Planning to step into China as a meta-search brand? Be ready for the grind
Thursday, 10th July 2014
Source : Ritesh Gupta
Traveldaily Exclusive: Travel meta-search continues to spread its tentacles as established players look beyond the US and Europe for expansion;

This trend is paving way for intriguing battles in several markets and China is a prime example of this phenomenon.

With KAYAK targeting China with a local site, and Skyscanner opting to acquire Chinese meta-search specialist Youbibi, the stage is set for intense competition. 

One can't refrain from evaluating about how these brands are going to take on nine-year old meta-search brand Qunar.com. But as one digs deeper it becomes clear that these brands first need to sort out key issues like product sourcing to make sure that a solid local meta-search product is ready.

"Content and understanding the nuances at the local level are of utmost importance," said KAYAK's VP Asia Pacific, Debby Soo, who is scheduled to speak at the upcoming 2014 TravelDaily Conference, to be held in Shanghai (September 3-4, 2014).

Soo added, "As we have done elsewhere, product quality is pre-eminent, followed by monetisation. Once a certain threshold is reached, then the next step is worked out. Till then there are no big marketing plans, and possibly no strategic alliances."

Major challenges

As TravelDaily found out, a new comer is expected to face numerous challenges. The most critical aspect of any meta-search business is the depth of its content, and this is precisely where complexity is deeply rooted in China. For instance, even the definition of a hotel isn't clear.

"There are many debates around how many hotels China actually has, from 20k to 300k, depending on how we define "hotel"," said Joseph Xiao, team manager - Greater China and Singapore Markets, HotelsCombined.com.

According to sources, a specialist like Qunar would cover over around 150,000 lodging options, including hotels, B&Bs etc. 

Other than in-house hotel sourcing team, other options for a meta-search include pulling data from OTAs. Entities can also work with with B2B partners like wholesalers and the likes of DerbySoft , but overall meta-searchers need to avoid time-consuming, and expensive routes.

"The hybrid model of Qunar is different from what a traditional meta-search or traffic generation site would focus on," said a source based in Beijing. Other than charging for CPC and cost per sale basis, and display ads, Qunar also offers hotel reservation promotional programs - last minute sale (featuring over 12000 hotels) and opaque booking platform. The source further added, "While meta-searchers are generally OTA friendly, Qunar is competing with OTAs on the commission front. Qunar possesses a technology solution for around 60,000 hotels or so (signed directly by Qunar), where they market and sell their inventory and garner commission in return."

Qunar continues to invest in strengthening its product. In the first quarter of this year, the entity's product sourcing expenses were over US$6.3 million, an increase of 358% year-on-year.

As for flights, Qunar's search results featured over 3,550 domestic routes from 17 airlines by the end of last year. The figure represented all domestic flight routes in China.  

Catching up with local players

The concept of "facilitated bookings" where a user doesn't leave the meta-search site and still completes the booking with supplier/ OTA has been prevalent for both flights and hotels here in China. For any international meta-search brand that hasn't focused on this aspect, it would call for major adjustment – in terms of both technology as well as regulatory licensing requirements, explained a source.

KAYAK does offer facilitated booking in flights, hotels and cars so users can book their travel without leaving the site or app. KAYAK might not face any major teething problems, but in all likelihood Skyscanner must have weighed this in while going for a strategic alliance with Youbibi.

Another key element would be gaining brand recognition. Last year Qunar garnered over 60% of its traffic without incurring any payment for it. This denotes that visitors reached its site through natural search results, by filling up the domain name, or redirection from Baidu pursuant to its business cooperation agreement and other related agreements with Baidu. In all, Qunar processed around three billion web and mobile search queries for air tickets and hotels, respectively, last year. Mobile search queries have risen from 30m in 2011 to over 780m at the end of 2013.
Also, a key aspect is to go beyond just price comparison and aid decision-making with an apt blend of content and tools.

YuanYuan Zhang, former marketing head of TripAdvisor China, says a company focused only on meta-search would not be able to satisfy the need of the Chinese users, especially in the hotel sector. She says one has to aptly feature users' review and enhance the overall meta-search experience. In case of Qunar.com, the number of hotel reviews grew to 2.3 million by the end of the first quarter this year.

Zhang also says just having a localization team in place isn't enough, the pace of setting up operations and constant improvisation counts, too.

This is where KAYAK is expected to make rapid strides, counting on its technology prowess. The entity streams live customer data in its technology center in Boston. "There is a constant sense of urgency and focus on what's happening right now with customers and how to fix it fast," said Soo. The company has several versions of KAYAK live at any given moment to test user preferences. She added, "We believe that offering a superior and easy-to-use product will motivate travellers in China to gravitate towards KAYAK's website and mobile applications."

Qunar – can't afford to be complacent

Hotels based out of China acknowledge the role of Qunar in distribution.

Bangkok-based Chetan Patel, VP, Strategic Marketing & E-Commerce, Onyx Hospitality Group says, his team is facing challenges in terms of website accessibility in China. "Accessibility of our website in China can be at snail-pace, and obviously it can have an adverse impact on the conversion rate." So options like Qunar become critical. "We can't afford to ignore China, although it's more like an investment at this juncture," said Patel.

"Onyx has been associated with the likes of Wego, TripAdvisor and Google for targeting Chinese consumers. We have had one-off relationship with Qunar, but are now in the process of integrating with them," shared Patel. Onyx has chosen to only pursue the CPC model, and not gone ahead with the transaction model of Qunar.

Even for existing meta-search players there are certain challenges that are tough to handle.

"One of the biggest challenges we faced was the recent GFW (Great Firewall), which completely blocked all Google services in China recently, and slowed down the Internet access speed into and out of China," said an executive, associated with a meta-search engine outside China.  
It is clear that KAYAK, with established global presence, is expected to pose a challenge for the outbound segment. Also, a section of the industry believes that Qunar isn't expanding aggressively outside China.
It is learnt that Qunar is planning to set up a team that is going to target Taiwan, Singapore and Thailand for hotel inventory. Also, tie-ups with Booking.com and Agoda.com isn't ruled out, and the majority of Asian content is expected to come from tie-ups. This would be interesting, considering that the priceline.com group is getting stronger than ever. Similarly, OTAs in China are a major source for suppliers' content, so whether there would be any alliance or commercial agreement with a meta-search engine would be an interesting development to watch.

Any perceived favouritism by any meta-searcher could also mean jeopardising meta revenue from the other OTAs.

Senior executives from KAYAK, Skyscanner and HotesCombined are scheduled to speak on the upcoming TravelDaily Conference which will take place from Sep. 3-4 at Shanghai.
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