(report producer/author: China Merchants Securities, Ding Zhejiangchuan, Li Xiumin, Pan Weiquan)
Online travel (OTA) refers to travel consumers inquiring, booking, paying for tourism products and related tourism services from tourism intermediary service providers or online booking service providers through the Internet, mobile Internet and telephone. It involves consumption content such as hotels, ticketing, tourism agencies, scenic spots, etc. As a supplier of midstream of the industrial chain, online travel has broadened distribution channels for upstream merchants and enriched customer supply, provided travel information for downstream consumers and optimized travel experience. The main body collects commissions through agents, collects price difference wholesale or provides content services to earn advertising fees to achieve revenue. Overall, OTA enterprises have improved the overall operating efficiency of tourism industry chain by solving the problem of upstream and downstream information asymmetry. Currently, industry representative companies such as Ctrip Group, Tongcheng Elong , Tuniu , Meituan Dianping and other well-known companies.
1. Business model: The agency model is the main, wholesale model is the auxiliary, and the content model is the rise
After decades of development, the business model of the OTA industry is now approaching maturity. The traditional OTA model is mainly composed of the agency model, the wholesale model, and the content platform and advertising payment as the core, is gradually emerging. Due to the large variety of upstream suppliers in the OTA industry (involving hotels, airlines, scenic spots, attractions), downstream consumers have diversified demands (iteration planning, hotel reservations, transportation reservations, social media, etc.), and the industry's profit model is relatively mature. OTA companies each deepen their own advantageous areas to build competitive barriers for differentiated competition. Specifically, they can be divided into the following three business models: agency model, wholesale model, and content model.
Agent Model: OTA enterprises, as an online intermediary agent for hotel booking, transportation and tourism services, sell merchant products or provide transaction services for upstream suppliers, and at the same time draw a certain proportion of commissions to make profits in the transaction. This is the mainstream trading model in the OTA industry at present. Because this model has the advantages of high transaction efficiency, stable single transaction revenue, low operating costs, and simple transaction process, it is more suitable for domestic transportation and livelihood products with the characteristics of many consumer numbers, high frequency and high standardization. It is currently the most mainstream transaction form in the domestic OTA industry. Domestic well-known OTA companies such as Ctrip , Tongcheng Elong, and well-known overseas traditional OTA platform Booking are all operated in the agency mode. Specifically, in the agency model, suppliers are responsible for providing product and travel services, while OTA companies are responsible for product marketing, order consultation, and pre-sales and after-sales services and paying corresponding operating costs. Among them, suppliers usually use multiple OTA platforms to go online. Since OTA has a large number of B-end and C-end traffic resources, OTA platform giants such as Ctrip and Tongcheng often have higher bargaining power due to their economies of scale. The commission rate is differentiated according to different product categories, and is generally between 3% and 15%. In recent years, with the gradual growth of the OTA industry, the trend of online travel agencies to offline integration has become increasingly obvious. OTA companies such as Ctrip and Tongcheng have also begun to try to penetrate the direct operation model upstream, but in the long run, agents will still become the mainstream business model of the OTA industry.
wholesale model: OTA companies purchase related hotels, air tickets, tourism and other related services and products from upstream suppliers at low prices, and then sell them to downstream consumers at higher prices, and use this price difference as the main source of profit. Compared with the agency model, OTA companies in the wholesale model are positioned as second-hand middlemen. The way of buying low and selling high often brings higher returns compared to the wholesale model, and also requires higher operating costs and operating risks. OTA companies are usually more common in overseas markets, representing companies such as the world's largest OTA company Expedia.In recent years, with the gradual rise of OTA enterprise direct sales model, domestic wholesale model accounts for less and less, and is only occasionally used in special periods such as tight resources during holidays, and is mostly used in tourism products and services.
content mode: Online travel manufacturers provide consumers with multiple scene information acquisition methods through short videos, travel photos, graphics, sounds and other content, provide merchants with a platform for marketing and promotion, or through user-generated content, allowing users to publish their experiences and experiences of travel itineraries on the website through the Internet, gathering a large number of target traffic through content sharing, social sharing, etc., and charging corresponding advertising fees. Therefore, it is also called the advertising mode. Taking TripAdisor, the world's largest tourism community platform, as an example, the platform contains massive travel information from all over the world, including more than 535 million travel reviews and suggestions, more than 1 million user photos, covering more than 7 million hotels, attractions and restaurants in more than 190 countries around the world. The rich tourism information attracts a wide range of traffic from global travel enthusiasts, making advertising revenue the main source of revenue for the platform. Compared with overseas, there are relatively few OTA companies in China focusing on the UCG field of tourism. Representative companies such as Mafengwo , kuaiyou , which focused on "tourism strategies" in the early years, and Donkey Review.com , which focuses on "hotel reviews", etc., due to the late business model and the difficulty of monetizing traffic, the current advertising revenue accounts for a relatively low revenue among domestic OTA companies.
content mode has a higher dependence on online traffic than other modes. In recent years, with the rapid development of the short video industry, new traffic platforms such as Douyin , Xiaohongshu, and Kuaishou have gradually emerged, providing new empowerment for online travel through short videos, and raising new challenges to traditional OTA companies on the content and traffic side. Take Douyin as an example. As a short video platform with an average daily active user base of more than 600 million, Douyin Travel Video received 227 trillion cumulative video playbacks in 2021, with a total of 112,000 travel content creators and more than 105,000 travel company accounts. The rich video content, platform traffic, and the good combination of short video and online travel makes Douyin have the potential to layout OTA business. The company promotes and promotes the upstream livery and tourism suppliers through short videos and local popular lists. The company's enterprise account allows merchants to accumulate private domain traffic on the platform and make reservations by connecting to third-party platforms such as Ctrip, building a business model of "content + marketing + private domain + transaction".
It is worth noting that due to the more planned long-distance travel, short video platforms such as Douyin and other instant stimulation are more likely to plant local life-related livelihood businesses, which are less planned, making Douyin show the characteristics of large traffic conversion in the hotel and tourism sector, and it is more likely to monetize traffic in the form of advertisements. In the short term, it will be difficult to have a major impact on current traditional OTA companies such as Ctrip and Tongcheng on the trading side. In the long run, we believe that the agency model with the advantages of high transaction efficiency, stable profit model and low operating cost will still be the mainstream business model of domestic OTA companies, and the new model combining content and advertising will have broad prospects in the future.
2. Industry overview: Internet popularization accelerates the development of the online tourism industry, and penetration growth is an important driving force in the future
China's tourism market scale ranks first in the world, and there is broad room for future development. According to iResearch, according to the total number of domestic and inbound tourists, China has become the world's largest tourism market. In 2019, the scale of China's tourism market reached 6.6 trillion yuan, with a compound growth rate of 10.8% from 2017 to 2019, of which 6.006 billion tourists were traveling in the country in 2019, and the compound growth rate of 2017 to 2019 was 9.6%. With the gradual growth of domestic tourists and per capita tourism expenditure in the future, my country's tourism market will have broad room for development in the future. It is expected that the size of China's tourism market will grow to 10.1 trillion yuan in 2025, with the annual compound growth rate from 2020 to 2025 to 2025 to 10.7%. Consumption upgrades drive the growth of demand for quality leisure tourism, and demand for business tourism has shown a steady growth trend. According to tourism purposes, the Chinese tourism market can be divided into business tourism, mass leisure tourism and quality leisure tourism.In 2019, the market sizes of business tourism, mass leisure tourism and quality leisure tourism were RMB 230 million/250 million/190 million, respectively, a year-on-year increase of 9.5%/8.7%/18.8% respectively. With the gradual improvement of national economic life and the continuous growth of per capita disposable income , the quality requirements of consumer for tourism travel have gradually increased. In recent years, diversified tourism models such as self-driving tours, semi-self-guided tours, and customized tours have emerged. Driven by consumption upgrades, quality leisure tourism has become the fastest growing sector. It is expected that its market size will exceed mass leisure tourism in 2024.
Thanks to the rapid development of the tourism industry and the rapid increase in online penetration rate, online tourism has entered the fast lane of rapid growth, accounting for more than 40%. According to Airui Consulting data, the annual compound growth rate of China's online travel industry was 29.9% from 2015 to 2019, and the onlineization rate maintained a continuous upward trend. The proportion of the online travel market increased from 19% in 2015 to 46% in 2021. Affected by the COVID-19 pandemic, the revenue of the domestic tourism industry in 2021 reached 2.92 trillion yuan/year growth of 30.94%, of which the online tourism market size was about 1.33 trillion yuan/year growth of 34.8%, and the offline tourism market size was about 1.59 trillion yuan/year growth of 54.4%.
Internet popularization accelerates the development of the online travel industry, with the monthly active users of online travel reaching 400 million. my country's Internet penetration rate continued to rise from 4.6% in 2002 to 73% in 2021, with an annual compound growth rate of 14.8%. Mobile Internet users increased from 875 million in 2014 to 1.349 billion in 2020, with an annual compound growth rate of 6.4%. The popularization of the Internet has promoted the transformation from offline ticket booking to online ticket booking. The convenience of online services has made online travel service platforms largely replace offline travel agencies and become a priority choice when people have travel needs. As of the end of 2020, the number of monthly active users of online travel in China reached 432 million/year increase of 5.4%. The continuous increase in penetration rate of
will be the main driving force for the development of the online travel industry in the future, and OTA is the core channel of online travel. In the long run, the trend of increasing penetration in my country's online travel market has become prominent, and the proportion of the online travel market size increased from 19% in 2015 to 46% in 2021. At a time when the epidemic continues to limit domestic tourism demand, the growth rate of the domestic tourism market has slowed down. The growth of online tourism in the future will mainly come from the increase in penetration rate, especially in third-tier and below cities. OTA is the core channel of the online travel industry. According to iResearch Consulting data, in 2019, transactions conducted through OTA channels accounted for about 69% of the online travel market, and self-operated channels accounted for 31%, which is basically the same as in previous years.
3. Market segment: Online accommodation and online transportation have broad future development space, grasp the opportunities for increasing penetration rates in low-tier cities
Since the planning of traditional tourism activities is mainly composed of three parts: transportation, accommodation and entertainment consumption, the market segment of online tourism can also be divided into three sectors: online transportation, online accommodation and online vacation. Specifically, there are many segments of online travel, such as online travel, which can be divided into air tickets, train tickets, bus tickets, and boat tickets. Online accommodation can be divided into chain hotels, independent hotels, online B&B . Online vacations can be divided into outbound travel, cross-provincial travel, short-distance travel, peripheral travel, etc. Major OTAs have created relative competitive advantages and differentiated business models around major market segments based on their own resource endowments.
In terms of market size and onlineization rate, the online transportation field has the largest market size and the highest onlineization rate. In 2021, the scale of China's online transportation market reached 979.4 billion yuan/online rate of 62%, accounting for 74% of the online travel market; the scale and proportion of the online accommodation and online travel and vacation markets were relatively small. In 2021, the market size was 230.3 billion yuan/online rate of 40%, and 121 billion yuan/online rate of 12%, accounting for 17% and 9% of the online travel market respectively. The OTA rate of online accommodation and tourism and vacation is over 80%, and the penetration rate of online transportation is relatively low. Overall, the space for OTA rate optimization in major sub-sectors will be relatively limited in the future.The online travel market is further segmented by channel, and can be divided into two categories: online direct sales and online travel agents (OTAs). According to data from Airui Consulting, the OTA rates of online transportation/online accommodation/online travel and vacation in 2019 were 63%/82%/83%, respectively. The OTA penetration rate in the transportation field with the highest degree of onlineization is lower than that of accommodation and tourism and vacation. This is mainly because the online business in the transportation field is closely related to people's livelihood and is subject to stricter industry supervision. It is relatively difficult for OTAs to obtain agent licenses, as well as the market concentration of railways and civil aviation companies is high and the scale effect is strong, such as "
online air ticket market size and online rate are the highest, followed by online train tickets. Specifically, the online transportation market can be subdivided into four categories: air tickets, train tickets, bus tickets, and boat tickets. According to iResearch Consulting, in 2021, the market transaction scale of online air tickets, train tickets, bus tickets and boat tickets will account for about 53%, 43%, 4% and 0.2% of the online travel market transaction scale, among which the more traditional air tickets and train tickets have the highest online rate, reaching 89%/80% in 2021, far ahead of other segments, while the online rate of bus tickets and boat tickets is only 8% and 12%, which has a lot of room for improvement in the future.
Online transportation Market penetration rate rapidly improves to promote the rapid development of the industry, and the industry recovers the fastest after the epidemic. According to iResearch Consulting data, China's online transportation industry developed rapidly from 2015 to 2019, with an annual compound growth rate of up to 27.7%. In recent years, the industry's online penetration rate has continued to increase, rising to 53% in 2019, a 5pct increase from 2018, which is an important reason for promoting the rapid development of the industry. Affected by the COVID-19 pandemic, the scale of the online transportation industry has declined significantly after 2020. The market size in 2021 was 979.37 billion yuan/+30%, which has recovered to 82% in the same period in 2019, making it the fastest recovering sector among the three major sub-industry. Among them, transactions conducted through OTA channels account for about 63%, and self-operated channels account for 37%, and the OTA rate remains stable all year round.
Online accommodation booking market has grown steadily, with a penetration rate exceeding 40%. From 2015 to 2019, the annual compound growth rate of China's online accommodation booking market reached 28.2%, maintaining a rapid growth trend all year round. In 2021, the online accommodation booking market size was 230.3 billion yuan, a year-on-year increase of 36%, and has recovered to 77% in the same period in 2019. In 2019, transactions conducted through OTA channels accounted for about 82%, and self-operated channels accounted for 18%, which is basically the same as in 2018. In the future, the OTA rate in the online accommodation booking industry is expected to remain stable in the long term. In recent years, the OTA rate of the online accommodation booking industry has shown a slow downward trend, from 88% in 2013 to 82% in 2019, mainly due to the continuous increase in the chain rate of the hotel industry in the early years, the concentration brought about by the accelerated integration of upstream suppliers' chain hotel industry, and the continuous development of online self-operated business of hotel leaders. With the disappearance of dividends in the mobile Internet era, the increase in customer acquisition costs of online accommodation booking companies, and leading OTA companies have also established good cooperative relationships with upstream suppliers. The OTA rate is expected to remain stable in the long run in the future.
The online vacation market has the fastest growth rate, and it has recovered slowly due to the impact of the epidemic. From 2015 to 2019, the annual compound growth rate of China's online vacation market reached 44.9%, making it the fastest growing industry among the three major segments. The online vacation market size in 2021 was RMB 121.02 billion, a year-on-year increase of 95%, and has recovered to 39% in the same period in 2019. In 2019, transactions conducted through OTA channels accounted for about 78%, and self-operated channels accounted for 22%, which was basically the same as in 2018. In the long run, the OTA rate in the online accommodation industry has a slow decline, mainly due to the gradual transformation of the domestic tourism market to a miniaturization and personalized service model, and the proportion of group tours has gradually decreased, and the rise of semi-self-guided tours, customized tours, free travel and other forms.
Since the commission rate reflects the bargaining power of the midstream of the industrial chain and the added value of the industrial chain that can be provided by major links, there are significant differences in commission rates between sectors. Specifically, the hotel industry has the highest commission rate, and the transportation field has a low commission rate and limited room for optimization.The commission rate for hotels is generally around 10%. The specific situation is determined based on the hotel star rating, the hotel platform supply chain and the traffic diversion effect of the OTA platform. It is the sub-track with the highest commission rate. On the one hand, consumers of hotel users are usually highly loyal to the brand, especially the relatively stickyness of mid-to-high-star hotel customers, making it easier for leading hotel groups and OTA platforms with resource advantages to form a stable pattern; on the other hand, due to the long construction cycle of hotels and high initial investment, they belong to the long-term industry of heavy assets , and inventory is an important barrier for major hotels. Therefore, major OTA platforms are also trying to use investment, acquisition, merger and acquisition methods to layout the hotel supply chain. By cooperating with major hotel chain groups to develop hotel self-operated business, penetration into the upstream with a relatively light asset model, the commission rate of the hotel industry still has room for continuous optimization in the future.
The commission rate in the online transportation field is low, and there is little room for future commission rate optimization due to policies. The transportation level is mainly divided into two areas: air tickets and bus tickets. In terms of air tickets, since 2015, the State-owned Assets Supervision and Administration Commission has required the three major state-owned airlines to increase the direct sales ratio to more than 50%, and the agency fees have dropped by 50% year-on-year, which has greatly limited the profit margin of OTA in the air ticket field. Currently, the airline agency commission rate is about 1-2%. In the field of tickets, due to the high degree of nationalization of railways in my country, the main issuer is China Railway Company . Its official booking channel 12306 platform has developed well, further limiting the space for the increase in the OTA rate and commission rate of the online train ticket business. To sum up, we believe that the three major market segments of OTA, online accommodation and online transportation, will be the must-fight place for the OTA industry in the future. Among the three major market segments, the online accommodation booking industry has the best future development prospects. On the one hand, the hotel industry has a broad market space and the online booking industry has maintained a high growth rate of more than 30% all year round, and the commission rate is relatively high (about 10%). Because hotels have a certain entry barrier due to their long-term heavy asset attributes, they have certain entry barriers. For OTA companies, developing the upstream hotel supply chain through self-operation and other methods can create core competitive advantages. There is room for long-term optimization of the monetization rate, which is the track with the most profitable prospects in the future. On the other hand, although the trillion-scale scale of the online transportation industry is relatively large and the growth rate is also high, due to the high concentration of upstream airlines and railway companies and policy restrictions, the industry commission rate is relatively low and the growth space is small, which limits the profitability of OTA enterprises' transportation sector. The future growth space mainly comes from the increase in penetration rate in low-tier cities.
2. Industry development: The epidemic accelerates onlineization, the sinking market space expands, the three-legged pattern is stable
1. The development stage of the online tourism industry: from the heroes to the integration of resources, grasp the refined operation in the era of stock
Initial stage (1997-2004): In 1997, a climax of global Internet investment emerged, the Internet began to penetrate into traditional industries with the help of capital, the first batch of tourism websites in China came into being, and Huaxia Tourism Network and Youth Hostel Online were established one after another. In May 1999, Elong was established in the United States and positioned as a city life information website. In October of the same year, Ctrip Travel Network was launched, providing air ticket and hotel reservation services through a combination of e-commerce and call centers. Early OTA companies achieved business and market expansion by acquiring traditional distributors. Ctrip acquired Beijing Hyundai Transport Reservation Center and Beijing Coast Air Services Co., Ltd. in 2000 and 2002 respectively. Elong acquires Bateloon and its e-commerce website to enter the tourism service industry. In December 2003, Ctrip was launched on Nasdaq , and in October of the following year, Elong was launched. OTA companies in the initial stage have gradually clarified their development route through exploration and attempts. Their business is mainly based on accommodation and transportation bookings with a high degree of standardization, and at the same time provide users with relevant travel information and other information services.
Rapid Growth Stage (2004-2010): Many OTA companies have been established one after another, and the online travel industry is showing a trend of diversified and differentiated development. In 2004, Tongcheng was established and early provided B2B services in the tourism industry.In 2005, Qunar was established as a travel search engine, providing users with timely travel product price inquiry and information comparison services. In 2006, Tuniu was established to enter the online travel market from the resort tourism sector, avoiding the head-on competition with Ctrip and Elong in the hotel and air ticket fields. Mafengwo, founded in the same year, is a UGC travel social networking website, providing users with a communication platform for sharing travel notes and strategies. In 2008, Luma was established, taking scenic spot tickets as the entry point, and took the lead in using QR code technology for scenic spot ticket business nationwide, realizing electronic ticket booking and digital customs clearance. There are generally certain differences in business between OTA companies at this stage to fill the demand of various market segments. Thanks to the rapid development of the overall industry, OTA companies have shown a good trend of blooming flowers.
Resource Integration Stage (2010-2016): With the increasing number of OTAs, homogeneous competition is inevitable. In order to compete for customer sources and seize the market, OTAs have launched multiple rounds of price wars in the fields of hotels, tickets, etc. When a platform launches subsidy and cashback activities, in order to prevent users and the market from being seized, other platforms can only follow up and fight back with corresponding or greater preferential measures. The increasingly fierce price war has caused a huge drag on OTA's performance, and the model of burning money to grab the market is difficult to maintain, which eventually led to the integration of resources in the entire industry, and a large number of small and medium-sized enterprises have been cleared out, and the market concentration has been significantly improved.
Hotel field: Hotel reservations, as the largest segment in the online travel market, became the main battlefield of OTA at this stage. At the end of 2009, Elong launched two scheduled cashback activities in succession. One is to join hands with Tenpay to launch the "QQ hotel booking cashback", and the other is to join hands with China Southern Airlines to launch the cashback of air ticket booking. In March 2010, Ctrip issued a "Hotel Lowest Price Commitment Letter", claiming that if Ctrip membership prices are higher than the discount price at the hotel front desk or the public price of other similar websites, Ctrip is willing to pay 3 times the compensation. In response to Ctrip's lowest price commitment, Elong promised that "as long as it is higher than Ctrip's quotation, Elong will actively return cash at a 3-fold difference." In July of the same year, Elong significantly increased the discount on online hotel bookings, with a cashback amount of 10%. At the beginning of 2012, Elong's hotel bookings had reached half of Ctrip's, and the price war effect was significant. In July 2012, Ctrip launched its full promotion for US$500 million. In 2013, Ctrip once again launched the "Double Tenth Tourism Shopping Festival" for 500 million yuan. The price war has caused a significant drag on the performance of Ctrip and Elong. Ctrip's net profit in 2012 was RMB 714 million, down 33.6% year-on-year, and its net profit in 2014 was RMB 243 million, down 75.7% year-on-year. Elong's net profit in 2012 was only RMB 470,000, and its net loss in 2013 was as high as RMB 168 million, and continued to decline in 2014.
Ticket field: After years of fierce competition among OTA, the traditional hotel and air ticket market has basically stable structure, and the remaining space for competition is small. Scenic spot tickets have attracted the attention of OTA due to their low online degree and great market potential. The three online travel websites of Ctrip, Tongcheng and Luma spent hundreds of millions of yuan to launch a war of cash back on scenic spots. At the end of 2013, Ctrip announced that it would invest 200 million yuan in the ticket market. Lumama announced that it will invest 500 million yuan in 2014 to help the scenic spot ticket business, striving to become the number one brand of tickets and self-guided tours. Subsequently, the "two-way war" between Ctrip and Tongcheng further escalated the ticket price war in scenic spots. Ctrip has launched more than 5,000 scenic spots ticket cashback activities, while Tongcheng has expanded the number of scenic spots participating in cashback to more than 8,000. The "two-way war" ended with Ctrip investing 200 million US dollars in Tongcheng, connecting the cash-paid business of attractions to Tongcheng.
With the rapid development of the mobile Internet, major OTA companies have begun to switch from PC to mobile Internet. Qunar was the first to form a wireless department, Ctrip launched mobile applications to adapt to the trend of users' gradual transfer from computers to mobile devices, the "mouse + cement" model was transformed into the "thumb + cement" model, and Elong established an innovation fund, specifically used to invest in innovation in mobile tourism. Since 2011, the user entrance dispute has shifted from the PC side to the mobile Internet side, and the price war and brand war of OTA companies have eventually evolved into a capital war to seize the resources of mobile Internet entrances.Internet giants have begun to invest in OTA companies in order to build a complete mobile Internet chain, connect products, and improve user loyalty. Internal mergers and acquisitions of OTA manufacturers have accelerated. OTAs such as Ctrip, Elong, and Tongcheng have been deeply rooted for many years and have accumulated rich resources in users, products, and supply chains. BAT has traffic and capital advantages, and investment enables both parties to achieve complementary advantages. Alibaba launched Taobao Travel in 2010, and later invested in Quickyou.com , Baidu strategically invested in Qunar in 2011, and Tencent successively invested in Tongcheng and Elong. Ctrip continues to expand through horizontal acquisitions. In 2015, it merged with Qunar.com, investing a total of US$50 million in Tuniu and US$400 million in Elong. In addition, within the OTA manufacturer, Ctrip continues to expand through horizontal acquisitions. In 2015, it merged Qunar.com, invested a total of US$50 million in Tuniu and US$400 million in Elong. Currently, Ctrip holds a total of 26.14% of Tongcheng Elong's shares, making it its largest shareholder, and shares inventory with Tongcheng Elong.
Maturity stage (2016 to present): After the previous stage of price war and investment and mergers and acquisitions, the online travel industry has formed a three-legged competitive landscape. Various companies have re-arranged offline stores to promote the integration of online platforms and offline travel agencies. In many low-tier cities, the penetration rate of online travel is not high, and offline stores are still an important channel for people to access tourism information, products and services. Compared with online websites, offline stores allow consumers to conduct face-to-face consultations, enhance their sense of trust, and improve user stickiness through good services.
As the online traffic dividend reaches its peak, various companies have re-planned offline stores to promote the integration of online platforms and offline travel agencies. In many low-tier cities, the penetration rate of online tourism is not high, and offline stores are still an important channel for people to access tourism information, products and services. Compared with online websites, offline stores allow consumers to conduct face-to-face consultations, enhance their sense of trust, and improve user stickiness through good services.
BAT Group has slightly reduced its holdings in the OTA industry, but it is still an important investment partner. Since 2008, Internet giants have begun to make arrangements in the OTA field. Whether it is Ctrip, Tongcheng, Elong, Tuniu, Lumama, or Qiongyou, giants can be seen behind it. However, after experiencing the impact of the epidemic, the giants have reduced their holdings of leading OTA companies to varying degrees compared with before 2020: Tencent's shareholding in Meituan Dianping fell by 292pp in 2018-21, Tencent's shareholding in Tongcheng Travel fell by about 113pp in 2016-21, Baidu's shareholding in Ctrip fell by about 25pp in 2016-21, and Ctrip's shareholding in Tongcheng Travel fell by 343pp in 2018-21.
In the past two years, OTA companies represented by Ctrip have increased their layout in content ecology. In March 2021, Ctrip established a new strategy of "tourism marketing hub", with Planet as the core, community, live broadcast and vertical and horizontal as carriers, aggregated the three core sectors of traffic, content and products, and superimposed on rich travel scenarios to create an open marketing ecological circulation system. Tongcheng and Kuaishou have reached a strategic cooperation on , connecting hotels, scenic spot tickets, etc. to the Kuaishou platform to create a closed consumption loop of "planting grass + pulling weeds". Douyin, which started with short videos, has also set its sights on the online travel track. Douyin's entry has brought new highlights to the future development of online travel.
2. Post-epidemic development: Cross-provincial and long-distance travel is restricted, short-distance travel has become the mainstream, OTA accelerates penetration of the market
Affected by the downward trend of tourism demand brought about by the repeated impact of the new crown epidemic, the domestic tourism market has fluctuated repeatedly, recovering only nearly 50% in the same period in 2019. In 2021, the total domestic tourism revenue was 2.92 trillion yuan, a year-on-year increase of 31%, and has recovered 51% in the same period in 2019; in 2021, the number of domestic tourists was 3.25 billion, a year-on-year increase of 12.75%, and has recovered only 54% in the same period in 2019.At the beginning of 2022, due to the repeated epidemic situation in many places such as Shenzhen and Shanghai and the intensified travel control, the domestic tourism market was greatly impacted. In 2022, the number of domestic tourists in H1 was 1.46 billion, a year-on-year decrease of 26%. The decrease in the number of travelers led to a significant decline in tourism revenue. In 2022, the domestic tourism revenue in H1 was 11,700 yuan, a year-on-year decrease of 28%. In addition, the income of major holidays such as the Spring Festival, Qingming Festival, May Day, and Dragon Boat Festival generally recovered from 40% to 60%, far lower than the recovery level in the same period last year (about 70%-80%).
Repeated COVID-19 pandemic, tourism market revenue fluctuations have intensified, and cross-provincial travel circuit breaker mechanism has been introduced many times, and precise prevention and control has become the main theme. Since 2020, the new crown epidemic has repeatedly had a serious impact on the tourism market. Policies related to "circuit breaking" and lifting the ban on cross-provincial travel have been introduced many times, becoming a key factor in the fluctuation of the tourism market. The epidemic prevention policy has gradually improved from the initial prevention and control of the province and the city to the precise prevention and control of the tourism market by region and street, effectively promoting the recovery of the tourism market.
Cross-provincial and long-distance travel is restricted, short-distance travel has become the mainstream, business and travel demand has decreased, and the popularity of surrounding and local tours continues to increase. The epidemic has caused a nationwide decline in mobility, and cross-provincial travel has been greatly affected. The proportion of intra-provincial tourism and cross-provincial tourism during the National Day holiday in 2020 will be about 7:3, and intra-provincial tourism will account for more than 90% of the Dragon Boat Festival in 2022. The average travel distance has also continued to shorten from 213 kilometers on National Day in 2020 to 107.9 kilometers on Dragon Boat Festival in 2022. Long-distance travel is restricted, and the popularity of surrounding and local tours is constantly increasing. The popularity of "at the doorstep" scenic spots is rising, and camping tours have become a popular choice for leisure and vacation.
htmlFree travel has emerged in the post-epidemic era. Affected by the "circuit break" mechanism of cross-provincial travel, offline travel agencies have recovered slowly. From the supply side, the number of domestic travel agencies reached 42,604 in Q1 2022, and the number of travel agencies remained basically stable. The number of domestic travel agencies received 11.77 million people, a year-on-year decline of 44%, only recovering to 19% of the same period in 2019. In Q1 2022, the number of domestic travel agencies recovered even slower (47% of the year-on-year recovery in 19 years). This is mainly due to the implementation of various cross-provincial travel circuit breaker mechanisms in the post-epidemic era. The trend of free travel is gradually emerging, and the proportion of individual and leisure travel is gradually increasing.Due to the influence of travel habits, the proportion of OTA channels has increased, and content platform OTAs accelerate their penetration into the market. Due to the repeated influence of phased policies, residents are more inclined to local and short-distance tours, and changes in demand for upstream tourism have brought new changes to the OTA industry structure. On the one hand, according to Bida Consulting data, the proportion of surrounding tourism increased from 20.8% to 75.9% before and after the epidemic. Replacement of outbound travel has become the most mainstream tourism model at present. On the other hand, the decline in the proportion of travel agencies has also further increased the proportion of OTA channels. In addition, since long-distance travel is more planned, surrounding tours are relatively more improvised, playing a good synergy with short videos, live broadcasts and other methods on the traffic end. It also accelerates the penetration of content platform-based OTAs such as Douyin and Kuaishou within the OTA channel.
The epidemic has accelerated industry integration, and the private domain traffic of leading enterprises continues to expand. In recent years, as the impact of the epidemic has brought strong uncertainty to the operation of the hotel industry, some small and medium-sized hotels have accelerated clearance, and small hotel chain brands have slowed down their opening pace, promoting the growth trend of industry concentration and chain rate. As the industry accelerates integrated marketing, the hotel chain group has expanded its user base through private domain traffic. As of 2021, the number of members of the CTO/Huazhu/Jinjiang Hotel has 13/19/180 million, an increase of 6.4%/14.2%/15.2% respectively year-on-year. The direct sales ratio is expected to further increase in the future.
Under the influence of the epidemic, hotel occupancy rate in Q2 declined rapidly, and inventory accumulation drove the growth of OTA demand. According to STR data, the domestic hotel occupancy rate in April-June 2022 was only 42%/38%/52%, a year-on-year decline of 28%/24%/15%, and the average house price was 365.1/369.9/390.5 yuan, a year-on-year decline of 30%/27%/20% compared with 2019.Due to the impact of the epidemic, hotel occupancy rate and average housing prices both declined significantly in 2022Q2, and the inventory accumulation in the hotel industry has intensified. Moreover, due to the more serious vacancies in high-star hotels, the high-star hotel side needs to find differentiated people through downstream OTA channels for distribution, which promotes the continuous growth of OTA demand. The proportion of high-star hotel structures such as Tongcheng Elong and Meituan has increased, which has posed a certain challenge to Ctrip's original business model of binding high-end hotels and business travelers. With the gradual relaxation of all epidemic prevention and control in July-August and the recovery of summer travel and parent-child travel, the domestic hotel occupancy rate has recovered to 60% from July-August 2022 (72% recovered in the same period in 2019). The national night supply and demand gap between July-August in the country changed by +21%/-32% year-on-year. With the recovery of tourism demand, the hotel supply and demand gap decreased significantly year-on-year. Overall, the hotel sector recovered relatively stable.
Online hotel reservation users in first- and second-tier cities account for more than 60%, and the penetration rate of the sinking market has a lot of room for improvement. Currently, 60% of online hotel booking users are located in first- and second-tier cities, and only 40% are located in third-tier and below cities. In 2019, 32% of online hotels have effective new users from first- and second-tier cities, and 68% are from below third-tier cities, low-tier cities and has become the most important incremental market in online hotels. In addition, the penetration rate of online hotel booking users in third-tier and below cities is only 19.6%, far lower than that in first-tier (40%) and second-tier cities (30%), and there is broad room for improvement in the future.
3. Competitive pattern: The industry concentration is high, Ctrip's system accounts for half of the market, and the pattern is expected to remain stable for the long term
The industry concentration is high, and Ctrip's system accounts for half of the market. With the first-mover advantage, the business traveler group with high consumption capacity and stickiness obtained by high-tier cities has achieved a high-level city with high-end market share (GMV) of Ctrip in 2021 reached 36.3%/-4.4%, and the slight decline in year-on-year share was mainly due to the accumulation of high-star hotel inventory during the epidemic. The market share of Meituan and Tongcheng Elong increased slightly, with Tongcheng Elong's market share (GMV) reaching 14.8%/+1.9%, of which Meituan's market share (GMV) reaches 20.6%/+1.7%; Qunar Travel's market share (GMV) reaches 17.5%; Tongcheng Travel achieves rapid and stable growth through the introduction of WeChat traffic. In 2021, the OTA industry's CR4 was as high as 86%/-4.4%, an increase of 13pct compared with 2019. Overall, the phenomenon of repeated epidemics that have had a great impact on long-distance travel and business travel still exists. The market share of Ctrip (Ctrip + Qunar), which focuses on high-star hotels and business travel, has decreased, causing a slight decline in CR4. In the long run, the industry concentration is still expected to maintain an upward trend.
Online transportation market Ctrip accounts for nearly 70%, and the resources of the online vacation market continue to be concentrated in the top. Based on the transaction volume in 2019, Ctrip's market share reached 35.5%. The Ctrip's (including Qunar) accounts for half of the online transportation ticketing market with a market share of 54.6%. As a joint venture between Ctrip and Tencent, Tongcheng Elong also accounts for 13% of the transportation market. Fliggy Travel has achieved rapid growth backed by Alibaba's strong ecological layout, with a market share of 16.1%. The online transportation ticketing market maintains a relatively high market concentration. In 2018, Tuniu ranked first in the industry with a market share of 28.4%, Ctrip ranked second in market share of 24.7%, Luma ranked third, and Tongcheng Elong ranked fourth with a share of 10.4%. The online vacation industry has a CR4 of up to 82.7%, an increase of 2.2pct from 2017, and resources continue to concentrate on the head.
misaligned competition and win-win growth, and the pattern is expected to be stable in the long run. As the Internet dividends in the OTA industry gradually fade, the future development of OTA companies will mainly come from expanding new user customers in low-tier cities and fine-grained operations to meet the differentiated needs of retained users. Major OTA companies each create diversified business models based on their core customer groups to compete in dislocation. (1) In terms of business model: As the industry leader, Ctrip has a first-mover advantage in scale, technology, brand and user minds, and is the first to seize high-tier cities and grasp the core business and travel customer base; Tongcheng is backed by Tencent's entrance and has obvious advantages in traffic, and has a huge user base in low-tier cities; Meituan has entered the hotel and tourism industry with its high-frequency traffic advantages and local life attributes, and has a strong development momentum; Fliggy, as a travel brand under Alibaba, has data support and traffic advantages.(2) Market positioning: Ctrip is positioned in mid-to-high-end business travel, with target markets being first- and second-tier cities and the top third-tier cities. Tongcheng Travel and Meituan Youth Travel are positioned in mid-to-low-end markets, and Ctrip and the latter two have little competition. In terms of service scope, Ctrip mainly focuses on long-distance travel in other places, with a small number of short-distance travel, Tongcheng mainly focuses on off-distance travel, while Meituan focuses on local life. (3) User base: Ctrip is preferred by business people and young white-collar workers. Tongcheng's users are mainly young white-collar workers and small town youth, while Meituan is preferred by young white-collar workers, small town youth and student groups. In terms of traffic sources, Ctrip mainly uses its own traffic, Tongcheng mainly uses WeChat traffic, and Meituan relies on takeaway traffic to attract traffic. Therefore, on the cost side, Ctrip is the highest, Tongcheng is second, and Meituan is the lowest. Therefore, overall, we believe that the current major OTA leaders share industry growth through misaligned competition, and the three-legged market structure is expected to remain stable in the long run.
4. Competitive barriers: creating a basic user base, supply chain capability, products and services OTA moat
Competitive barriers are the core competitiveness of enterprises to enhance market share. We believe that the competitive barriers of OTA enterprises lie in the basic user base, supply chain capability, products and services. If you want to discuss the future development of the competitive landscape of the industry, it is indispensable to discuss the competitive elements of the industry. In terms of market share, the OTA industry presents a high-concentration pattern. Top3 companies have grasped nearly 90% of the market, and there is little room for improvement in market share; and in terms of market space, the profit space of OTA is determined by the industry scale, onlineization rate, OTA rate and commission rate. Among them, the popularity of the Internet in the online travel industry determines the onlineization rate, and the commission rate essentially reflects the bargaining power in the industrial chain link. With the gradual stability of the OTA rate, the future growth of the industry mainly comes from the growth of the onlineization rate in low-tier cities and the increase in commission rate under refined operations. Therefore, overall, we believe that the key competitive factors that OTA companies can increase their market share are users, supply chains and products.
The basic user base benefited from the company's early first-mover advantage and is the foundation for OTA companies to settle down. Since 2010, OTAs have started multiple rounds of price wars in order to compete for traffic and customer sources, and have ushered in a wave of investment and mergers and acquisitions under the promotion of BAT and other companies. The direct result is that users and traffic are concentrated in the leaders, which makes major OTA companies currently have a stable user base and traffic source, and the user mind is relatively solidified, which is also the reason why the current competitive landscape tends to be stable in the long term. Specifically, user scale affects OTA's bargaining power in the industrial chain, customer acquisition costs and user attributes affect the space for OTA's business expansion, and customer acquisition costs depend on the source of the enterprise's traffic. As the Internet traffic reaches its peak, OTA companies' customer acquisition costs have risen. Obtaining users' minds, improving user retention, and exploring user value through refined operations has become the key points of OTA companies' competition.
Product and service quality affects customer retention and ensures the stability of OTA enterprises' long-term operation. The product is in a direct user-oriented stage, and product attributes affect repurchase rates, and product types affect core customer groups and extension space. Creating a diversified product system and promoting product-side innovation will not only help prevent business risks brought by external uncertainties, but also help improve customer retention and reach and cover a wider user base, building a solid moat for OTA companies. At present, as online travel clients enter the era of refined operations and the enhanced supply chain capabilities further open up the extension space of OTA product portfolio, major OTA companies combine their own core customers to launch targeted live and travel product portfolios to cater to the current trend of changing customer travel needs under the rise of "quality travel", "leisure travel" and "parent-child travel". Grasping customers' core needs to improve user stickiness will help ensure the long-term stability of OTA operations.
3. Comparison of company: Ctrip Business Travel, Tongcheng Sinking, Meituan Local, misaligned competition and win-win incremental
1. Ctrip Group: a leading online travel service provider, building a one-stop travel platform around leisure and business travel needs
1.1 Company development: Deeply cultivated the industry for 20 years, accumulate strength and achievement in the leading online travel service industry
Ctrip is a leading enterprise in my country's online travel service industry. It adheres to the principle of "user-centered" and provides users with diverse travel products and convenient one-stop service experience. Ctrip was founded in 1999, listed on Nasdaq in 2003, and was listed on the Hong Kong Stock Exchange for the second time in April 2021. Currently, the company provides users with one-stop services such as accommodation reservations, transportation ticketing, travel and vacations and business travel management. It is China's leading online travel service provider. Ctrip's development history can be divided into four stages: start-up stage, steady development stage, expansion stage and strategic transformation stage. Start-up stage (1999-2003): In-depth exploration of operational models, acquire traditional tourism distributors, and expand their own strength. Ctrip was founded in 1999 and provides air ticket and hotel reservation services through a combination of e-commerce and call centers. In 2000, Ctrip acquired Beijing Hyundai Express Reservation Center with hotel reservations as the entry point. In 2002, Ctrip targeted its rapidly rising air ticket business and acquired Beijing Coast Air Services Co., Ltd., which covered 35 cities in the same year. In 2003, Ctrip was listed on Nasdaq.
is in a steady development stage (2004-2010): The air ticket and hotel business have developed rapidly, and have initially established the leading position in the online travel service industry. In 2004, Ctrip launched the first international air ticket online booking platform in China, and soon began to enter the business and travel management market. In 2007, the monthly air ticket sales exceeded 1 million, the number of members exceeded 40 million in 2009. In 2010, mobile applications were launched to adapt to the trend of users' transfer from computers to mobile devices. Expansion stage (2011-2016): External competition intensifies, and Ctrip accelerates its expansion through investment and mergers and acquisitions. Alibaba and JD.com have begun to deploy online travel. Meituan, which started with group buying business, has gradually launched hotel and ticket booking services. Competition in the online travel service industry has intensified. Ctrip, Elong and Qunar have all seized market share through subsidy cashbacks, setting off a price war. Since 2014, Ctrip has successively invested in Tongcheng, Elong and Qunar. In 2016, it acquired Tianxun for global expansion and has successively reached strategic cooperation with many related companies in the industry. Strategic transformation stage (2017-2022): Expand the international market and increase the content strategy. In 2017, Ctrip launched Trip.com mobile app and online website to global users, and the following year it became the world's largest online travel platform under the statistics of the total commodity transaction volume. In 2019, Ctrip announced its G2 strategy, moving towards high quality and globalization. In 2020, the "Tourism Revival V Plan" was released to promote the recovery of the tourism industry. In 2021, Ctrip established a new strategy of "tourism marketing hub", with Starball as the core and community and live broadcast as the carrier to increase the ecological layout of content.
The company's main businesses include accommodation reservations, transportation ticketing, travel and vacation, business and travel management and other businesses, and meet the various booking and travel needs of leisure and business travelers through a one-stop travel platform. According to the prospectus, by the end of 2020, the company was able to provide more than 1.2 million global accommodation services, more than 480 international airlines, and more than 310,000 global activities, and work with more than 30,000 partners to meet the changing needs of customers. Accommodation booking: Provide users with services to search, compare and book accommodation based on their destination and specific accommodation preferences. Users can further filter and sort search results by price range, star category, location, brand and convenience. By the end of 2020, the company provided more than 1.2 million global accommodation services, covering a wide range of hotels, motels, resorts, residences, apartments, homestays, guesthouses and other properties. Transportation Ticketing: Provide users with ticket information inquiry and ticket booking services, including air tickets, train tickets, long-distance bus tickets and boat tickets. The company also provides travel insurance products and various value-added services that simplify ticketing processes.As of the end of 2020, the company's transportation ticketing network covers more than 200 countries and regions. Travel and vacation: Provide users with packaged travel and vacation products, including group tours, semi-group tours, customized tours, etc. It also provides one-stop service for transportation and accommodation, including destination transportation, attractions tickets, local activities, insurance, visas and tour guides. Business travel management: An enterprise travel management system has been developed for enterprise users, and through professional travel service teams, it plans and monitors the enterprise's travel activities, provides travel management and control services, and plans business travel for users in a cost-effective way. Other businesses: mainly include online advertising and financial services.
1.2 Equity structure: The equity structure is scattered, Baidu is the largest shareholder, the executive team is rich in experience
The company's equity structure is scattered, Baidu is the largest shareholder. Directors and executives hold a total of 6.6% of the shares, Liang Jianzhang, Fan Min and Sun Jie hold 3.6%, 1.4% and 1.3% of the shares respectively, while other directors and executives hold a total of 0.3%. Baidu holds 10.9% of the shares and is the company's largest shareholder. Pzena Investment Management, LLC holds 6.6%, T.ROWE PRICE ASSOCIATES, INC. holds 5.1%, MIH Internet SEA Private Limited holds 5.5%, and Morgan Stanley holds 5.9%.
The company's management team has rich experience in industry and stable employment. The four co-founders (Liang Jianzhang, Fan Min, Shen Nanpeng, Ji Qi) have held important positions for a long time since the establishment of the company. They have more than 20 years of experience in the OTA industry or hotel industry, and their core team is relatively stable.
1.3 Operating situation: Focus on the "Hotel and Tourism" + "Transportation" sector, the epidemic has brought new challenges to the company's development.
The company's revenue and profits have maintained a steady growth trend for a long time, and the company's operations are under short-term pressure due to the repeated epidemic. From 2017 to 2019, the company's revenue was RMB 26.78/30.97/35.67 billion, respectively, with a corresponding CAGR of 10.02%. During the same period, the company's net profit attributable to shareholders showed a fluctuation and upward trend, corresponding to a CAGR of 48.47%, and achieved a net profit attributable to shareholders of 7.011 billion yuan in 2019. The new crown epidemic in 2020 has brought a significant negative impact on the online travel service industry. Since the company's core customer groups are business travelers and white-collar workers, the flow of long-distance travel and outbound tourists has been severely damaged, the company's performance has been under short-term pressure. In 2020, its revenue fell to 18.32 billion yuan/-48.6%, and its net profit attributable to shareholders fell to -3.247 billion yuan/-146.3%. With the improvement of epidemic prevention and control, the company's revenue rebounded in 2021, its losses decreased, and its operating conditions improved.
Accommodation reservation, transportation ticketing, travel and travel management are the company's four main businesses, and accommodation and transportation reservations are the company's most important sources of income. In 2021, the proportion of revenue from accommodation booking, transportation ticketing, tourism and vacation, business and travel management and other business was 40.7%/34.5%/5.5%/6.7%/12.6% respectively. From 2017 to 2021, the proportion of accommodation booking and transportation ticketing revenue was in the range of 35%-45%, and the sum of the revenue of the two businesses accounted for more than 75%. In recent years, with the gradual diversification of the company's business and the impact of the epidemic on the OTA industry, the proportion of accommodation booking and transportation ticketing revenue has shown a slow downward trend, but in the long run, it is still the company's most important source of revenue.
The post-epidemic era of tourism and vacation revenue is under great pressure, and business and travel management revenue growth is strong. The compound growth rate of the company's tourism and vacation business revenue from 2017 to 2019 was 23.6%. The epidemic in 2020 caused a huge impact on the tourism industry, and tourism and vacation revenue fell by 72.6% year-on-year. Due to the continued restriction of cross-provincial long-distance travel, it was in 2021. From 2017 to 2019, the company's business and travel management business developed rapidly, with a compound revenue growth rate of 29.1%, the highest among all businesses. In 2020, due to the impact of the epidemic, the demand for business travel dropped sharply, and the revenue of business travel management fell by 30.1% year-on-year. With the improvement of the epidemic prevention and control situation in 2021, enterprises resumed production and work in an orderly manner, economic activities were on track, and the revenue of business travel management increased by 53.6% year-on-year, which was significantly higher than other main businesses.
The company's gross profit margin remained at a high level and was relatively stable, and its profitability declined significantly due to the impact of the epidemic. As the industry leader, benefiting from the scale effect and high operational efficiency, Ctrip's gross profit margin has maintained a high gross profit margin level between 77% and 82.5% for a long time.From 2017 to 2019, the company's operating profit margin and parent-attributable profit margin showed a fluctuation and upward trend. Since 2020, due to the impact of the epidemic, the loss range has gradually narrowed. In the post-epidemic era, the R&D expense rate showed an upward trend, and the sales and management expense rate decreased. The epidemic has brought great pressure to the company's business and expense control has become stricter. The R&D expense ratio has remained at a high level for a long time and has continued to rise since 2019, mainly because the company has increased R&D investment in the four major directions of content, products, quality and supply chain, and launched various innovative projects during the epidemic. The sales expense ratio has shown a downward trend since 2018, mainly because investment and mergers and acquisitions have stabilized the competitive landscape of the online travel service industry, and the costs required for sales and marketing have been reduced accordingly. In addition, the epidemic has suppressed market demand, resulting in the company's stricter control of sales expenses. The administrative expense ratio dropped from 19.9% in 2020 to 14.6% in 2021, mainly because the company continues to improve the automation rate and staff efficiency of customer service centers and achieves streamlining of staff structure.
1.4 Competitive advantages: bind the core users of business travel, deepen the supply chain and product services, and the core basic market is stable under the first-mover advantage and scale effect
1.4.1 bind the core customer group of business travel, the basic user base is superior, and the traffic end still has room for improvement
As a pioneer in the domestic online travel industry, Ctrip has deployed the online accommodation reservation and transportation sector earlier. After years of development, the early first-mover advantage has formed a relatively obvious brand advantage and scale advantage, and the basic user base is excellent. Since the early online travel penetration rate showed a top-down feature, Ctrip keenly grasped the trend of industry development and accumulated a large number of business travelers in high-tier cities through exploring business models and price wars in the early stage. The user stickiness and loyalty of this type of customer group have made Ctrip gain a relatively stable user base in high-tier cities, and its brand image is deeply rooted in the hearts of the people. Ctrip is bound to core business travel and white-collar customer groups, and its users are concentrated in first-tier, new first-tier, second-tier and other high-tier cities. It also presents characteristics such as strong payment ability, low price sensitivity, and high user stickiness. Ctrip is positioned in mid-to-high-end tourism services, and its user base is mainly working people with strong payment ability and low price sensitivity. In terms of regional distribution, the proportion of users in first-tier and new first-tier cities is about 43%, indicating that users in higher-tier cities prefer Ctrip. In terms of consumption level, the proportion of medium and above consumer users is 86.7%, higher than Tongcheng and Meituan, and is at the forefront of the industry.
Ctrip's core monthly active users are mainly young people between the ages of 24 and 35. Compared with Meituan's customer base between the ages of 30 and 35, it is Ctrip's advantageous area. According to data from iResearch Qianfan, in May 2022, Ctrip's active users were 43.21 million, of which nearly 60% were users aged 24-35, and nearly 75% were users under 35, indicating that Ctrip has a strong attraction to young people. Compared with Meituan, which focuses on local consumption among young groups, we can find that the advantageous area of Ctrip's users is young customers aged 30-35 in high-tier cities. This type of customer group has strong consumption capacity, large demand for business and travel and quality tourism, and low price sensitivity. A stable customer base of medium and high consumption levels is Ctrip's core advantage on the user side, providing strong support for its revenue growth.
1.4.2 Accommodation and transportation are moving forward in unison, establishing its own hotel brand to penetrate the upstream of the industrial chain, and deepening the supply chain has achieved remarkable results
Ctrip started with accommodation and transportation booking business, expanding the upstream supply chain through strategic investment, and maintaining long-term cooperative relationships with major high-star hotels. As the reservation method is transferred from offline to online and product homogeneity becomes more and more serious, accommodation and transportation product suppliers have to rely on online platforms to attract traffic. The huge user group makes Ctrip often in a favorable position when bargaining with hotels, and a stable medium and high consumer customer base helps Ctrip become the first choice for high-star hotel distribution. Ctrip has been deeply engaged in hotel booking business for many years, strengthening its relationship with upstream suppliers through investment, strategic cooperation, etc., and has stable cooperation with hotel groups such as Huazhu and Junlan to build a solid moat for Ctrip in the high-end hotel and tourism sector.
Ctrip hotel room volume was surpassed by Meituan, and the average customer price advantage was highlighted.Meituan has driven the rapid growth of its hotel and tourism business with its traffic advantages and the sinking market. In the first half of 2021, the proportion of hotel booking nights accounted for 47.3%, exceeding the sum of Ctrip (23.9%), Qunar (10.4%) and Tongcheng (10.3%). However, in terms of customer order price and commission rate, Ctrip's high-end hotels have absolute advantages over Meituan's mid-to-low-end hotels. In addition, the customer base of Gaoxing Hotel has higher consumption capacity and stickiness. Coupled with Ctrip's accumulation in the high-end hotel and tourism supply chain, it makes it difficult for Meituan to still have a big gap in revenue compared to Ctrip.
Investment and M&A consolidate existing advantages and lay out the supply chain to create a closed loop of travel services. Ctrip's transportation business is divided into air tickets, train tickets, bus tickets and boat tickets. In terms of air tickets, Ctrip invested in China Eastern Airlines, carried out resource cooperation and technical complementarity, acquired the British air ticket search platform Skyscanner, and accelerated its entry into the international market. According to the 2021 annual report, Ctrip distributes air tickets to almost all domestic airlines and major international airlines, providing flights from more than 470 global airlines, covering more than 2,600 airports in more than 200 countries and regions. In terms of ground transportation, Ctrip has successively invested in Yidao Car Rental and YiHi Car Rental to create a closed loop of air tickets, hotels, scenic spots and ground transportation, providing users with a smoother travel experience.
"Deeply cultivated in China and cared about the world", overseas business ushered in a strong recovery, and global layout improved risk resistance. In recent years, Ctrip has continued to expand its overseas market through investment and acquisitions of related foreign companies and has increased its global influence. From 2018 to 2019, Ctrip's overseas business growth rate was higher than that of domestic, and its revenue share increased from 9.77% to 12.49%. It declined significantly due to the impact of the epidemic in 2020, and gradually recovered as the epidemic improved. In recent years, with the repeated domestic epidemics, the recovery of overseas markets has become an important driving force for ensuring performance. The global layout has made Ctrip have stronger risk resistance compared to other OTA platforms. The recovery momentum of overseas business in Q1 2022 was strong, with hotel bookings on international platforms rising by about 25% compared with the same period in 2019, and air ticket bookings increased by more than 270% year-on-year.
1.4.3 Diversified marketing improves conversion rate, and the stock era focuses on refined operations. The content strategy has begun to show results.
insists on marketing innovation, and the content strategy has begun to show results. The epidemic in 2020 caused the tourism industry to continue to sluggish. Ctrip actively carried out marketing through live broadcasts, with 118 live broadcasts throughout the year, attracting 200 million consumers to make appointments for travel in the live broadcast room, contributing a total transaction volume of about 5 billion yuan, with remarkable results. In March 2021, Ctrip established a new strategy of "Tourism Marketing Hub", with Planet as the core, community, live broadcast and vertical and horizontal as carriers, aggregated the three core sectors of traffic, content and products, and superimposed on rich travel scenarios to improve the conversion rate from content to transactions.
accurately grasps the post-epidemic tourism trends and accelerates the innovation of leisure and vacation products. During the epidemic, Ctrip launched the Tourism Revival V Plan and the Tourism Revival 2.0 Plan, and jointly launched a 2 billion yuan recovery fund to stimulate tourism consumption and help the overall recovery of the industry. Since the epidemic, consumers have paid more attention to travel safety. Ctrip has actively adapted to changing tourism needs and launched new products such as customized tours and private groups. In addition, Ctrip has increased investment in rural revitalization and red tourism, created rural tourism routes and red tourism routes, built fake farms with degree in many places, deeply explored tourism resources, and promoted the innovation of leisure and vacation products.
2. Tongcheng Travel: A leader in OTA that has been deeply involved in the sinking market, grasping the advantages of "traffic" + "resources"
2.1 Historical development: In the early years, it started with hotel and transportation business, endogenous development plus external mergers and acquisitions achieved OTA industry leader
Tongcheng Travel is the third largest OTA platform in China. In the early years, the company started with hotel and transportation business, and can be divided into two major entities: Tongcheng Travel and Elong Travel. Elong Travel: OTA is a pioneer in accommodation booking business, vigorously developing hotel and air ticket booking business. Yilong was established in 1999 and is positioned as a city life service. In 2000, Elong acquired Berloom and its e-commerce website and began to operate hotel booking business. From 2001 to 2003, Elong mainly focused on tourism business revenue, accounting for more than 60%. In 2004, Elong's revenue increased by 65%, and was listed on Nasdaq in the same year.In 2006, Elong was replaced by its major shareholder Expedia, and the company's three-legged team was in line with its execution ability declined. In 2007, Elong replaced its CEO again and made subtraction in business, focusing on hotel business and supplementing air tickets, cutting off offline business. At the same time, in order to avoid Ctrip's advantageous areas, Elong has expanded its markets for small and medium-sized hotels, even inns and second- and third-tier cities. From 2009 to 2015, the capital market also invested heavily in online travel. In mid-2011, Tencent entered the market to make strategic investments in Elong. In 2012, Ctrip invested US$500 million to launch a price war, ending with Ctrip buying all its equity in Yilong from Expedia in 2015.
Tongcheng Travel: Positioning a 2B tourism platform in the early years, gradually developing into an exclusive operator of WeChat wallet travel ticketing. The Tongcheng team was founded in 2002, and then in 2004, Tongcheng Network was established and positioned on a 2B tourism platform. In 2006, after gaining a foothold in the 2B field, Tongcheng decided to extend its business to the 2C field. In 2012, Tencent acquired a stake in Tongcheng Network, and in 2014, Tongcheng Network became the exclusive operator of the "train tickets and air tickets" entrance of WeChat wallet. In 2014, Ctrip acquired shares in Tongcheng and ended the price war of Tongcheng's "1 yuan ticket" and in the same year, Tongcheng Tourism and Elong Travel signed a strategic cooperation agreement. In 2016, Tongcheng Network split its business and gave its offline tourism business to Tongcheng Holdings. Tongcheng Network and Tongcheng International Travel Agency (Group) focused on tourism standard and non-standard products businesses respectively. The merger of Tongcheng Elong is backed by Tencent to upgrade and seek change, becoming a leader in the OTA industry. In 2017, Tongcheng Network, a subsidiary of Tongcheng Tourism Group, merged with Yilong Travel Network, and in 2018, Tongcheng Yilong was listed on the Hong Kong Stock Exchange. In 2020, Tongcheng Yiyilong launched the "Anxin" series of plans to provide guarantees for customers, and in the same year, the Ark Alliance program was established to serve attractions. In 2020, Tongcheng Elong carried out brand upgrades to focus on younger consumer groups. In 2021, Tongcheng Elong made organizational structure adjustments and was officially renamed "Tongcheng Travel". According to Fastdata statistics, Tongcheng Travel's market share accounted for 14.8% in 2021 ranked third among the OTA platforms.
As a leading OTA platform in China, Tongcheng Travel has a wide range of business operations. Since the merger of Tongcheng and Elong, in addition to continuing to maintain the advantages of the previous strong ticketing and accommodation booking business, Tongcheng has also expanded other businesses such as tourist attractions and business travel services, providing SaaS services to hotel suppliers and assisting in the development of smart tourism in tourist attractions, aiming to complete the transformation from an online travel platform to an intelligent travel manager. Through multiple business lines, we will further implement cross-selling strategies. In addition, in the context of repeated epidemics, Tongcheng Travel provides users with intelligent epidemic prevention and control information, and provides users with one-click health code jump service based on user travel needs.
2.2 Equity structure: Backed by the two major shareholders of Tencent and Ctrip, they share related resources with Ctrip
Ctrip and Tencent are the main shareholders of Tongcheng Travel, and they also provide product services and traffic resources. Ctrip is the largest shareholder behind Tongcheng, with a shareholding ratio of 25.23%; Tencent is the second largest shareholder behind Tongcheng, with a shareholding ratio of 21.44%. The former supplies hotel and non-standard accommodation night resources to Tongcheng Travel, while the latter opens WeChat exclusive ticketing and accommodation entrances to Tongcheng. In addition, as the major shareholder of Tongcheng Travel and an important accommodation resource supplier, Ctrip shares hotel and non-standard accommodation, travel tickets, and attractions tickets with Tongcheng. Due to the different strategic focus, the two avoid direct competition and can directly benefit mutually.
The board of directors is composed of members of the Tongcheng Department, Ctrip Department and Tencent Department, and the members of the Tongcheng Department are executive directors to lead the company's development. Chairman Wu Zhixiang and CEO Ma Hezhi are the founder of Tongcheng Network. Wu Zhixiang has 17 years of experience in e-commerce and OTA, and Ma Heping has more than 13 years of marketing experience in Internet companies; two non-executive directors are from the Ctrip department, and two from the Tencent department. The average age of the team is 52 years old and has deep industry experience. The company's main executive members are Historical Art Long and Tongcheng executives, with many years of experience in cooperation. Chief Financial Officer Fan Lei and two vice presidents Yu Pei and Bai Zhiwei are both from Elong Cayman, and Chief Operating Officer Wang Qiang comes from Tongcheng Network. The average age of team members is 42 years old and has rich management experience.
2.3 Operating situation: Actively respond to the impact of the epidemic, and the business strategy has initially achieved results
's revenue has gradually improved since its listing, and its profit elasticity in the face of the epidemic. Since its listing in 2015 to the outbreak of the epidemic in 2019, Tongcheng Travel's revenue has been growing steadily. The operating income of 2015-2019 was as high as 63.83%. In 2020, due to the impact of the epidemic, Tongcheng Travel's revenue decreased by 19.75% year-on-year to about 5.933 billion yuan. After the strategy transformation in 2020 and the brand upgrade in 2021, Tongcheng Travel's operating income increased by about 7.538 billion yuan in 2021, a year-on-year increase of 27.05%, an increase of about 2% compared with 2019 before the epidemic. In 2017, Tongcheng Travel's net profit turned positive and achieved a net profit of 194 million yuan. The key reason is that Tongcheng Travel has paid a deposit of costs, mainly due to the reduction of professional expenses such as order processing costs, labor costs and legal service fees. Tongcheng Travel's net profit from 2018 to 2019 was positive, with net profit reaching RMB 714 million in 2021, and cagr4 reached 38.42% in 2017 to 2021.
The company's operations are still resilient after the epidemic, and the revenue of accommodation services accounts for nearly 60%. In 2021, the revenue of transportation/accommodity/other businesses accounted for 31.96%/59.14%/8.9%, and the structure was basically the same as in 2020. The company mainly focused on transportation ticketing services and accommodation booking services, and attracted new products by empowering small and medium-sized hotels in the sinking market and expanding offline markets to increase penetration. In 2021, Tongcheng Travel had about 61.7% of new paid users on the WeChat platform from third-tier and first-tier cities. In addition, by launching a series of related products such as "air ticket blind box" and marketing activities such as the "campus card" plan, Tongcheng Travel has increased its recognition and penetration among young users.
Transportation and travel services: increase travel value-added services, improve travel intelligence level, and gradually recover business. In 2021, Tongcheng Travel Transport Ticket Service Revenue was 4.458 billion yuan, an increase of 28.42% year-on-year, basically returning to the same level in 2019, mainly due to the demand related to business recovery in the post-epidemic period and the improvement of user value-added services. The "Huixing" smart transportation system launched by Tongcheng Travel provides users with travel solutions such as transit linkages based on users' travel needs and preferences. In 2021, Tongcheng Travel expanded the coverage of the "Huixing" smart transportation system. The "opening and changing seats" function makes it impossible for users to obtain direct train tickets for the same train segment itinerary. Seize the marketing trend of "air ticket blind box", cover more than 40,000 routes covering more than 200 departures and destinations, and attract tens of millions of users to participate.
Accommodation reservation service: Improve upstream and downstream user experience and ensure product quality. In 2021, Tongcheng Travel Transport Ticket Service Revenue was 2.409 billion yuan, an increase of 23.83% year-on-year, an increase of 2.12% compared with the same period in 2019, mainly due to the increase in accommodation demand and related value-added services. In 2021, Tongcheng Travel added the "Hotel Service Quality Score" project to the supplier regular assessment and rating system, sorting suppliers from time to time, giving high-quality suppliers resources to give penalties, and giving unqualified suppliers penalties to strengthen the management capabilities of suppliers. At the same time, in response to the normalization of the epidemic, according to the hotel refund and change policy, we provide free refund and change services to downstream users, providing "stay first and pay later" services and "free guarantee" and "leave-off payment" credit booking services. Other businesses: Assist in empowering upstream scenic spots and hotel intelligence levels. The company has developed an appointment mini program to help cooperative scenic spots conduct scientific admission management, integrate the admission health code and itinerary card functions, realize online appointment control, and assist scenic spots in deploying intelligent self-service ticket machines, fully automatic gate machines, robots, etc. to reduce the pressure on scenic spots. Tongcheng Travel's two major hotel property management systems (PMSs) can provide digital solutions for all business scenarios for different hosts (B&B, hotel, regional chain, group chain, etc.), and can carry out OTA direct connection, full network sales, revenue management, smart hotel upgrade and other services to help customers improve operational efficiency.
2.4 Competitive advantages: "Tencent traffic" + "Ctrip supply chain", in-depth cooperation accelerates the expansion of the sinking market
2.4.1 Carry out in-depth cooperation with Tencent, and with the help of WeChat traffic portal, quickly occupy low-tier cities
Benefiting from the traffic channel support of Tencent ecosystem, Tongcheng Travel MAU has improved rapidly, and low-tier cities are the main source of incremental growth. From 2017 to 2022H1, Tongcheng Travel's average monthly active users increased from 121 million to 221 million, and the average monthly paid users increased from 15.6 million to 28.9 million, with a monthly payment rate of 13.1%. In the first half of 2022, 87.1% of the company's registered users came from non-first-tier cities, and in the second quarter of 2022, about 61.7% of new paid WeChat users came from third-tier and below cities, a further increase from 59.3% in the same period in 2021.
and Tencent cooperate in depth to consolidate their traffic advantages. WeChat mini-program traffic accounts for more than 80%, and there is still a lot of room for improvement in the payment rate. In July 2021, Tongcheng and Tencent renewed their agreement and continued to have two portals in the WeChat payment interface, most of which traffic comes from the WeChat payment interface and the drop-down list of the most commonly used mini programs by users. Through maintaining extensive cooperation with Tencent, users are diverted from multiple Tencent-affiliated platforms such as QQ Music, QQ browser and Tencent Video to mini programs. At the same time, the company used several well-known IPs under Tencent to jointly launch a series of online and offline interactive marketing activities to attract users and increase brand awareness. In 2021, about 80.7% of the average monthly active users of the same Chengcheng came from WeChat mini-programs; the proportion of paid users to the total monthly active users has remained at 12% for the year, and there is still a lot of room for improvement in the future.
2.4.2 Share hotel inventory with major shareholder Ctrip, create upstream supply chain advantages, and achieve win-win cooperation
Tongcheng Elong target market in low-tier cities, Ctrip focuses on first- and second-tier cities, and the two have relatively little competition intersection. According to user groups, Tongcheng Travel focuses on developing low-tier markets, with a high market share in third- and fourth-tier cities and below cities. Ctrip has an absolute advantage in the mid-to-high-end markets of first- and second-tier cities. At present, the main focus of downward towards the low-tier market is the top third-tier cities. Lower-tier cities will be carried out based on Tongcheng Travel. Therefore, the market where the two directly compete is only a small number of top third-tier cities, with relatively few intersections. According to the data of the Seventh Census in 2020, my country's third-tier and below cities have a broad space of more than 900 million people, with a population accounting for more than 65%. Tongcheng Travel has broad development prospects in low-tier cities.
joins hands with major shareholder Ctrip to gain the advantages of the upstream supply chain. Tongcheng Elong and Ctrip reached a three-year resource supply framework agreement in November 2018. Ctrip will provide accommodation booking and car rental services through Tongcheng Elong's platform, and Tongcheng Elong provides Ctrip with several accommodation and transportation ticketing services. At the end of 2020, Tongcheng Yilong and Ctrip signed a three-year framework agreement again, and the supply side maintained the original contract. Under the cooperation agreement, Tongcheng's revenue is much higher than its expenditure, which is the beneficiary. In 2019/2020/2021, Tongcheng charged suppliers the commissions provided by Ctrip on its platform and the commissions charged to suppliers for its own sales were RMB 1.5 billion, RMB 1.39 billion, and RMB 1.575 billion; Tongcheng paid Ctrip the system maintenance fees of RMB 103 million, RMB 117 million and RMB 151 million.
In cooperation with Ctrip, Tongcheng Travel can obtain Ctrip's advantageous resources on the supply side, and Ctrip can obtain huge traffic on Tongcheng Elong's WeChat side, and use it as an entry point for entering the third- and fourth-tier markets to expand its market share. With its many years of OTA status and huge procurement volume, Ctrip can purchase products and services far lower than the average market price. Cooperating with Tongcheng Elong can obtain higher bargaining power and create more cost advantages for Tongcheng Elong; while Tongcheng Elong's broad layout in low-tier cities and lower customer acquisition costs are used by Ctrip as its entry point for entering the third and fourth-tier markets. Both parties benefit and benefit in order to gain a larger market share. The accommodation room for Tongcheng Travel sold by the night grew rapidly from 10% in 2016 to 75% in 2019. Overall, the cooperation between Ctrip and Tongcheng Travel can effectively achieve mutual benefit and have strong stability.To enter the low-tier OTA market, traffic and products are indispensable. Due to the low-tier cities' travel frequency, it is difficult to acquire customers for a separate travel APP, and the cost of maintaining traffic activity is high. Although Ctrip's supply chain is strong, it also requires high-frequency traffic to compete with Meituan. As the APP with the most active users in China, Tencent's downstream market traffic coverage, activity and user duration exceed that of other traffic parties, so the cooperation between the two parties is relatively stable.
2.4.3 Compared with Meituan, Tongcheng achieves common development in the medium and short term through dislocation competition, and traffic is the focus of long-term competition
Meituan is Tongcheng Elong's main competitor in low-tier cities. In the medium and short term, the two sides achieve common development through dislocation competition. Comparing Tongcheng and Meituan, we can find that although both are OTA platforms that focus on low-tier cities, due to the complete different user customer groups, traffic sources and supply chains, the two parties have created different business models to jointly seek growth in the sinking market, and achieve common development through dislocated competition:
(1) Target customer groups and related services: Tongcheng Travel focuses on traveling in low-tier cities, and Meituan focuses on in-store hotels and travel with local life extension. Specifically, Tongcheng Elong's travel booking related services are more about off-site travel in low-tier cities. They are usually mostly local tours and intra-provincial tours, and hotel and tourism services are more about transportation hubs. Since Meituan Youth Travel is more about the same-city tours around local life, there is a gap in the target customer groups of the two. Generally speaking, Tongcheng Elong's customers have slightly longer travel distances, higher expenditures and lower frequency. In the short term, Tongcheng Elong is better than Meituan's ability to provide one-stop tourism products. The two wine and tourism business targets different customers; in the medium and long term, as the supply differences of tourism products will gradually narrow, it is crucial to control traffic.
(2) Room night volume and unit price: Meituan hotel room night volume is higher than Tongcheng Travel, and Tongcheng Travel hotel average price is higher than Meituan. A complete travel/travel is usually composed of three links: transportation, accommodation and entertainment. The expenditure in the transportation link is the silent cost in the early stage of the trip. The higher transportation cost in the travel process will increase the acceptance of prices by consumers in the subsequent accommodation and entertainment process. However, Ctrip, Tongcheng and Meituan customers have different preferences for long-distance travel, intra-provincial travel, and same-city travel, making the three show the characteristics of Ctrip and Tongcheng Meituan in terms of hotel average prices. Since the frequency of local life consumption is stronger than that of tourism, Meituan has conducted a good drain on in-store hotel travel through in-store catering and other services, making the number of nights in Meituan hotels much higher than that in Tongcheng.
(3) Traffic source: Tongcheng travel traffic depends on Tencent, and its social attributes are highlighted. Meituan’s wine and travel traffic comes from Meituan, and its local life attributes are highlighted. The frequency of travel in the sinking market is relatively low, so it puts extremely high requirements on the traffic of OTA. On the one hand, it must be able to reach users in low-tier cities, and on the other hand, it must have sufficient high-frequency business formats to support it. Tongcheng Elong uses WeChat traffic to help acquire a large amount of social communication at low cost; while Meituan traffic is a transaction attribute related to takeaway catering, and Dianping can provide customers with more content services, with lower customer acquisition costs. In the long run, the competition between Meituan and Tongcheng in the sinking market has finally become a traffic battle. On the one hand, in the field of social communication volume, Tencent has established a stable source of traffic through channels such as WeChat and QQ, and the average daily usage time and number of active users of social apps such as WeChat are significantly ahead of Meituan; on the other hand, in the field of local life traffic, in recent years, the rapid rise of content platforms such as short video platforms such as Douyin and Kuaishou has played a significant diversion effect on traffic. In 2021, Douyin has led major apps with a daily average usage time of nearly 100 minutes. In terms of local life, Douyin has also launched new challenges like Meituan. In the long run, Meituan on the traffic side is not as stable as Tongcheng.
3. Meituan: A rapidly developing OTA service platform, expanding its hotel and tourism business around local life
3.1. Hotel and tourism business: accurately position and focus on hotel and tourism, and differentiated competition has achieved success in the future
. Meituan’s hotel and tourism business relied on Meituan’s takeaway catering business to divert traffic and differentiated competition in the early stage, and quickly gained a certain advantage in the industry.Meituan first deployed its hotel business in 2012. Meituan's hotel promotion model mainly adopts telemarketing, that is, through call center employees, they promote products and services to potential customers in the form of telephone. In June 2014, Meituan Hotel Business Department was officially established. Less than a year after its establishment, the hotel business has transformed from group buying to booking, and is positioned as a city accommodation. In the early stage, it aimed at markets with a unit price of less than 200 yuan, giving priority to meeting the accommodation needs of the same city, and then gradually expanding to another place. On the one hand, the growth of Meituan Hotel is driven by the demand of merchants in low-tier cities. On the other hand, Ctrip and Qunar attach more importance to medium- and high-end hotels at the strategic level. Differentiated competition has enabled Meituan to win rapid development in low-tier cities. At the same time, in the high-star hotel market, Meituan has made certain efforts and gradually made progress through comprehensive advantages. Since the company's catering revenue of high-star hotels accounts for higher than that of room accommodation, Meituan mainly adopts a side attack method and gradually penetrates the hotel business through Meituan's synergistic advantages in the fitness and catering peripheral business of high-star hotels.
3.2 Business situation: In-service hotel and tourism grew rapidly, and the operating profit margin steadily increased
Meituan In-service hotel and tourism business took the lead, quickly gaining a position in the domestic OTA industry and its business grew steadily. In 2021, Meituan’s in-store hotel and tourism business achieved operating income of 32.5 billion yuan/+53%, a year-on-year recovery of 146% in 2019, leading OTA companies such as Tongcheng and Ctrip. In terms of room night volume, Meituan's room night volume exceeded the Ctrip Group's total for the first time in 2019, becoming the first in the industry. In 2021, the room night volume increased by nearly 35% year-on-year. Meituan Hotel-related business room night volume and continued stable growth are an important driving force for the growth of Meituan's in-hotel hotel hotel and tourism business revenue.
3.3 Competitive advantage: Actively respond to the impact of the epidemic, and accelerate the penetration of the market with "local attributes" + "traffic collaboration"
positioning local demand to maintain traffic advantages, and the number of active merchants and transaction users continues to grow. Currently, Meituan relies on local life service resources to provide connected services to small and medium-sized hotels in third- and fourth-tier cities, and accelerates its penetration of the market by meeting users' local needs, such as hourly room reservations, temporary accommodation and other scenarios. This move avoids the high-end market occupied by Ctrip and Fliggy, and the competitive pressure is relatively small. In addition, after Meituan occupied the blank market for medium and low consumption, it gradually penetrated the high-end local life market, promoting a stable growth in the number of active merchants and transaction users.
The epidemic has changed the competitive landscape of the OTA industry, and Meituan will attract more hotels to join the platform through its traffic advantages. Under the influence of the epidemic, the demand for business, travel and cultural tourism has been strongly impacted. As the earliest industries in local life, some hotels maintained revenue through takeaway, local vacation and leisure during the lockdown period, increasing online sales channels. After the epidemic eased, the proportion of catering income of high-star hotels increased significantly, and the income structure changed. Meituan has huge traffic advantages and a complete one-stop platform for local services. Gaoxing Hotels have chosen Meituan to complete online improvements. Under the influence of the epidemic, Meituan's competitive advantage in the high-end hotel market has become more prominent, but it is still difficult for high-star hotels to break through the layout of Ctrip's high-tier cities, so the sinking market is still the focus of future development. Meituan fully utilizes its competitive advantages in a comprehensive service platform, uses a number of businesses such as takeaway, catering, and group buying to direct traffic to the hotel and tourism business, and achieve traffic coordination. On the one hand, in recent years, Meituan has fully utilized its comprehensive sexual life service platform advantages and started from the online booking of hotel accommodation services, and launched high-quality catering, wedding banquets, fitness, leisure and entertainment services in the hotel to increase the online penetration rate of the hotel, thereby effectively helping the hotel improve its comprehensive income. On the other hand, since Meituan’s core users are mainly students and office workers, Meituan’s own local life service platform created by “takeout, catering, and group buying” has a high overlap in customer groups, and the platform’s huge traffic advantages can attract traffic to the hotel and tourism business, thereby accelerating the development of the hotel and tourism business.
Thanks to the continuous increase in penetration rates in low-tier cities and the expansion of local life business, Meituan in-store hotel and tourism is expected to maintain a rapid growth trend.As mentioned above, the challenges facing Meituan Youth Travel in the short term mainly come from the competition of Tongcheng Travel in the sinking market and the divergence of Douyin's traffic in local life. At present, Meituan and the other two companies are still in a stage of misaligned competition to seek incremental growth, which will not affect the rapid development of Meituan Youth Travel in the short term. In the long run, under the epidemic situation as soon as possible, Meituan has made breakthroughs in high-star hotels in recent years. We believe that Meituan Hotel Travel is still difficult to break through Ctrip's layout in high-tier cities. In the OTA field, Ctrip has bound the business and traveling group in high-tier cities, Tongcheng has absorbed travel users in sinking markets, and Meituan has grasped the users' minds of local life-related live-related live-streaming consumption. The key to whether Meituan's live-streaming can break through to high-tier cities in the long term is the change in users' minds. Considering that Ctrip is firm in its business and travel business, it is difficult for competitors to break through. We believe that Ctrip's advantages in high-tier cities may continue to maintain in the future, and the competitive landscape is expected to be stable in the long run.
(This article is for reference only and does not represent any of our investment advice. If you need to use relevant information, please refer to the original text of the report.)
selected report source: [Future Think Tank]. system error
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