market research report : online travel market in china 2012

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Online Travel Market in China

March 2012

2ONLINE TRAVEL MARKET IN CHINA 2012.PPT

SAMPLE

Executive Summary

Market

Drivers & Challenges

Competition

China’s online travel industry has exhibited a rapid growth and development over the past years

Estimated worth USDx bn in 20‐‐, growing at a CAGR of y% from USDz in 20‐‐

Online travel booking user base has grown by p% CAGR over 20‐‐‐20‐‐

Trends

Players are Widening their Services Offerings

Players are Coordinating with Online Communities

Growing Investments

Drivers:

‐ Increasing Internet Usage

‐ Rising Middle Class and Increasing Income

‐ Rise in Number of Credit Card Holders

‐ Growth in Tourism

‐ Loosened Visa Restrictions on Chinese Travelers

‐ Changing Consumer Lifestyles

‐ Untapped Market Potential

Government Initiatives The New Travel Agency Regulations

Challenges:

‐ Increasing Competition

‐ Lack of Automation

‐ Regulations on Foreign‐Invested Travel Agency

Company 3 Company 5Company 2 Company 4Company 1

Major Players


SAMPLE

•Market Overview

•Drivers & Challenges

•Government Initiatives

•Trends

•Mergers & Acquisitions

•Competition

•Key Takeaways


SAMPLE

China is expected to record z bn trips by 20‐‐, providing tremendous growth opportunity to its online travel market

•Online travel sales in Asia is expected to witness rapid growth of y% during 20‐‐ ‐20‐‐, with country 1, country 2, country 3, country 4 and country 5 being the key markets In 20‐‐, online travel growth is expected to be a1% being the most important driver affecting the Asian travel market, followed by the fuel price fluctuation (a2%) and the Asian economy (a3%)

The consumer base of Asian online travel market primarily comprises first time travellers, who have chosen online travel booking channels for their first travel experience

• China’s online travel market is estimated to grow at a CAGR of x% reaching USDb4 bn during 20‐‐ ‐ 20‐‐ China has the world’s largest internet population, representing p% of the word’s total internet users, which provides a strong consumer base for the growing online travel industry

• z bn trips are expected by 20‐‐ in China, providing trade opportunities for the country’s online travel market

Asia Market – Overview Impact on the Asia Travel Industry 20‐‐*

Domestic Market – Overview (1/2) Online Travel Market Size and Growth

0

5

10

15

USD bn

x%

20‐‐e

b4

20‐‐e

b3

20‐‐

b2

20‐‐

b1

0 10 20 30 40 50 60 70

%

Asian economy a3

Fuel price fluctuation a2

Online travel growth a1


SAMPLE

With less than merely x% of the user base, online travel market offers significant opportunity of further penetration

•As of Jun 20‐‐, no. of people using travel booking services reached a3 mn, growing at a CAGR of x% from 20‐‐

•Utilization ratio refers to the share of no. of people using travel booking services amongst the total internet users in China As of Jun 20‐‐, b3% of the total internet users indulged in online travel booking services

The remaining b4% of the total internet population can be viewed as the potential consumer base indicating the huge scope of growth for the online travel market in China

Domestic Market – Overview (2/2) Online Travel Booking – User Base

Activity 2x2%

Activity 4x4%

Activity 3x3%

Activity 1x1%

Online Travel Booking Activities (20‐‐)Share of Total Population in China

0

10

20

30

40

0

2

4

6

8

b3

20‐‐

No. of usersmn

Utilization Ratio%

a3

x%

Jan‐Jun 20‐‐

a2

b2

20‐‐

a1

b1

Utilization ratioNo. of Users


SAMPLE Online travel companies coordinates with travel service providers and global distribution system

Air Carriers

Tour Operators

Global Distribution Systems

• Finding 1

Hotels

• Finding 3

• Finding 2

Advertisers

Online Travel Companies

• Finding 4

Customer

• Finding 5


SAMPLE Novel business models driving the online travel industry in ChinaBusiness Models Commission Charged

Includes player 4, player 5, player 6Service description 2

Includes player 8, player 9, player 10

• Service description 4

player 7• Service description 3

Includes player1, player 2, player 3

• Service description 1

PlayersDescription

•Airlines pay x% commission on the domestic flight ticket booking

•Airlines pay x% commission on domestic flight ticket bookings

•Airlines have cut y% points of the commission paid on foreign flight bookings

Before

After July, 20‐‐

Some players also charge a service fee over and above the commission received

Indicative

•OTAs operate on a commission basis• Travel service providers pay a percentage of the flight and hotel room bookings


SAMPLE Drivers & Challenges – Summary

Loosened Visa Restrictions on Chinese Travelers

Untapped Market Potential

Drivers

Increasing Internet Usage

Rising Middle Class and Increasing Income

Rise in Number of Credit Card Holders

Growth in Tourism

Changing Consumer Lifestyles

Regulations on Foreign‐Invested Travel Agency

Challenges

Increasing Competition

Lack of Automation


SAMPLE

Growing number of internet users in China coupled with rising penetration…

•Finding 1Sub‐finding 1



Increasing Internet Usage (1/2) Impact

Rising Internet Population Internet Penetration – Rural and Urban

PenetrationNo. of users

0

200

400

600

800

0

20

40

60

Penetration%

No. of usersmn

x%

20‐‐e

a6

b6

20‐‐

a5

b5

20‐‐

a4

b4

20‐‐

a3

b3

20‐‐

a2

b2

20‐‐

a1

b10

50

100

c4

20‐‐20‐‐

d2 d4

20‐‐ Jun

%

c3

d3

y%

z%

20‐‐e

d5

c5

c2

20‐‐

d1c1

RuralUrban


SAMPLE

Equivalent to ~y% of the total population

…creates business opportunities for the online travel market in China

•Finding 1

Increasing Internet Usage (2/2)

Survey in 20‐‐ Purchase online flight

tickets

x1%

Purchase online train tickets

x2%

Make online hotel room reservations

x3%

Result 1


Growth in Mobile Internet Users Usage of Mobile Internet for Travel Booking

Result 2

Finding 3

0

100

200

300

400

mnx%

20‐‐

a4

20‐‐

a3

20‐‐

a2

20‐‐

a1 Jan – Jun20‐‐

%

x4


SAMPLE Rising urban middle class population coupled with increasing income corresponding to greater …

‐‐‐‐‐Above x5Global affluent

‐‐‐‐‐x4 – x5Mass affluent

‐‐‐‐‐x3 – x4Upper middle class

‐‐‐‐‐x1 – x2Lower middle class

Poor

Class

‐

Size

(mn)

‐

Share

( %)

20‐‐e

Below x1

Income Bracket

(USD)

‐

Size

(mn)

‐

Share

( %)

20‐‐CAGR % (20‐‐‐20‐

‐)

‐

• Finding 1

Rising Middle Class and Increasing Income (1/2) Impact

Share of Chinese Urban Households

Improved Decline

Preferred Leisure Activities of Millionaires

• Finding 2• Finding 3

0

20

40

60

80

100

120

%

20‐‐e

a3b3

c3

d3 e3

20‐‐e

a2

b2

c2d2e2

20‐‐

a1

b1c1d1 e1

Poor

Lower Middle Class

Upper Middle Class

Mass Affluent

Global Affluent

g5%

g4%

g3%

g2%

g1%

Family activities

Driving

Tea tasting

Reading

Travel


SAMPLE

…spending on non‐essential items such as travel and recreation, driving growth in the online travel market

Rising Middle Class and Increasing Income (2/2)

Share of SpendingUrban Disposable Income*Urban Consumer Spending*

Result 1

Result 2

0

2,000

4,000

6,000

USD bn

x%

20‐‐e

a3

20‐‐e

a2

20‐‐

a1

0

5,000

10,000

15,000

20,000

USD bn

y%

20‐‐e

a6

20‐‐e

a5

20‐‐

a4

0%20‐‐e

c2

20‐‐

c1

b2b1

z%

100%

50%

Discretionary SpendingBasic Spending





Increasing usage of plastic money is poised to drive the online travel market in China

Rise in Number of Credit Card Holders Impact

Growth in Credit Card Holders Rise in Consumer Credit Card Spending

0

50

100

150

200

250

300

no. in mn x%

Jun 20‐‐

a3

Mar 20‐‐

a2

Jun 20‐‐

a1

0

100

200

300

400

USD bny%

20‐‐

a5

20‐‐

a4




SAMPLE


Growing tourism boosts the potential consumer base of the online travel market

Growth in Tourism Impact

Rise in Outbound Tourism Rise in Inbound Tourism

Result 1

0

50

100

0

50

100

ExpenditureUSD bn

No. of touristsmn x%

20‐‐e

a3

b3

20‐‐

a2

b2

20‐‐

a1

b1

Outbound tourism expenditureNo. of outbound tourists

0

50

100

150

mny%

20‐‐e

c3

20‐‐

c2

20‐‐

c1

No. of inbound tourists




SAMPLE


SAMPLE Liberalized visa protocols for Chinese tourists will encourage foreign trips, offering growth prospects for OTAs

Reduced Visa Restrictions on Chinese Travelers Impact

• Findings

Recently many countries have reduced visa restrictions for Chinese tourists

Result 1

Result 2

Result 3


SAMPLE Holidays and vacations inducing people to travel far distances, driving the online travel market in China

•Finding 1

Changing Consumer Lifestyles Impact

Cause Effect

• Finding 2 Sub‐finding 2

• Finding 3 Sub‐finding 3

Untapped Market Potential Impact

Share of Internet Population using Online Travel Booking Services (20‐‐)

Finding 4

0

50

100

%

Country 2

a2

Country 1

a1


SAMPLE Players are facing trouble in enhancing their market share due to increasing competition and lack of automation


Increasing Competition Impact

Lack of Automation Impact

New Domestic Market Entrants

• Findings

International players Result 1

• Finding 2





High entry barriers challenge foreign players pursuing to explore the Chinese online travel market

Regulations on Foreign‐Invested Travel Agency Impact

State Administration for Industry and Commerce (SAIC)

Step 1

China National Tourism Administration (CNTA)

Investor needs to submit certain required documents to CNTA for attaining the permission opinion

letter regarding foreign investment in travel agency business

Ministry of Commerce (MOFCOM)

Step 3

Step 4Step 5

Step 2

Entry Barriers




SAMPLE


Government aims to protect the rights of tourists and travel agencies and promote the healthy development of tourism

Benefits for Foreign Players

• Regulation 1

Regulations and Penalties for Misconduct

• Finding 1• Sub‐finding 1

• Finding 2

The new ‘Travel Agency Regulations’ was adopted by the Chinese government in May 20‐‐ for encouraging more travel agency service providers in order to meet the growing demand for travel both domestically and globally

• Regulation 2

• Regulation 3

• Regulation 4

SAMPLE


SAMPLE

Summary – Trends

Trends


Growing InvestmentsPlayers are Coordinating

with Online Communities


SAMPLE Players are adopting new strategies to tackle the increasing competition in the online travel sector


Value‐added services are being offered by the

players

•Description 3

•Description 2Player 2

Player 3


DescriptionPlayer

Finding 1


SAMPLE Online travel companies are collaborating with online communities in a bid to expand their consumer base

Players are Coordinating with Online Communities

OTAs and online communities are integrating their

services

•Finding 1

•Description 3


Player 3


DescriptionPlayer


SAMPLE Players are investing in order to strengthen their base and foothold in the market

Growing Investments

Increasing investments to capitalize on the growth potential

•Finding 1

•Finding 2

Jan 20‐‐

May 20‐‐

Jun 20‐‐

Date

•Description 3

•Description 2USDy mn

USD z‐wmn

•Description 1USDx mn

DescriptionInvestment


SAMPLE Mergers & Acquisitions (M&A) (1/2)

‐‐‐‐‐‐

‐‐‐‐‐‐

Announced Date Closed Date Target Buyer/Investors SellersSize

(USD mn)

‐ ‐ ‐ ‐ ‐ ‐

‐ ‐ ‐ ‐ ‐ ‐

‐ ‐ ‐ ‐ ‐ ‐

‐ ‐ ‐ ‐ ‐ ‐

‐ ‐ ‐ ‐ ‐ ‐

‐ ‐ ‐ ‐ ‐ ‐


SAMPLE ‐1,000

‐500

0

500

1,000

1,500

2,000

2,500

3,000

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000

Net Profit

Total Income

x4

x3

x2

x1

Major Domestic Public Companies – Summary (1/2)

Size of the Bubble represents Market Capitalization in USD mn

Company 4Company 3Company 2Company 1


SAMPLE

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000

USD mn

Company 3b4

a4

Company 2b3

a3

Company 2b2

a2

Company 1b1

a1

Net Profit

Total Income

Total Income and Profit for Major Domestic Companies ‐ 2010

Major Domestic Public Companies – Summary (2/2)


SAMPLE Domestic Company – Company 1

Key People

Products and Services

Company Information Locations – China

Corporate Address ‐

Tel No. ‐

Fax No. ‐

Website ‐

Year of Incorporation ‐

Ticker Symbol ‐

Stock Exchange ‐

Service 8, service 9Category 3

Service 4, service 5, service 6, service 7Category 2

Category Products/Services

Category 1 Service 1, service 2, service 3Name Designation

Person 1 Vice Chairman and CEO

Person 2 President and Director

Person 3 Chief Financial Officer

Person 4 Vice President

HeadquartersOther Offices


SAMPLE Financial Snapshot Key Ratios

Financial Summary

• The company earned a net profit of USDb4 mn in FY 20‐‐, as compared to a net profit of USDb3 mn in FY 20‐‐

• The company reported total Income of USDa4 mn in FY 20‐‐, registering an increase of x% over FY 20‐‐

• The company reported an operating margin of c1% in FY 20‐‐ a decrease of y percentage points over FY 20‐‐

• The company reported debt to equity ratio of d1 in FY 20‐‐, an increase of z% over FY 20‐‐

Financial Summary

Profit / Loss

Total Income

0

500

1,000

0

20

40

60

ProfitUSD mn

Total IncomeUSD mn

20‐‐

a4

20‐‐

a3

20‐‐

a2

20‐‐

a1

Indicators Value (20/03/2012)Market Capitalization (USD) g1Total Enterprise Value (USD) g2EPS (USD) g3PE Ratio (Abs) (21/03/2012) g4

Improved Decline

Domestic Company – Company 1

Particulars y‐o‐y change (2010‐09)

2010 2009 2008 2007

Profitability RatiosOperating Margin ‐ ‐ ‐ ‐ ‐

Net Margin ‐ ‐ ‐ ‐ ‐

Profit Before Tax Margin ‐ ‐ ‐ ‐ ‐

Return on Equity ‐ ‐ ‐ ‐ ‐

Return on Capital Employed ‐ ‐ ‐ ‐ ‐

Return on Working Capital ‐ ‐ ‐ ‐ ‐

Return on Assets ‐ ‐ ‐ ‐ ‐

Return on Fixed Assets ‐ ‐ ‐ ‐ ‐

Cost RatiosOperating costs (% of Sales) ‐ ‐ ‐ ‐ ‐

Administration costs (% of Sales)

‐ ‐ ‐ ‐ ‐

Interest costs (% of Sales) ‐ ‐ ‐ ‐ ‐

Liquidity RatiosCurrent Ratio ‐ ‐ ‐ ‐ ‐

Cash Ratio ‐ ‐ ‐ ‐ ‐

Leverage RatiosDebt to Equity Ratio ‐ ‐ ‐ ‐ ‐

Debt to Capital Ratio ‐ ‐ ‐ ‐ ‐

Interest Coverage Ratio ‐ ‐ ‐ ‐ ‐

Efficiency RatiosFixed Asset Turnover ‐ ‐ ‐ ‐ ‐

Asset Turnover ‐ ‐ ‐ ‐ ‐

Current Asset Turnover ‐ ‐ ‐ ‐ ‐

Working Capital Turnover ‐ ‐ ‐ ‐ ‐

Capital Employed Turnover ‐ ‐ ‐ ‐ ‐


SAMPLE Key Business Segments Key Geographic Segments

Key Recent Developments

• In Oct 20‐‐, company 1 collaborated with company 5 for establishing a tourism service centre under the brand name brand 1

Business Expansion

• In Dec 20‐‐, company 1 along with company 2., and other investors had plans of investing x mn in company 3

• In Nov 20‐‐, company1 along with other investors had funded USDy mn to company 4Private Placements

• Company 1 functions as a tour operator in China Company operates website1.com, a travel website that provides various travel services and products to travelers who visit China

Website 2 is an online travel website owned by the company

Overview

Description News

0%

50%

100%

2009

x3

w2

2008

x2

w1

2007

x1

y1

z1

0%

20%

40%

60%

80%

100%

20‐‐

d2s1 g2

h2

20‐‐

a1

b1c1 d1 g3

h1

s2c3

b3

a3

d3 g1h3

20‐‐

a2

b2c2

Country 4

Country 3

Other Area

Country 2

Country 1


Segment 8

Segment 7

Segment 6

Segment 5

Segment 4

Segment 3

Segment 2

Segment 1


SAMPLE Domestic Company – Company 2

Key People

Products and Services

Company Information Locations – China

Corporate Address ‐

Tel No. ‐

Fax No. ‐

Website ‐

Year of Incorporation ‐

Name Designation

Person 1 Co‐Founder and CEO

Person 2 Co‐Founder

Person 3 Co‐Founder

Headquarters

Service 8, service 9Category 3

Service 4, service 5, service 6, service 7Category 2

Category Products/Services

Category 1 Service 1, service 2, service 3


SAMPLE Description News

Overview

• Company 2 is a travel search portal in China

• It enables the consumers to compare real‐time positions of air tickets, hotels, car rentals, and tour

packages

• Their information has a coverage of x1 air routes and x2 hotels worldwide

• They also offer more than z1 tour packages in z2 Chinese cities

Private Placements

• In Jun 20‐‐, company 3 had invested USDx mn in company 2, making it the majority shareholder of the

company

Company 2 plans to use this fund for the development of technical talent, hotel search and mobile services and

acquisitions

They have plans of expanding their cooperation with company 3’s other services

• In early 20‐‐, company had raised USDy mn in funding from investors, including investors, including

company 4, company 5, company 6, company 7 and company 8

Business Plan • In Jan 20‐‐, company had plans of considering an initial public offering in the country 1

Key Recent Developments



SAMPLE Online travel market is expected to grow at a CAGR of x% to reach USDa4 bn by 20‐‐

Online travel industry is largely driven by the world’s largest online consumer base in China

Increasing internet usage

coupled with growing mobile

internet users act as a major

driver for the online travel

industry in China

Opportunities in the Market

Market Size Government Initiatives

Challenges

Government has adopted certain policies and regulations associated with the Chinese tourism sector, which are also applicable for the online travel agentsRising middle class, growing

credit card usage and growth

in tourism provides

opportunity for growth in the

online travel sector

Reduced visa restrictions,

changing consumer lifestyle

and untapped market

potential facilitates further

growth of online travel

market

• Increasing Competition

• Lack of Automation

• Regulations on Foreign‐Invested Travel Agency

Government is taking initiatives for supporting the sustainable development of the online travel industry, strengthen the protection of rights and interests of tourists and travel agencies and stabilize the overall tourism sector

0

2

4

6

8

10

12x%

20‐‐

USD bn

20‐‐e

a3

a4

20‐‐e20‐‐

a2a1


Thank you for the attention

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