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The was bound to be a major shake up in the online travel sector... Only a few weeks ago, Google announced an agreement to acquire ITA Software, a Cambridge airlines and online travel agency and now here in China the Chinese airlines announced that they were slashing commissions to travel agents.
The result of that last announcement drove the share price of Ctrip.com down by 14%% investors started to realize this was not a good position to be in. The commissions paid by carriers such as Air China and China Southern to travel agents like Ctrip.com could drop by as much as 50% and for Ctrip.com that represents as much as 40% of its planned 2010 revenue. Ouch!
Why are the Chinese domestic airlines now making this cut? Only a few weeks ago international carriers cut commissions to travel agents for flights in and out of China so this latest move brings the Chinese carriers inline with that of the international carriers.
As pointed out in the Tech News post, the online landscape for travel in China has changed dramatically over the last decade. Correctly, the post points out that ten years ago, Ctrip.com, and later its top rival eLong.com and other online travel search engines (Qunar for example) could reliably aggregate the best airline deals for travelers in one place. But now travelers can often go direct to the airlines' own websites for the best deals and specials on fares around China, so online travel sites likes Ctrip are often seen as rivals by the airlines.
And I suggest that this is not the end to the misery of the online travel agency. Wait until the hotel chains and tour operators become more savvy in their eCommerce capabilities and then you will have a complete dis-emendation of the current online travel firms. Doomsday prediction or just recognition that buying commoditized services can be done quickly and simply at the point of sale not through a 3rd party.
Your thoughts?
Source: China Tech News
Written on Thursday, 08 July 2010 22:02 by Matt McDougall
