wu further added, “When a supplier works with us, they could simply leave all the labor intensive service work to us by treating us as their outsourced customer service center and order processing center, then they can allocate their resources on working out the best possible user experience based on their core competency, such as, for hotel managers, they now could primarily focus on how to ensure the best experience when customers stay in the hotel.”

Ctrip.com acknowledges the trend of OTA-meta-search strategic alliances, the most prominent one being Priceline acquiring KAYAK. But in China, Ctrip.com states that it has achieved this goal through its organic expansion, that is, by upgrading itself to a one-stop travel service platform and by adopting an open platform. “We are running the best hybrid model in China travel space, smoothly combining the best essence of both a traditional OTA model and a meta-search model.” Wu claimed.

However, it is being pointed out that with the adoption of so-called hybrid or open platform model, Ctrip is also facing significant challenges for quality and service control on the products offered by 3^rd parties as all bookings are still completed on Ctrip’s website or mobile app. As Ctrip is aggressively pursuing this model, the team needs to be very cautious about selecting its business partners and sustaining the service standard as expected from them.

Jenny is scheduled to speak at the upcoming 2014 TravelDaily Conference in Shanghai (September 3-4, 2014).

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Established meta-search brands including KAYAK and Skyscanner are set to foray into China. TravelDaily.cn explores what to expect as these entities enter with contrasting market entry strategies

Traveldaily.cn Exclusive: By Ritesh Gupta

Travel meta-search continues to spread its tentacles as established players look beyond the US and Europe for expansion. This trend is paving way for intriguing battles in several markets.

China is a prime example of this phenomenon.

With KAYAK targeting China with a local site, and Skyscanner opting to acquire Chinese meta-search specialist Youbibi, the stage is set for intense competition.

One can’t refrain from evaluating about how these brands are going to take on nine-year old meta-search brand Qunar.com. But as one digs deeper it becomes clear that these brands first need to sort out key issues like product sourcing to make sure that a solid local meta-search product is ready.

“Content and understanding the nuances at the local level are of utmost importance,” said KAYAK’s VP Asia Pacific, Debby Soo, who is scheduled to speak at the upcoming 2014 TravelDaily Conference, to be held in Shanghai (September 3-4, 2014).

Soo added, “As we have done elsewhere, product quality is pre-eminent, followed by monetisation. Once a certain threshold is reached, then the next step is worked out. Till then there are no big marketing plans, and possibly no strategic alliances.”

Major challenges

As TravelDaily found out, a new comer is expected to face numerous challenges. The most critical aspect of any meta-search business is the depth of its content, and this is precisely where complexity is deeply rooted in China. For instance, even the definition of a hotel isn’t clear.

“There are many debates around how many hotels China actually has, from 20k to 300k, depending on how we define “hotel”,” said Joseph Xiao, team manager – Greater China and Singapore Markets, HotelsCombined.com.

According to sources, a specialist like Qunar would cover over around 150,000 lodging options, including hotels, B&Bs etc.

Other than in-house hotel sourcing team, other options for a meta-search include pulling data from OTAs. Entities can also work with with B2B partners like wholesalers and the likes of DerbySoft , but overall meta-searchers need to avoid time-consuming, and expensive routes.

“The hybrid model of Qunar is different from what a traditional meta-search or traffic generation site would focus on,” said a source based in Beijing. Other than charging for CPC and cost per sale basis, and display ads, Qunar also offers hotel reservation promotional programs – last minute sale (featuring over 12000 hotels) and opaque booking platform. The source further added, “While meta-searchers are generally OTA friendly, Qunar is competing with OTAs on the commission front. Qunar possesses a technology solution for around 60,000 hotels or so (signed directly by Qunar), where they market and sell their inventory and garner commission in return.”

Qunar continues to invest in strengthening its product. In the first quarter of this year, the entity’s product sourcing expenses were over US$6.3 million, an increase of 358% year-on-year.

As for flights, Qunar’s search results featured over 3,550 domestic routes from 17 airlines by the end of last year. The figure represented all domestic flight routes in China.

Catching up with local players

The concept of “facilitated bookings” where a user doesn’t leave the meta-search site and still completes the booking with supplier/ OTA has been prevalent for both flights and hotels here in China. For any international meta-search brand that hasn’t focused on this aspect, it would call for major adjustment – in terms of both technology as well as regulatory licensing requirements, explained a source.

KAYAK does offer facilitated booking in flights, hotels and cars so users can book their travel without leaving the site or app. KAYAK might not face any major teething problems, but in all likelihood Skyscanner must have weighed this in while going for a strategic alliance with Youbibi.

Another key element would be gaining brand recognition. Last year Qunar garnered over 60% of its traffic without incurring any payment for it. This denotes that visitors reached its site through natural search results, by filling up the domain name, or redirection from Baidu pursuant to its business cooperation agreement and other related agreements with Baidu. In all, Qunar processed around three billion web and mobile search queries for air tickets and hotels, respectively, last year. Mobile search queries have risen from 30m in 2011 to over 780m at the end of 2013.

Also, a key aspect is to go beyond just price comparison and aid decision-making with an apt blend of content and tools.

YuanYuan Zhang, former marketing head of TripAdvisor China, says a company focused only on meta-search would not be able to satisfy the need of the Chinese users, especially in the hotel sector. She says one has to aptly feature users’ review and enhance the overall meta-search experience. In case of Qunar.com, the number of hotel reviews grew to 2.3 million by the end of the first quarter this year.

Zhang also says just having a localization team in place isn’t enough, the pace of setting up operations and constant improvisation counts, too.

This is where KAYAK is expected to make rapid strides, counting on its technology prowess. The entity streams live customer data in its technology center in Boston. “There is a constant sense of urgency and focus on what’s happening right now with customers and how to fix it fast,” said Soo. The company has several versions of KAYAK live at any given moment to test user preferences. She added, “We believe that offering a superior and easy-to-use product will motivate travellers in China to gravitate towards KAYAK’s website and mobile applications.”

Qunar – can’t afford to be complacent

Hotels based out of China acknowledge the role of Qunar in distribution.

Bangkok-based Chetan Patel, VP, Strategic Marketing & E-Commerce, Onyx Hospitality Group says, his team is facing challenges in terms of website accessibility in China. “Accessibility of our website in China can be at snail-pace, and obviously it can have an adverse impact on the conversion rate.” So options like Qunar become critical. “We can’t afford to ignore China, although it’s more like an investment at this juncture,” said Patel.

“Onyx has been associated with the likes of Wego, TripAdvisor and Google for targeting Chinese consumers. We have had one-off relationship with Qunar, but are now in the process of integrating with them,” shared Patel. Onyx has chosen to only pursue the CPC model, and not gone ahead with the transaction model of Qunar.

Even for existing meta-search players there are certain challenges that are tough to handle.

“One of the biggest challenges we faced was the recent GFW (Great Firewall), which completely blocked all Google services in China recently, and slowed down the Internet access speed into and out of China,” said an executive, associated with a meta-search engine outside China.

It is clear that KAYAK, with established global presence, is expected to pose a challenge for the outbound segment. Also, a section of the industry believes that Qunar isn’t expanding aggressively outside China.

It is learnt that Qunar is planning to set up a team that is going to target Taiwan, Singapore and Thailand for hotel inventory. Also, tie-ups with Booking.com and Agoda.com isn’t ruled out, and the majority of Asian content is expected to come from tie-ups. This would be interesting, considering that the priceline.com group is getting stronger than ever. Similarly, OTAs in China are a major source for suppliers’ content, so whether there would be any alliance or commercial agreement with a meta-search engine would be an interesting development to watch.

Any perceived favouritism by any meta-searcher could also mean jeopardising meta revenue from the other OTAs.

Senior executives from KAYAK, Skyscanner and HotesCombined are scheduled to speak on the upcoming TravelDaily Conference which will take place from Sep. 3-4 at Shanghai.

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Traveldaily.cn Exclusive: Interview with Debby Soo, VP, Asia Pacific at KAYAK

In every business, there are decisive moments that eventually signal the beginning of a new era.  

One just can’t stop relating this to what KAYAK is considering, and its repercussion for the entire travel meta-search category.

Yes, it’s about KAYAK’s foray into China. It is something that has been anticipated for long in the travel e-commerce category. The development would be significant considering the way KAYAK has gone about its expansion post its merger with The Priceline Group. For instance, in late 2013, the entity launched its operations in eight new markets in three continents. The list included Hong Kong and Singapore.

But China would definitely be a big test. In fact, this could also be termed as the final frontier for the U. S.-based entity. Or that very decisive moment, one where a global brand would end up leading the traffic generation business on a global, bigger scale.

KAYAK’s VP Asia Pacific, Debby Soo, has a vital role to play. She has launched local KAYAK sites in Australia, New Zealand, Hong Kong, Singapore, Taiwan, India and Japan.

San Francisco-based Soo is quite clear about the strategy KAYAK is considering for China. The first phase wouldn’t be a marketing blitz. Rather it’s about the product first.

“Content and understanding the nuances at the local level are of utmost importance,” said Soo, who is  scheduled to speak at the upcoming  2014 TravelDaily Conference, to be held in Shanghai (September 3-4, 2014).

The team is looking to stick to its proven approach of establishing its presence in markets outside the U. S. “As we have done elsewhere, product quality is preeminent, followed by monetisation. Once a certain threshold is reached, then the next step is worked out. Till then there are no big marketing plans, and possibly no strategic alliances,” shared Soo.

Being ready for China

Soo is clear about why the team is optimistic about China.

“We believe that Chinese users will be compelled to use KAYAK because of our easy, clean, intuitive user interface, and our fast, accurate and comprehensive search results,” said Soo,

So is there any benchmark or analysis that showcases the site’s superiority over others?

“We have consistently invested significant time and resources to innovate to meet customer demands,” said Soo. She adds, “We evaluate our performance (against other meta-search sites and OTAs)If any of our partners’ APIs or data isn’t accurate enough then we fix the problem including at times discontinuing the association.”

KAYAK believes its legacy would serve it well, be it for its global brand recognition or association that it has built over the years..  “What we definitely are upbeat about is our global presence. It certainly offers suppliers, OTAs etc. a chance to reach out to a wider audience,” At the same time, Soo acknowledged: “The long tail end of content would be a challenge. Our team is so lean (70% of 300-odd employees are technologists!) that reaching out to the entire market would demand perseverance.”  

“Fail fast, fail often” mentality

KAYAK’s “fail fast, fail often” mentality drives innovation and entrepreneurial spirit among its tech team. 

“For example, in our technology center in Boston, we stream live customer data — the latest feedback, Twitter feeds, searches per country, etc. – there is a constant sense of urgency and focus on what’s happening right now with customers and how to fix it fast,” said Soo.

The team minutely scrutinizes user behaviour.

“We have so much data on what users are searching for and clicking on and we use that data to drive product decisions.  We have several versions of KAYAK live at any given moment to test user preferences,” said Soo.

Technology supremacy

KAYAK’s technologists are counted as the major backbone.

Soo asserted that KAYAK’s technology benefits from an on-going, cumulative scale advantage with more than 100M user queries per month.

“We obtain data from multiple sources and continually optimize our global flight search technology and data requirements. We currently utilize fare information from Amadeus, ITA, other 3rd-party providers, airlines and online travel agencies,” shared Soo. KAYAK also uses proprietary search algorithms including patent-pending accuracy technology for airline price and availability data. The team, according to Soo, is consistently trying to outperform other flight search sites and online travel agencies in speed, comprehensiveness, best price found and accuracy.

As for mobile, KAYAK believes it has edge over others, in line with its vision of being the best on whatever device people may want to use. 

“KAYAK’s mobile app features full search capabilities, a facilitated booking experience – a user never has to leave our app to book their travel, as well as flight tracking and itinerary management tools. KAYAK’s app features a full set of capabilities as well as an intuitive, fast and accurate UI,” said Soo.

Challenges

Soo believes the market is challenging on a few counts. One of them is handling the issue of multiple price points.  “It isn’t easy to make apples-to-apples comparisons here. What is available online might differ on various channels, and the same is the case with OTA and offline agencies. For us, online-offline discrepancy doesn’t matter, but we can’t afford to slip up in online pricing,” said Soo. So there is going to be a team that would specifically assess the accuracy to pave way for return users.

KAYAK believes its arsenal of tools will enable the company to combat such hurdles.

“A major development that we are seeing in the travel search market is the need for price transparency.  Many OTAs, airlines and hotels charge users booking, taxes and baggage or credit card fees.  These fees are often not included in the price that is shown to the user,” said Soo.

Citing an example, she added that the way the site displays information in Europe is quite different from what’s done the U. S. In fact, it was in response to this issue (price transparency) that paved the way for the creation of the Payment Fee Calculator, a feature that shows users exactly what they will pay for a flight or hotel room.  “This feature was initially rolled out in Europe, where extra fees are the industry norm, and we received such positive user feedback, that we have rolled out this feature across all of our markets,” said Soo.   

Future of meta-search

Is KAYAK open to embracing a hybrid model i. e. transaction-oriented plus traffic generation?

Not for the moment, though nothing can be ruled out, said Soo.

“KAYAK’s value proposition for our partners is that we send extremely qualified, and high-converting traffic to our partners, and that our partners still “own” the customer because the customer books on their site,” said Soo. 

She added, “Our focus for local suppliers and OTAs in China will likely not deviate from our current value proposition for existing global partners.”

No doubt meta-search sites are all about monetising the traffic they generate. So is there any benchmark that KAYAK has set for the traffic that it intends to generate here?

“We have a general sense of the level of traffic and how that traffic will monetize, but until we are live in a market, we really don’t know for sure what the numbers will be.  As for cost per acquisition in our marketing efforts, one way we could determine the appropriate cost is to look at the cost per acquisition in some of our more mature markets that have similar market dynamics to the market in question,” said Soo.  

Expectations from 2014 TravelDaily Conference

Soo said KAYAK is considering launching in China. So the 2014 TravelDaily Conference would be an ideal event. “The TravelDaily event is a widely attended and highly reputable conference.  I am looking forward to sharing KAYAK’s global expansion plansand meeting and learning about new potential partners.  I am also excited to learn more about the complexities of the online travel landscape in China,” said Soo.

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