GLOBAL REPORT—More than 500 million Internet users reside in China, according to the China Internet Network Information Center, and hoteliers around the world believe the opportunities for online distribution are abundant as that number continues to grow.
However, factors including government restrictions on the Internet will impact how successful players will be in the e-commerce space.
“China has been very closed over the years,” said Steve Lapekas, executive VP of corporate business development at Pegasus Solutions, a company that provides technology and services to hotels and travel distributors.
Non-domestic brands now have the opportunity to expand into the emerging market and are doing so aggressively, but the new challenges lies in selling rooms online, Lapekas said.
Challenges in online distribution
From Wyndham Hotel Group’s perspective, language and translation are key issues, said Frank Trampert, managing director of Asia/Pacific for the company. “Online distribution in China is quite complex and different from the rest of the world.”
Although content is being distributed online, it is not the dominant channel for bookings. “Phone transactions actually account for the largest share of bookings (in China),” Trampert said.
“For now, overseas hotels can only sell hotel rooms with the Chinese (online-travel agencies) if they have Chinese employees to manage the extranet system and translate the reservations back into English,” said Loretta Chan, VP of distribution for Interstate China Hotels & Resorts.
The top online Chinese OTAs and government-owned global distribution systems dominate the outbound travel business, Chan said. The Chinese OTAs are more focused on the domestic business, and the overseas content is usually integrated with just one wholesaler.
Lack of adequate technology also is an issue in the online distribution space in China, Trampert said. “Booking capabilities have been a major hurdle for most non-Chinese (OTAs) as legacy reservation systems are unable to accommodate Chinese language character sets.”
As for Chinese consumers’ ability to pay for reservations, there are limited means for completing online transactions, Chan said.
“Credit cards are getting more popular in China now, but most of the local Chinese credit limits are very low,” she said. “So most of the overseas travel packages or hotel purchase transactions are completed offline in cash.”
Overcoming obstacles in online marketing
Government restrictions on social media are an added hurdle for hoteliers operating in the nation, Trampert said. “The fact is that social-media sites such as Facebook and Twitter do not exist in China. Instead the country is dominated by microblogging websites, instant messaging and (bulletin board systems), all of which require a different set of technology to interact with consumers—in Chinese, of course.”
There always has been a challenge is leveraging those social challenges to drive transactions, said Traci Mercer, VP of market management for Expedia.
Traci Mercer, VP of market management for Expedia
In 2011, Expedia spent an excess of $36 million in online sales and marketing for its China-based eLong brand, Mercer said. “As opposed to using things like Twitter, we used traditional search-engine marketing … and email.”
Expedia’s online-marketing approach is slightly different than what other brands are doing, but it is working for the company, Mercer said. “Every country is different, and they have their unique ways of operating and unique government regulations … With the eLong brand, (the key) is just to learn to work within the regulations that are there.”
The approach most global hotel chains are taking is to hire local marketing agencies or develop in-house marketing teams, according to Interstate China’s Chan. Many companies are using these resources to send brand and hotel information to consumers via Sina Weibo, a popular microblogging site with more than 300 million members as of April.
The next wave for online-travel marketing that will hit Chinese travelers will be local Pinterest-like sites, Chan said.
Working with local partners continues to be a strategic move for operators looking to boost their presence in the online market.
“We work with eLong and Ctrip, both major players in the market,” Trampert said of Wyndham’s partnerships in China.
The key partner for Interstate China is Hubs1, a web-based tool that allows hotels to manage content, rates, inventory, reservations, which has made distributing online in China much easier, Chan said.
Pegasus recently announced a partnership with TravelSky, a state-owned entity that controls all airline tickets issued in China and is now expanding into hospitality.
As more brands move into China with their core reservations systems still residing in the United States, there was a need for TravelSky to establish a technical connection with a global player, Lapekas said.