Exclusive Feature: At the beginning of the week, we received news of a new JV between the Chinese E-Commerce giant Alibaba (ranked 6th in the world on the list of interment companies - Source Wikipedia) and Marriott, the world’s largest hotel company.
The Chinese outbound market is huge, already the world’s largest with 122 million tourists in 2016 according to China National Tourism Administration.
According to Marriott, this deal’s main aim is to link the two companies’ loyalty programs, create other cross-promotional opportunities.
Starting as of now, Alibaba users (500 million active monthly) will be able to sign-up to Marriott’s loyalty programs and book member rates through one of Marriott’s digital channels.
So what brings Marriott to this move? Dose Marriott actually support the creation of yet another huge OTA ?
One can see the move on Marriott end on several levels:
- The Chinese outbound market is already the largest in the world
- Marriott understands that in order to have a strong foothold in the Chinese market, one has to join forces with a local player. There is no way around it. The Chinese market is in the hands of Chinese companies.
- Marriott wants to make sure that the giants - Priceline Group, Expedia as well as other, smaller OTAs - will not find a way to take over the lucrative outbound and local tourism Chinese market. Priceline is already invested in Ctrip (see below)
- With this JV, Marriott will be able to cut and keep relatively lower distribution costs in this huge market
- Marriott hopes to create and build a strong loyalty base among the huge Chinese market
- Maybe drive bookings from Airbnb platform to Marriott’s platform but it’s too early to speculate on that.
So, what’s next?
We can only assume that other global hotel chains are already engaged in a retrace looking for alternatives to counter this bold move; but it’s not only hotels. Also, the big global OTA’s are in a race of their own to get a foothold in this lucrative fast-growing huge market.
According to reports, approximately 73 percent of Chinese outbound travelers regard social media as the key channel to researching and gathering information about traveling, and of all the different social media in China, WeChat leads the way with half of its 938 million monthly users spend over 90 minutes a day on the platform. WeChat Pay currently has 600 million monthly active users.
If we look at the list of the largest Internet companies according to revenue (Source Wikipedia), the one ranked 3rd is JD.com - which is an E-commerce giant - and the one ranked 5th is Tencent, a huge Social media giant which owns WeChat.
According to the Wikipedia report, Alibaba is ranked 6th followed by the Priceline group on the 7th. place and Baidu another Chinese Search company ranked 8th.
Talking about online travel in China, we shouldn’t forget Ctrip.
Ctrip is the undisputed OTA leader in China.
On August 6, 2014, Priceline.com announced that it will invest $500 million in Ctrip.com International Ltd. to broaden the companies’ options in China.
Priceline and Ctrip, which have had a commercial partnership since 2012, increased their cross-promotion of each company’s hotel inventory and other travel services.
Ctrip made a move on the international flight search market and as of November 2016, Ctrip owns the international travel site Skyscanner.
Ctrip has a significant stake in India’s largest online travel agency, MakeMyTrip. Ctrip wants to take advantage of the growing Indian travel market, and its collaboration with MakeMyTrip should help it do so.
To make you even more puzzled and confused, lets add-up to this writing the Chinese hotel giants and travel conglomerates that I am sure would like to find ways to lower their own local distribution costs.
Let’s name just a few:
- Shanghai Jin Jiang Hotels - largest shareholder in Accor SA
- Huazhu Group
- HNA tourism group which holds significant holdings in Hilton, Rezidor and NH hotels
If that isn’t enough, just add this data to your complicated equation: Jin Jiang has the world’s biggest loyalty group; the combining of Jin Jiang and Plateno Group integrating their member databases creates a loyalty program with 100 million plus members.
I find it hard to believe that the Chinese hotels giants (most of which have strong government influence) will let the market move to the hands of the US players.
Time will tell.
These are interesting times we are living in; so many questions and assumptions,,,,
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Joseph Fischer is the CEO of Vision Hospitality & Travel - An international lodging & hospitality consulting firm. He is a veteran hotelier with over 30 years of extensive management experience in the global lodging Industry.
A strategic “out-of-the-box” thinker, visionary, with plenty of tangible and ready-to-be-implemented ideas. Joseph is a frequent contributing writer on 4Hoteliers.com global new portal.
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