Alibaba Group, at the end of October, announced that they would be rebranding their online travel business ‘Taobao Travel’ as ‘Alitrip’. Alitrip is a separate business and brand name, specialising in travel and will act as a leading online travel-booking platform. This announcement comes just a month after Alibaba delivered the largest public stock offering in history.
Li Shaohua, general manager of Alitrip, describes the push into the travel and tourism industry as a “logical extension” of the Alibaba Group’s strategy. Alitrip has been designed to provide users with a high quality service and will aim to fill the current unmet demand of the Chinese travel industry. The new site currently has more than 10,000 merchants, including airline Cathay Pacific and online booking agency Agoda.com.au, offering services from hotel bookings to package tours.
This push into the online travel business comes at a time when China’s online travel market is experiencing significant growth. Reports indicate the third quarter enjoyed a 20 percent jump on the previous year’s transaction value totals, to reach $11.9 billion. As mentioned on a previous blog, it’s estimated that as many as 100 million Chinese will be travelling abroad by the end of 2015 and could be spending up to $194 billion per year.
Alibaba isn’t the only online juggernaut looking for a piece of the online travel services pie, Amazon is rumoured to be launching a new travel service early next year. It is said they will focus on independent hotels and resorts and will attempt to be competitive by charging hoteliers a 15 percent commission, lower than Expedia’s current 25 percent. If true, Amazon’s travel service could have serious potential when you consider it’s already massive traffic base; an estimated 23 million users of its priority shipping and video service Amazon Prime
Although Alibaba and Amazon are large, well-established companies they still have stiff competition in their respective markets. Alibaba will have to compete with Ctrip and Qunar who have roughly 56 percent of the Chinese market. In the west, Amazon has formidable opposition with the likes of Booking.com, Tripadvisor and Expedia.
Yes the competition will be thick, however these two online giants can offer something pure travel services cannot – product diversity. Both Alibaba and Amazon have the means to offer the consumer more; not only can they provide a travel service but also can suggest or offer additional products. Consumers are may be inclined to purchase goods such as camera, sunglasses or tablets for their upcoming holiday. That, combined with their established user base, could prove to be their competitive edge.
The demand for travel in China, both domestic and international, is growing rapidly and so is the interest of companies wanting to capitalise on the trend. The online travel services sector is one to keep an eye on over the next decade. Alitrip and Amazon both have their sights fixed on the international market and we could well see a face off between the two in the near future.