New forces rush to the tower, old forces defend the city: the online tourism battle in 2024

The online travel market continues to expand, and various platforms are leveraging their own advantages to compete for market share. From Ctrip's supply chain advantages to Meituan's sinking markets, to Douyin's content traffic, competition is intensifying but the market potential remains huge.

The big cake of online travel is growing bigger and bigger visibly.

According to data from the State Administration of Culture and Tourism, in the first quarter of 2024, the total number of domestic tourists in my country reached 1.419 billion, a year-on-year increase of 16.7%. During the May Day holiday, the number of tourists nationwide reached 295 million, exceeding the same period in 2019 before the epidemic by 28.2%.

This is far from the limit. Shen Aixiang, the founder of Orders Are Coming, publicly stated that my country's online tourism market is still in the recovery period, and the proportion of the cultural and tourism industry in GDP has not yet reached the pre-epidemic level. This means that this market dividend will have a more significant long-tail effect in the next few years.

There is plenty of meat and plenty of wolves.

On the one hand, content platforms such as Douyin, Kuaishou, and Xiaohongshu have made great contributions to expanding the pie. Whether it is Zibo, Erbin or Altay, whether it is special forces tourism or foreigners' "city not city", every hot spot that touches people's mind to go is inseparable from the promotion of their powerful traffic.

But on the other hand, these emerging forces did not get the biggest piece of the pie. According to Ctrip's first quarter financial report in 2024, its group revenue reached 11.92 billion yuan, a year-on-year increase of 29%. Its stock price once surpassed Baidu, and its market share still ranked first.

The new forces rushed to the tower, the old forces defended the city, and each of them had the chips that the other wanted most.

If we do a SWOT analysis on these OTA players, Ctrip, which is in the first tier, has the supply chain advantage and high average customer base that traffic platforms desire most, but lacks traffic and content foundation; Meituan, which is in the second tier, has an absolute market share in the sinking market, but has not been able to capture high-star hotels and travel for many years; the new force Douyin has a strong traffic advantage, but is constrained by low write-off rates and pressure to realize cash...

What may be meat to one may be poison to another. The online travel market is far from over and the struggle has just begun.

1. Ctrip: The mid-life crisis of the industry leader

Ctrip's SWOT analysis shows that its advantages are obvious, namely its market share and profitability, which make it the leader in the industry.

After acquiring Qunar in 2015, Ctrip's market share has remained above 50% for many years. If the investment in Tongcheng Tourism is included, it can reach 70%.

In terms of profitability, according to "Zhigu Trends", Ctrip's gross profit margin was still over 77% during the most severe period of the epidemic from 2020 to 2021, making it more profitable than LV.

No wonder Liang Jianzhang said that Ctrip has the gene of profitability running in its blood.

The contributors behind this are the supply chain advantages of high-star hotels and the mental foundation of high-net-worth business travelers.

According to a report by Essence International, Ctrip's base in high-tier cities is stable. As of now, it has more than 12 million platinum members with annual consumption of more than 20,000 yuan.

Ctrip’s high-star hotel business revenue accounts for 70%-80% of its total hotel business. According to Kaiyuan Securities data, before the epidemic, the average room rate of Meituan was 195.92 yuan, while that of Ctrip was 421 yuan.

For Meituan, compared with the takeaway business of "bending down to pick up coins", the hotel and travel business has become a "cash cow", but compared with Ctrip, the profits from "picking stars" are more substantial.

In order to consolidate the supply chain advantages, during the most difficult three years of the epidemic, Liang Jianzhang insisted on doing "Boss Live" while "tearfully" paying the ticket refund fees, and with a wave of his hand, he also bought up several industry companies at the bottom. In April and May 2020 alone, it successively acquired Travix, a Dutch air ticket sales provider, and spent nearly 100 million yuan to acquire Green Cloud, a comprehensive service platform for the hotel and travel industry.

The hotel and travel industry provides "non-standard" products and attaches great importance to contract fulfillment and service capabilities, especially for business travelers. A stable cooperative relationship is the prerequisite for ensuring user experience. Any latecomer who wants to replace Ctrip will have to walk the same path again and pay a much higher price than before. In the medium term, Ctrip's position in the industry is unshakable.

But on the other hand, as a pure trading platform, the opposite of its transaction mentality is the lack of content and innovation, which makes it not attractive enough to young people, giving content platforms an opportunity to enter.

More importantly, Ctrip’s “good friends”, the high-star hotels, are secretly building their own private transaction domains and gathering customers in their hands. Taking Huazhu Group as an example, as of the end of 2023, it has nearly 200 million members, and orders from its own channels account for 85%.

With strong enemies in front and a fire in the backyard, Ctrip, which is facing a mid-life crisis, is not having an easy time as it seems.

2. Meituan: The King of Room Nights Sinking into the Lower Markets

Meituan, Tongcheng, Fliggy, etc. are considered the second tier of OTAs, but Meituan is more special.

In March 2018, Meituan, which had entered the hotel and travel market only six years ago, took the lead in the industry with 22.7 million room nights, surpassing the total of Ctrip.

The number of room nights represents the popularity of a hotel on the OTA platform and is an important indicator that the industry pays attention to. Meituan is good at "high frequency hitting low frequency" and has a more stable and huge traffic pool compared to Ctrip.

However, Meituan's iron army of local sales, which has been invincible in the past battles in local life, has only been partially effective in the hotel and tourism industry.

Meituan's low-end hotel business has developed smoothly and has made rapid progress in the sinking market, but its battle to enter the high-star market has not made any substantial progress for many years. As of now, the average room rate of its hotels is still hovering in the 200 yuan tier.

After 2018, Meituan tried to use its old method to boost the supply of high-star hotels. Carry out "super group buying" on the user side, lower the prices of star-rated hotels, reduce commissions on the merchant side, etc.

As a result, star-rated hotels only take advantage of Meituan's traffic in the off-season, but change their attitude during the peak season. After four years of hard work, Meituan’s high-star hotel orders still account for less than 20%.

High-star hotels care about repurchase rate rather than customer flow, and Meituan’s low-price mentality will instead lead to “price-breaking”, which is not helpful for its brand image.

Starting from 2023, the high-star hotel strategy mentioned in every earnings conference gradually faded, and Meituan began to emphasize the "renewal plan" for economy hotels, and combined special group purchases with live broadcast activities to strengthen transfusions to small and medium-sized hotels.

Just last week, Meituan officially announced its investment in Air Travel, a civil aviation information service platform that covers all scenarios of hotel and travel and has a user base of over 100 million. Meituan's move is more about consolidating its own traffic base, or it has more of the meaning of "defending the city."

The change in strategy is not only due to the recognition of the mismatch in demand, but also because this leading local life company has been caught in a situation where its market share has been snatched away by giants and it is unable to cope with the situation.

Starting from 2023, with the e-commerce dividend reaching its peak, Alibaba, WeChat, Douyin, Xiaohongshu... almost all major Internet companies have set their sights on the fat piece of local life. Under attack from all sides, Meituan is busy addressing its shortcomings and looking for growth. On the one hand, it is focusing on special group purchases and launching the "Super Popular" live broadcast room to consolidate the low-price mentality and complete the live broadcast ecosystem. On the other hand, it is focusing on going overseas to find new growth stories.

Overall, Meituan's SWOT analysis shows that the hotel and travel industry is large enough, with stable traffic and a high write-off rate. More than 80% of its users are younger people. If it can hold on to its current position, it will have a good chance of winning when facing the next market "variables".

According to Meituan’s 2023 full-year financial report, core local business accounted for 75% of revenue, with hotel and travel transactions increasing by 100% year-on-year. According to industry insiders, Meituan’s in-store hotel and travel revenue in 2023 will be approximately 41 billion yuan, close to Ctrip’s 44.5 billion yuan.

3. Tik Tok: Born from traffic, trapped by traffic

The variables of Ctrip and Meituan are content platforms headed by Douyin.

Zhang Yiming believes that "hard work can make miracles happen", and the powerful infusion of traffic not only expanded the hotel and tourism industry. It has brought about an incremental market and also grabbed a considerable market share for Douyin.

In 2021, Douyin life service was launched. In 2023, the GMV of the hotel and tourism business reached 60 billion yuan, and the market share increased from 2% to 3%. Some industry insiders predict that the share is expected to increase by another percentage point in 2024.

Hotel and travel businesses may not be able to master live streaming sales in a short period of time, but the rise of short video platforms and grass-planting platforms has brought new potential and growth. An industry insider said, "Before the emergence of Douyin and Xiaohongshu, all traditional OTAs took on clear demands, while the new forces took on occasional demands."

Compared with its old rival Meituan, for traditional OTAs, Douyin is more like a barbarian at the door, stirring up the water.

But the hard bones that Meituan cannot chew are also difficult for Douyin to chew, and high-star hotels are not willing to buy into the traffic platform. According to "Liquor Management Finance", the hotel Douyin group buying price is generally about 40% lower than other platforms to be competitive in the market. But this has further triggered doubts among industry insiders about the damage to its brand quality.

In addition, Douyin's SWOT analysis has an additional obvious "flaw" compared to Meituan, which is the sequelae of occasional consumption - "low write-off rate".

According to Jiuqian's middle platform data, Meituan's write-off rate is 85%, while Douyin's overall write-off rate for life services is about 60%, among which hotel and travel are the lowest. According to previous statements by Ebrun Power citing industry experts, "it is about 30%."

Continuous and stable customers are exactly what the hotel and travel industry, especially star-rated hotels, care about most.

Not only that, looking at Douyin's strategy for 2024, the booming hotel and travel business has quietly slowed down. The most notable thing is the increase in the commission rate from 4.5% to 8%; in March, there were reports that ByteDance would cancel its OTA business and return to selling traffic and merchant services, and then become the industry's "water seller."

This statement was quickly denied by Douyin officials. At present, there are still some calendar rooms on the Douyin platform, but the number is no longer comparable to other OTA platforms.

Tik Tok's strategic change in the OTA field is considered to be a compromise due to the adjustment of the group's business. In 2024, Douyin's sales target for the entire platform is 600 billion yuan. Both the increase in commissions and the adjustment of Douyin's organizational structure in March this year are preparations for profitability.

The hotel and tourism business is certainly a cash cow, but the initial supply chain layout and the opening of the entire chain require a lot of resources, funds and time costs. Tik Tok’s traffic is expensive. If its investment-output ratio in the local life sector is far inferior to that of e-commerce, then why should it persist in this context of “reducing costs and increasing efficiency”?

4. Ending

As the summer travel rush arrives, it remains unknown who will come out on top in this year's OTA battle.

Ctrip’s success is due to its high stars, but its worries are also due to its high stars; Meituan succeeded in the sinking market, but it is also trapped in the sinking market; Douyin relied on traffic to enter the heart of the industry, but it is also constrained by the uncertainty it brings.

But as Meituan’s Wang Xing said, local life depends on demand in the short term and supply in the long term. The only thing that is certain is that, under the influence of platform competition, the industry pie will become bigger and bigger, merchants will gain incremental growth and more choices, and consumers will add new Internet celebrity cities to their travel favorites one after another.

Author:yuki

Source: WeChat public account "New Entropy"