Suggestions and comments for online travel agencies

After all, the accommodation industry is just skin. If the skin is not there, the hair will not be attached. The role of the social average profit rate is to complain when there is injustice. Win-win for the accommodation industry and online travel agencies is the foundation for long-term, sustainable and healthy development.

1. The emergence of online travel agencies is the product of social division of labor and technological progress

Social division of labor and specialization are inevitable due to the scale effect of economic development. The emergence of the Internet provides opportunities for this trend. An unprecedented opportunity.

In the past, the accommodation industry had a sales department responsible for key account management and customer marketing. Under the principle of social division of labor, it could be outsourced to intermediaries. The initial intermediaries had nothing to do with the Internet, and there were physical intermediaries who bought them out first. Rooms are then sold.

The popularity of the Internet has enabled intermediaries in the accommodation industry to move from offline to online. In May 1999, Ctrip was established; in September 1999, Alibaba was established; on December 1, 2016, Meituan-Dianping and InterContinental Hotels Group reached a cooperation agreement.

2. Some problems with the online development of China’s accommodation industry

1. The original sin of the online development of China’s accommodation industry in the early stages

It was caused by huge costs and huge losses The practice of market exchange violates China's current laws, the Price Law and the Anti-Unfair Competition Law. OTAs spend hundreds of millions of yuan to offer prices lower than the cost of hotel rooms, and they do not hesitate to use loss-making means to launch price wars and compete for customers. The OTA uses the amount in excess of the commission as "cashback" after booking the hotel and returns it to the OTA's member account. This breaks the hotel's own price system and actually includes the hotel as an object of price competition and cultivates a consumer base. Dependence on OTAs converts hotel members into OTA members, achieving channel monopoly and making hotel room prices fall as a trend.

Zhao Huanyan calculated that the net profits of four online travel agencies in 2014 were 2.3364 billion yuan, including Ctrip's 243 million yuan, Elong's annual loss of 269 million yuan, Qunar's loss of 1.8469 billion yuan, and Tuniu's loss of 463.5 million yuan. .

When the online travel agencies initially launched a price war, Zhao Huanyan debated on Sina Weibo with officials who supported the online travel agencies’ price war, and quoted Chinese law as follows:

Order No. 10 of the President of the People's Republic of China and the People's Republic of China was issued on September 2, 1993. On September 2, 1993, the third meeting of the Standing Committee of the Eighth National People's Congress adopted the "People's Republic of China and the Anti-Unfair Law of the People's Republic of China". Competition Law, which came into effect on December 1, 1993. Article 11 of Chapter 2 of Unfair Competition stipulates that operators shall not sell goods at a price lower than cost for the purpose of squeezing out competitors.

On December 29, 1997, the "Price Law of the People's Republic of China" was promulgated by order of the President of the People's Republic of China (No. 92 of the Eighth Session of the National People's Congress). Since May 1, 1998 Effective from today. Among them, Chapter 2: Price Behavior of Operators, Article 14: Operators shall not engage in the following unfair price behaviors: (2) In addition to lowering prices for fresh goods, seasonal goods, overstocked goods and other goods in accordance with the law, in order to exclude competitors or Monopolize the market, dump at prices lower than cost, disrupt normal production and operation order, and damage national interests or the legitimate rights and interests of other operators.

2. In the long run, the essence of the Internet is to eliminate intermediaries

The essence of the Internet is to promote the minimum distance and minimum cost between production and sales. The emergence of OTA as an intermediary cannot reflect the superiority of the Internet. A platform type that does not charge intermediary fees and only charges a small usage fee is a win-win model.

3. More than 70% of the business of online intermediaries in China's accommodation industry comes from offline businesses

Strictly speaking, it is not an Internet company. In comparison, Expedia mainly relies on the Internet to complete transactions.

4. Online intermediaries in China’s accommodation industry rely on the crowd tactics of thousands of people

The advantage is that it helps offline services, but the disadvantage is that it goes against the Internet companies’ reliance on technological progress. Features.

The Expedia Las Vegas telephone reservation center only has 200 people.

The following is a comparison of data in 2012:

Trip Advisor*** has 1,575 employees, annual income of US$763 million, and average per capita income of US$484,400;

Ctrip has 12,000 employees, annual revenue of US$668 million, and average per capita income of US$55,700;

Qunar has 1,100 employees, annual revenue of US$75 million, and average per capita income of US$68,200.

3. The extent of hotel damage in China far exceeds that in North America

1. The situation in North America

The HAMA white paper analyzed the national hotel prices in the United States and Canada from 2009 to 2012. Third-party distributors controlled marketing expenses for 56 of the 104 hotels studied in the report. The customer acquisition cost of upscale hotels generally accounts for 15-20% of room revenue. From 2009 to 2012, hotel brand promotion expenses in North America increased by 37%, third-party distributor commissions increased by 34%, while local hotel marketing expenses (including Internet marketing and paid search) grew by only 6%, with average annual growth below 2%. Franchised hotel room revenue grew by only 22% from 2009 to 2012, but its customer acquisition costs increased by nearly 27%, with commissions accounting for 48% and brand promotion expenses Accounting for 36, hotel internal costs account for only 15. The customer acquisition cost of new and old customers of the hotel is defined as: "hotel brand promotion expenses (marketing, advertising, large-scale promotions, domestic and foreign sales centers and loyalty programs) and third-party distributor commissions (group bookings and individual guest bookings) and Internal marketing expenses and sales plans, including local marketing, sales staff and other expenses, such as staff to handle reservations.”

Cindy Estis Green of consulting firm Kalibri Labs collected 500 properties owned by 25 hotel groups in North America. Hotels, from 2009 to 2012, the commission of an American hotel group increased by 38%, while the total hotel revenue only increased by 20%. The lowest retail commission increase for the top ten upscale hotels was 10 and the highest was 72.

2. The situation in China is twofold: fire and water

In 2013, China's star-rated hotels suffered a loss of 2.088 billion yuan, and the commission income of three online travel agencies was 3.2303 billion yuan, of which Ctrip earned 2.2 billion yuan. , eLong 858 million yuan, and Qunar 172.3 million yuan.

In 2014, China's star-rated hotels suffered a loss of 5.921 billion yuan, and the commission income of three online travel agencies was 4.4803 billion yuan, including 3.194 billion yuan for Ctrip, 939 million yuan for eLong, and 347.3 million yuan for Qunar.

In 2015, China's star-rated hotels suffered a loss of 1.426 billion yuan, and the commission income of three online travel agencies was 7.043 billion yuan, including 4.6 billion yuan for Ctrip, 970 million yuan for eLong, and 1.4729 billion yuan for Qunar.

IV. Channel monopoly, market monopoly, price monopoly

1. Anti-monopoly law in mainland my country

my country’s anti-monopoly law stipulates that the concentration of operators reaches the State Council If declaration standards are stipulated, operators shall declare to the Ministry of Commerce in advance. Without declaration, concentration shall not be implemented. The "Anti-Monopoly Law of the People's Republic of China" stipulates that "all operators participating in the concentration had a turnover in China of more than 2 billion yuan in the previous fiscal year, and at least two of them had a turnover in China in the previous fiscal year." The turnover exceeds RMB 400 million, but reporting is not required in the following circumstances: one operator participating in the concentration owns more than 50% of the voting shares or assets of each other operator; each operator participating in the concentration owns more than 50% of the voting shares. Or the assets are owned by the same operator who is not involved in the concentration..."

The determination of the establishment of a monopoly includes: "abuse of market dominance"; operators entering into a "monopoly agreement" or an event that "has or may have exclusions" , the possibility of concentration of business operators that restricts the effect of competition.

2. Hong Kong’s antitrust laws are more stringent

Hong Kong’s antitrust Competition Ordinance came into effect on December 14, 2015.

The conduct regulated by the Competition Ordinance is divided into two broad categories: the first category is the conclusion or engagement of agreements or coordinated practices between enterprises that harms competition; the second category is the abuse of dominant market position by large enterprises (the market share exceeds 25 is considered to have a dominant market position) to harm competition. For violations of competition regulations, the Competition Tribunal has the power to take a series of sanctions against relevant enterprises, including imposing fines, issuing disqualification orders to directors, awarding damages or issuing other orders. 10 of the annual turnover of the regulations and can last up to 3 years.

3. The actual situation of online travel agencies

In 2014, Ctrip’s market share accounted for 46.2, Qunar accounted for 16.6, Elong accounted for 13.5, Ctrip and eLong accounted for* ** reached 59.7, and the three companies accounted for 76.3% of the market share.

In 2014, Ctrip’s total operating revenue was 7.8 billion yuan, and eLong’s total revenue (excluding business tax and surtax) was 1.1641 billion yuan.

In 2015, Chinese online travel agencies carried out acquisitions and mergers.

The "2015-2022 China Chain Hotel Market Assessment and Future Development Trend Research Report" released by China Industry Information Network shows that Ctrip and its three major OTA platforms, Qunar and Elong, together accounted for 2015 The online hotel transaction market share exceeds 70%.

4. The development trend of bidding ranking deserves attention

When the supply of the accommodation industry exceeds demand, some hotels seek their own temporary interests at the expense of the overall long-term interests, and are trapped in a prisoner's dilemma. Extricate yourself and gain market share at reduced prices on OTA websites. For hotels exclusively recommended by online travel agencies, the commission for each room is more than 100 yuan.

The U.S. government has strict regulations on Google’s business model, and the Chinese government also has clear regulations on Baidu’s bidding rankings. The specific principles should apply to online travel agencies.

5. Winning suggestions for the accommodation industry and online travel agencies

1. Industry organizations should determine a reasonable commission rate reference range for online travel agencies

For example , 6 to 10. The commission rate currently charged by OTA is 15 to 20, and its gross profit margin is more than 75.

"Several Opinions of the General Office of the State Council on Accelerating the Reform and Development of Industry Associations and Chambers of Commerce" (Guobanfa [2007] No. 36), which provides guidance on expanding the functions of industry associations, promoting the reform of industry association management systems, and strengthening industry The association has put forward clear requirements in terms of its own construction and improvement of support policies. The "Opinions of the State Council on Accelerating the Development of the Tourism Industry" even clarifies the timetable for the reform of tourism industry associations: "Within five years, the personnel and financial relationships of various types of tourism industry associations at all levels must be decoupled from tourism administration and other departments."

In the early years of the Republic of China, a few hotels in Shanghai organized the Shanghai Hotel Industry Association to cope with various circumstances, becoming the earliest industry organization. In 1925, in the French Concession, some inns organized the French Inn Association and registered with the French Consulate.

Currently, Shanghai’s banking industry already has a trade association. The ultimate goal of the hotel industry organization is the trade association. The Chinese hotel industry needs a trade association that protects its overall interests and formulates the rules of the game.

Industry organizations can initiate the establishment of industry-wide website platforms based on the principle of fair competition.

Industry organizations serve as a bridge for communication between enterprises and the government, and can also be entrusted by government management departments to draft regulations. Currently, most legal disputes in the accommodation industry in my country are handled in accordance with civil laws such as the General Principles of Civil Law, Contract Law, Company Law, and Consumer Rights Protection Law. Japan, Singapore, France and other countries have promulgated special laws. Hong Kong has also promulgated the "Hong Kong Hotels Law" and "Hotel Proprietors Regulations", and Taiwan has promulgated the "Tourist Hotel Industry Management Rules".

2. The hotel must ensure the advantageous position of direct sales

Ensure that its official website has the lowest price, continue to develop the proportion of direct sales on the hotel's official website, use platform media as allies, and distribute through multiple channels.

If the hotel occupancy rate reaches 60, you can consider reducing the online travel agency port; if it reaches 70, you can consider closing the online travel agency port; if it reaches 80, you can consider closing the distribution system port.

Comparison of booking cost per room: hotel official website is 5 yuan, GDS is 20 yuan, and OTA is 60 yuan.

Comparison of hotel direct sales proportions: The overall direct sales proportion of American hotels is 35, and the proportion of direct sales of traditional Chinese hotel groups is 6; the proportion of Shangri-La Hotels booking through intermediaries does not exceed 7, the proportions of InterContinental, Starwood, etc. are controlled at around 10, and the proportion of Hilton Hotels Pass