Here’s a quote from Cyril Ranque, Expedia VP of partner services group at Expedia Asia-Pacific:

“It’s all about making it relevant for the local market,” he said. “For multinationals like us that’s hard to do, because we’ve been successful by rolling out processes and systems. And whatever we know from the outside that has worked to expand in the western world is not going to work here.”

Winning in China is “a pure execution game” rendering many of the advantages foreign brands have secondary to raw execution, claims Fritz Demopolous, founder and CEO of Qunar.com:

“Look at Expedia’s failure,” Demopolous says. Expedia owns online travel agency eLong.com, but has only been able to corner 10 percent of the market, compared to 57 percent for Ctrip, according to iResearch. “I don’t think there’s one company that has done well, but that’s not to say that looking forward, a foreign company may not do well.”

As Demopolous explains it, a successful online venture requires capital, technical knowledge and local expertise. Chinese companies have access to as much capital as a foreign competitor, he says, and the proliferation of open source technology lowers that barrier to entry.

“In the consumer internet space, knowledge and capital are free flowing,” Demopolous says. “Domestic companies aren’t at any disadvantage at all online. It’s a pure execution game, a numbers game.”

Some of the stats quoted in the story:

Market Growth:

• Travel bookings in China: $65 billion by 2011 (source: PhoCusWright)
• Online % of total Travel bookings in China: 20% (source: PhoCusWright)
• Growth in tourism revenue, 2009: 8% (of course, the magic 8%!) (source: CNTA)
• Growth in travel bookings, 2009: -4% (PhoCusWright)
• Growth in travel bookings, 2010: 5% (PhoCusWright)

Outbound Tourism:

• Outbound trips from Chinese mainland travelers: 50 mm in 2009 (source: Chinese National Tourism Administration CNTA)

Online Travel Agency (OTA) Market Share:

• OTA market share: 57% Ctrip, 10% eLong (source: iResearch)

My opinion:
Its indeed true that most large Internet players have not succeeded in China. However, many other operational businesses and branded businesses have: Yum Brands, General Motors, NBA, Starbucks, Dell Computer, even Microsoft. I think pure local market businesses that facilitate sales of domestic products and services to domestic customers will be difficult for foreign companies to compete and win. But cross-border businesses where there is an international brand or international services *can* be arenas which foreign companies can compete and win.

Source: PhoCusWright 2009 “Emerging Online Travel Marketplace in China”

At China Travel Daily’s recent China Travel Distribution Summit in Shenzhen, examples were lacking of social media campaigns that delivered clear ROI in travel search. While some players have been cautious with campaigns, others who have used social media haven’t found good ways to measure its effectiveness. But consumers in China will soon demand more, says Elliott Ng, founder of Uptake Networks, a Palo Alto-based company whose Uptake.com combines travel search and social media. Ng recently visited China, stopping in three cities including Shenzhen, where he attended China Travel Daily’s summit. Ng was surprised at the pace of change in the travel market here, and says he could see it leading to new tools for travelers that leverage search and social media.

“The Chinese travel market is growing so fast that consumers are going to start demanding the same things that travelers have elsewhere in the world. That means that people can start taking some of these social media models that work elsewhere, and copying them or being inspired by them.”

In his presentation at the China Travel Distribution Summit, Ng shared what he sees as the top trends affecting social media, search and travel in the United States. Among the half dozen trends he named, Ng included: “Social media creates new ways for travel professionals and enthusiasts to affect travel decisions.”

As stated in the article, my presentation was really about global trends in travel technology and social media, not specifically about China. While I think the execution of various marketing tactics are different in China, the general principles are the same as they are around the world. Of course, execution is where great companies win and mediocre companies lose, especially in China.

I’ve been watching the China market since 2005, so I don’t mean to come off as a “fresh of the boat” Westerner staring at gleaming high rise buildings and “face” infrastructure projects. I mean to convey what I love so much about China, that one can never take last year’s perception of the market and apply it toward next year’s reality!

When it comes to consumption, don’t underestimate how fast Chinese consumers are learning to consume. Travel companies need to provide services and products aimed for tomorrow’s Chinese consumer, not today’s or yesterday’s. The happy conclusion I’ve come to is that the Chinese market has a long way to go from where it is today, and many lessons from Western markets can be applied (to some degree, and with localization) to the rapidly evolving Chinese market.