Online travel sales in China will almost triple the growth rate of the overall China travel market during the next two years but will account for a far smaller fraction of the market than in the U.S., according to a recent report from PhoCusWright.
In the report, “China Online Travel Overview,” the company projected that China’s annual online travel sales will jump about 70% between 2011 and 2013, to $15.4 billion. During the same period, overall travel sales in China are expected to rise 25%, to $105.5 billion.
In the online segment, air and hotel bookings are expected to grow at about equal rates, but supplier website revenue will grow faster than that of online travel agencies because of the Chinese consumer’s propensity to favor established brands.
While the rapid online booking growth rate reflects an e-commerce environment that’s far less mature than that of the U.S., online travel remains a relatively small fraction of the overall China travel market. Whereas e-bookings account for about 40% of U.S. travel, they account for about 15% of the China travel market.
“China’s controlled approach to economic development, consumer fear of fraud and identity theft, low credit card adoption rates and bureaucratic challenges related to introducing new payment methods greatly hinder e-commerce adoption,” PhoCusWright said in its report. (PhoCusWright is owned by Northstar Travel Media, parent company of Travel Weekly.)
It isn’t uncommon in China for travel agents to send bike couriers out to customers to collect cash and hand-deliver travel documents, said Henry Harteveldt, principal analyst at Atmosphere Research Group.
Additionally, rail accounts for a far higher percentage of travel spending in China (20%) than it does in the U.S., where less than 1% of travel spending is on rail.
But China’s rail systems, like those in the U.S. and Europe, trail air and hotels when it comes to adopting electronic reservations; it accounts for just 1% of online bookings in the country, according to PhoCusWright.
While the China travel industry is about a third the size of that of the U.S., further growth may be hindered by a combination of high oil prices, overall inflation and what some analysts say may be something akin to a China recession stemming from lower demand for its exports from Europe and the U.S.
Still, e-commerce, especially as it relates to travel, might thrive on the rapid adoption of mobile devices such as smartphones and tablet computers, especially among younger China consumers gaining purchasing power.
“There’s plenty of upward growth in China,” Harteveldt said. “But it’s going to be a very different path than what we’ve seen in the U.S.” Follow Danny King on Twitter @dktravelweekly.