Online Travel Services Ready for Take-off

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China's online travel services are taking off, with even greater growth forecast for the next few years.

Last year, at least 2.75 million Chinese booked hotel rooms, air tickets and other travel services on the Internet, up 72 percent from the previous year, according to a report recently released by Shanghai-based iResearch Consulting Group.

China's online travel market was worth some 1.54 billion yuan ($204 million) last year, a growth of 82 percent from 2005, the report said.

The findings are based on a month-long survey in November with responses from 60,000 Internet users across China.

Analysts with the consulting company are optimistic about China's online travel market, saying the number of users will more than double to 5.7 million in 2008, and hit 9 million by 2010.

The online sector is expected to be worth 6.5 billion yuan by 2010, analysts said.

Their optimism is based on three factors - the overall bloom of tourism, the soaring amount of money netizens spend on tourism, and improved online marketing systems.

Compared with the US online travel market, with revenues of $83 billion in 2006, China's market is still small.

In the US, online sales of travel services accounted for 30 percent of total tourism industry revenue in 2005 according to Merrill Lynch & Co. The percentage in China is less than 1 percent, Dai Bin, professor at Beijing International Studies University, told China Daily.

"Looking at it from the good side, this means there is still huge potential for developing this market," he said.

But he warned that the current boom is mostly due to a few companies.

The biggest success so far in China's online travel market is the NASDAQ-listed Ctrip.com, accounting for 54.2 percent of the market last year. In second place was another listed company, eLong.com, with 17.8 percent of the market.

The rest of China's travel websites, mostly for traditional travel agencies, work as "a platform to release information, a substitute for traditional marketing and communication", Dai said. Actual payment is completed offline in traditional ways.

Explaining why travel agencies prefer traditional means of payment, Hu Guodong, manager of the Internet department of Beijing UTS International Travel Service Co Ltd, said: "If a customer uses an online payment service, our agency has to hand 1 percent of our revenue to the bank, which is too much to bear for travel agencies with a thin profit margin."

In contrast, if the customer pays by swiping a credit card, the agency only pays a 0.1 percent fee to the bank, he said.

"We need the banks to give us better conditions to make online payment more feasible," he said.

Source: China Daily July 31, 2007

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