Weblog with daily updates of the news on a frugal, fair and beautiful China, from the perspective of internet entrepreneur, new media advisor and president of the China Speakers Bureau Fons Tuinstra
Leading VC William Bao Bean explains how travel startups managed through the COVID-19 crisis at PhocusWire Pulse. In China, they survived by focusing on booming domestic travel, but the lack of international travel hit some severely. Some of the travel startups he guided to the market had to give up their efforts to enter the Asian market, while others adjusted to the difficult market conditions.
China’s National Day is the start of its October Golden Week. Business analyst Ashley Dudarenok dives in her vlog into the history and the economic motives behind that weeklong season of travel and celebrations, and its disruptive effects on retail, logistics, and other industries.
Typically, China’s economy comes to a standstill during the annual Chinese New Year, but not in 2021, explains business analyst Shaun Reinto CNBCTV. GovermentalCovid-19 restrictions make it tough for migrant workers to return home, and double salaries at the factories might encourage them to continue working during the festival. Other industries like travel and leisure might suffer, though.
CNBCTV:
Shaun Rein, Managing Director at China Market Research Group on Wednesday said he expects the factory sector to outperform the expectations.
“The factories are offering incentives for workers to stay, they are giving double payment on their salaries. Meantime a lot of these workers have decided to stay where they work and so factories are going full steam ahead in January and February, so we expect that the factory sector is going to outperform a lot of expectations,” he told CNBC-TV18.
“You are also going to see outperforming in manufacturing and on eCommerce,” he added.
Rein’s observations come at a time when the Chinese migrant workers return home during the Chinese Lunar New Year period. Coming in the backdrop of almost a year of the coronavirus pandemic with reports showing re-emergence of the cases in January, the Chinese government got nervous and a lot of provincial governments made the COVID test mandatory.
China’s central government said that between January 28 and March 8—the six week period—there are going to be high restrictions on internal travel.
These new instructions on travel will hit the travel and leisure industry negatively, Rein said.
Many industries have to rethink the way their business and business models are organized when they resume action as the coronavirus crisis subsides. The travel industry is one of them, says Shanghai-based VC-veteran William Bao Bean, at WebInTravel. "Travel needed to solve a very big problem – high customer acquisition costs – and he said it needed a new model in which everyone wins, and not like now “where everyone loses but the platform”.
WebInTravel:
William Bao Bean, partner, General Partner, SOSV Capital said travel needed to solve a very big problem – high customer acquisition costs – and he said it needed a new model in which everyone wins, and not like now “where everyone loses but the platform”...
Bao Bean spoke of one of his investments, Travelflan, a new superapp-like model which worked on revenue share to offer distribution reach to travel suppliers to sell services. “It doesn’t make money on advertising, it works on revenue share. We have industry players who are under such pressure from Google, Facebook, Taobao, all the big giants that they are willing to trust each other and work together.”
Their secret sauce is zero customer acquisition cost, he said. “We should take advantage of this difficult time and come around a trust-based model, stay profitable and serve customers.”
Major industries like travel, retail, automotive, telecom and others see their traditional business models changing very fast. At Shanghai-based SOSV managing director William Bao Bean helps startups to make money in new ways, based on data, and capture fast emerging markets, he tells at the Phocuswright Europe conference in Amsterdam last week. Companies should not cling to melting margins, but identify where money can be made, he argues. William Bao Bean is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.
Are you looking for more experts on innovation at the China Speakers Bureau? Do check out this list.
Ctrip is one of China's successful travel companies, but for most startups, it is a tough market to crack, said William Bao Bean, managing director of the Shanghai-based China Accelerator, last week at a travel conference in Amsterdam, according to Phocuswire.com. Bean did identify some potential success stories, though.
Phocuswire.com:
Ctrip says that orders on the Customized Travel unit increased 180% in 2018.
According to the research, travelers most likely to book the high-end travel tend to be women or couples aged 31 to 40 years old.
Ctrip's data shows an average spend per person on a high-end customized travel package of $3,410 compared to $790 for a standard package.
Ctrip is targeting China’s high-net-worth individuals who totalled 1.67 million in 2018, according to the report.
Others are also seeing the potential in this segment with William Bao Bean, general partner at SOSV and managing director of Chinaaccelerator, investing in startups targeting these travelers.
Speaking at the Phocuswright Europe conference in Amsterdam last week, he said most people are “chasing a fraction of a fraction of a fraction” and that while the travel market is huge there is “virtually no money in it.”
He was talking about how difficult it is for early-stage investors to break in to the market and highlighted a company called Portier that Chinaaccelerator has invested in.
Portier provides high-end phones to guests in top tier hotels enabling the properties to offer them additional services.
Bao says that on average the company is increasing revenue room night by 20% and that it’s “high-margin revenue.”
He also touched on another investment in a company called Lux’Sens, which connects luxury good retailers to consumers, saying that 40% of global luxury spend is from China and that more than half of that spend is outside of China.
“50/60% of that [spend] happens outside China so why not try and capture that revenue.”
The Ctrip Customized Travel unit estimates high-end customized travel will grow by 200% in the next three years.
A dramatic consolidation has made life tough for all startups in China, including those focusing on travel, says William Bao Bean, the managing director of its Chinaccelerator, China’s first and leading startup accelerator based in Shanghai, to Phocuswire. Opportunities he still sees for the fast-growing number of outbound Chinese tourists.
Phocuswire:
William Bao Bean has been active in startups and investing in Asia since 2004, and he says in the last few years there has been dramatic consolidation - similar to what has happened in other technology sectors - that has left three dominant players: Alibaba, Tencent and Ctrip.
“This makes it challenging to be a startup,” he says.
“It’s almost like the mice trying to run around while three elephants are walking around. And every once in a while they’ll accidentally - or maybe on purpose - step on the mice and there’s nothing the mice can do about it.”
To survive in what he says is one of the most competitive markets in the world, startups must provide something that is truly unique and useful.
“Going back five or 10 years, all you needed to do was show up and run faster than the next guy and you could build a pretty decent business,” Bean says.
“Whereas now you need to actually provide an order of magnitude better service in order to make a play.”
But even with a superior product, survival is not guaranteed. Companies trying to reach a meaningful segment of China’s more than 1.4 billion residents need deep marketing budgets to pay for exposure on WeChat, Baidu and other mobile platforms.
“Everywhere in the world customer acquisition cost is high, but in China it’s really, really high,” Bean says.
“In the U.S. you might be able to spend $2 or $5 to get a user. In China, to get a user to download an app and open it once, it’s between $5 and $100.”
So where are there opportunities for travel startups in China? Bean sees potential in areas such as experiences, particularly those offering unique, specialized products, and for startups that can create benefits for existing travel suppliers.
One example that SOSV has invested in: U.S.-based Portier Technologies, which puts mobile phones in luxury hotel rooms, giving guests access to free data and minutes and giving the hotels a cut of revenue from services booked through the phone.
But for non-Chinese companies such as Portier to succeed in that market, Bean says they need local market knowledge.
“So if you are a big global player, you basically have to have a China play. But the issue is the infrastructure, the market, how you advertise, how you retain. Everything in China is a bit different,” he says.
Bean cites Airbnb, a company his firm has worked with to understand the Chinese market, as an example of the learning curve.
“Chinese culturally generally do not like being hosts. They really, really do not want some random person in their frickin’ house,” he says.
"But the funny thing is, Chinese are perfectly willing to go live in somebody else’s house - especially if it’s in a nice neighborhood, in Los Angeles, in the hills. They love that. So Airbnb has not done particularly well signing up hosts, but they’ve been very successful at signing up Chinese who are traveling abroad.”
Bean says the very large outbound market of travelers wanting new, unique and local experiences provides many opportunities for innovation.
“As an investor, will I do another online travel agency? No. But there is still a lot of opportunity around travel, and there is still a lot of money to be made.”
Where do they go to, where do they stay. The travel industry is eagerly looking at the luxury traveler from China. The latest Hurun Chinese Luxury Traveller report shows some answers: they increasingly go for luxury homes instead of hotels, says Hurun chairman Rupert Hoogewerfto the South China Morning Post.
The South China Morning Post:
The study reached out to individuals who spend more than 350,000 yuan (a whopping US$50,250) annually on travel.
When it comes to accommodation, traditional hotels are no longer the go-to choice, with nearly a quarter now turning to Airbnb-style holiday homes.
“The performance of the high-end short-stay holiday home market has been weak. However, as travelling as a family grows in popularity, the market is likely to see significant development in the future,” said Rupert Hoogewerf, the Hurun Report chairman and chief researcher.
Nearly half of the high-end travellers polled already have their own holiday homes, in Thailand (11 per cent) and Australia (10pc), followed by Switzerland and Japan (both 5pc).
Domestically the southern resort of Sanya, dubbed the Hawaii of Asia, remains their first choice, accounting for 12 per cent, with sea views maybe unsurprisingly topping the requirement list of holiday homes.
Polar exploration, the most popular travel theme last year, fell by 8.5 per cent and ranked second while parent-child travel enters the top three with 19 per cent. The interest in visiting islands and beaches, on the other hand, has reached it peak, with the selection rate dipping to 13 per cent this year.
Who will survive in the travel industry: the global giants or the local ventures, was a question for William Bao Bean, managing director of the Shanghai-based Chinaccelerator, at the WIT 2017 Conference in Singapore. William, who guided hundreds of startups, believes the big internet firms will crush the small ones, writes WebinTravel.
WebinTravel:
One critical question on everyone’s mind was who would emerge victorious in the online travel market: Local or global players?
Bean offered a slightly pessimistic view, remarking, “the big is getting bigger and the small are getting crushed,” and citing the example of how Facebook and Google currently control the majority of global advertising; or how payments and e-commerce are now owned or invested in by Tencent and Alibaba.
He did also add that “travel is insulated,” but nevertheless, its turf will be harder to defend from global players over time. “If they don’t have a short, they’ll use money as a weapon and acquire” businesses that will let them get ahead...
So, the big are getting bigger, but “they can be quite myopic”. It grants smaller companies and startups with a slim but existent window of opportunity to sneak ahead. But they must also be aware of common pitfalls, to avoid common mistakes that befall many entrepreneurs.
Bean argued, “the dumbest thing entrepreneurs do” is trust their gut when trying to expand their brand globally from the get go. “You cannot go with your gut, because it will take you in the wrong direction.”
Instead Bean recommended “focusing on data and trying things,” encouraging “companies to use data to back up their decisions.” He continued, “you will fail, but it will help you to fail faster” and recover sooner.
The autumn Golden Week is over and business analyst Ben Cavender looks at the trends among high-spending Chinese travellers. Unique places, convenience and safety top the agenda's of Chinese tourists, he tells in CNBC.
CNBC:
Tailor-made travel services are fast becoming customary among wealthy travelers looking to escape cookie-cutter vacation packages. According to Ctrip, factors that more Chinese tourists are seeking out from their holidays include "avoiding big crowds," "no shopping" and private travel guides.
When travelers visit places others haven't, they can derive "social cachet," and that's become a trend among the middle class, according to Ben Cavender, a principal at consultancy China Market Research Group.
"Increasingly, we are seeing well-heeled Chinese travel to hard-to-reach destinations for the bragging rights and WeChat pictures [to] show they've been somewhere exotic," he said...
Convenience, however, has also been a driver for the increase in domestic travel. As the growth in international flight options has not kept up with growth in demand, purchasing tickets without advanced planning can prove difficult and lead to more interest in alternatives that are less of a hassle, Cavender said.
Safety concerns also likely played a part in influencing travel decisions among mainland tourists, Cavender added, alluding to incidents that have taken place in Europe and the U.S. in recent quarters.
Getting space in travel is hard for startups in new technology, says VC-veteran William Bao Bean, general partner at SOSV, as companies like Priceline and Ctrip in China dominate the industry. Unless you are able to solve specific problems, he tells WebinTravel.
WebinTravel:
“Travel is a closed insular industry, there’s a lot of history and baggage. The incumbents really don’t want it to happen – it’s not in their interests to open up too much. It’s also hard to compete against the likes of Priceline that spends US$6 billion on marketing or Ctrip, which is so dominant in China.”
He however sees opportunities for “innovating around travel for companies that solve specific problems”.
Bao Bean said that SOSV, which groups seven accelerators, does about 150 investments a year, out of which there may be two to four in travel. In total, SOSV’s portfolio includes 700 investments, with the number one sector being biotech and fossil fuels. Bao Bean also founded MOX, SOSV’s Mobile-Only Accelerator, in partnership with GMobi, the largest mobile platform for South-east Asia and India.
In addition, he is also an active angel investor, doing about 40 investments a year personally.
His interests in travel range from luxury travel – one of his investments include Go Portier, the hotel concierge service used at The Siam in Bangkok – to the corporate segment through an app that offers services in 20 cities across Asia Pacific. He’s also involved in Rikai Labs, a Shanghai and San Francisco-based startup that builds chatbots that are distributed via messaging platforms like WeChat, Messenger and Slack.
Bao Bean is not afraid of testing – he tried social commerce for hotels “but it failed”. “You need decent engagement – event tickets, packages, weekend getaways, last minute trips – but it’s tough given Ctrip’s domination in the market.”
Surveys by the Hurun China Rich List not only show that China´s affluent have spent more money in 2016, but increasingly do to while traveling, says Hurun chairman Rupert Hoogewerf in the Luxury Daily. The number of days per month they travel went up again.
The Luxury Daily:
Purchases made while abroad are seen as part of the travel experience for many Chinese consumers looking for goods unavailable at home or unique to a specific location.
Hurun found that many affluent Chinese are reserving more days for traveling.
“Chinese luxury consumers continue to be extremely busy, away on business trips for eight days a month on average, up one day year-over-year,” said Mr. Hoogewerf.
“Despite this, they take 10 days for holiday, three more days than last year, whilst the super-rich take five more days than last year to 15 and go abroad 3.4 times a year on average, twice for traveling,” he said.
Despite fears about the health of the Chinese economy, the travel market is still growing. Ctrip’s second-quarter revenue rose 47 percent, to $408 million, from a year ago. Qunar’srevenue increased 120 percent, to $142.1 million in the second quarter.
Kaiser Kuo, the international communications director for Baidu, said the agreement with Ctrip would give Qunar more opportunities to cooperate on mobile search and map-based products.
He also said the two companies would be able to benefit from each others’ strengths in different markets.
“Ctrip is big on high end business travel, Qunar has been more leisure, personally booked travel,” he said. “We’re covering more bases, a broader demographic.”
The travel industry is not the only sector that is seeing companies team up amid steep competition.
Meituan, a group buying service, and Dianping, a consumer review site, agreed to join forces this month with the goal of creating an e-commerce juggernaut.
Luxury spending might have been hit by Xi Jinping´s anti-corruption campaign, but travel is on the way up. Rupert Hoogewerf just published his 5th China Luxury Travel Report and sees the super rich spending more time and money on more trips. Technology and luxury travel agencies set the trends, he tells Thoughtful China.
Fast moving changes among China´s ultrarich, business analyst Shaun Rein noted when he recently joined a millionaire on a trip to South Africa. Travel is hot for the rich, sharing their experiences over WeChat. Bling is out, feeling good is in, he tells at CNN.
The Antarctic and the Maldives are just two of the travel destinations preferred by China´s rich, who increasingly book their own trips. Those are just a few of the conclusions of the Hurun Chinese Luxury Traveler 2015, a 40-page report on the travel trends of the Chinese luxury high net worth individual, Hurun founder Rupert Hoogewerf tells Mice News.
Mice News:
The Hurun Report ran two surveys. The first polled 291 super luxury travelers, defined as individuals who spent US$30,000 or more on travel in the past 12 months, making this the largest and most significant survey of the Chinese outbound luxury travel sector.
“Hurun Research Institute carried out the survey between March and May in association with three of China’s leading luxury travel agencies: Diadema, Magic Travel and HH Travel,” it says. “Magic Travel and HH Travel and are the bespoke luxury travel brands of listed companies UTour andCtrip respectively.”
The survey asked respondents for their travel trends, and three specific case studies: Their most memorable trip last year; Their Chinese New Year trip this year; and their leisure travel plans for the next three years.
The poll showed 55 per cent of respondents were from the first-tier cities of Beijing, Shanghai and Guangzhou, with the rest from 23 provinces and including Hong Kong, Taiwan and Macau for the first time.
“Respondents were 40 years on average, married and with a 13-year-old child,” the researchers say. “They have a net worth of US$13 million and last year spent an average of US$58,000 on travel with the family. They were very international, having worked, studied or lived overseas for two years, traveled to 27 countries and taken 2.5 cruises. One-third had travelled to Antarctica last year.”
This survey of super travelers, who have spent US$30,000 or more last year on travel in the past year, “is significant, because they are ahead of the curve and give an indication of what we can expect to come from the so-called normal luxury traveler”, (Hurun founder Rupert) Hoogewerf says.
The results of the best outbound luxury travel agencies were based on a separate bespoke survey of 72 luxury hoteliers, carried out between April and May in association with ILTM and GHC, a leading luxury travel PR agency. Respondents replied to an unprompted question: “Which are the three most important luxury travel buyers from China that you currently do business with?” For the first time, the survey asked for the luxury travel buyers from Hong Kong, Macau, and Taiwan.
“The recent popularity of Antarctica for the Chinese luxury traveler shows how much experiential travel is now on the cards,” Hoogewerf adds.
FRANCE is overwhelmingly the destination of choice for well-heeled Chinese travelers going on luxury trips abroad while the US ranks close behind, a report from the Hurun Research Institute said yesterday.
The Maldives, Switzerland and Dubai are the international destinations growing most rapidly in popularity as travel spots favored by the "Chinese luxury traveler," partly thanks to visa arrangements offered by the countries, the research by the institute found.
The typical "luxury traveler" goes away for an average of eight days at a time, three times a year, and travels in groups of nine, according to the institute and International Luxury Travel Market Asia, which interviewed 150 Chinese millionaires in US dollar terms on their preferences.
These wealthy travelers are holidaying more - 20 days per year, up five days on last year.
Shopping is a prime motivation for travel, with each traveler spending an average of 813 euros (US$1,011) on tax-free goods per trip, according to Global Blue, the tax-free refund group.
China's luxury travelers' "love affair with all things France" was unlikely to change any time soon, said Rupert Hoogewerf, Hurun's founder. More than 40 percent of those surveyed cited France as being in their top 10 preferred destinations to travel to.
Within China, Sanya in Hainan Province, Hong Kong and Yunnan Province are the top three spots for luxury travelers to visit, the institute found. In addition, Tibet is becoming more popular.
China's billionaires and millionaires are a much-wanted market for the travel industry. But those rich have very distinct travel habits, discloses a new Hurun report, its founder Rupert Hoogewerf tells the China Daily. Key words: youth, self-reliance and brand loyalty.
Youth, self-reliance and brand loyalty are the defining characteristics of luxury outbound travelers in China. The study, based on interviews with 463 Chinese millionaires and billionaires, was put out by Hurun Report Inc, a leading publishing group famed for its China Rich List and affiliation with the International Luxury Travel Market, a high-end travel fair in Asia...
The demographic differences between Chinese and the Western luxury travelers have led to different consumer behavior, the survey revealed.
"Based on our research, the average age of Chinese millionaires is 39, whereas in the United States or Europe, the figure is over 50," Hoogewerf told China Daily.
The group usually comprises individuals who have mostly lost interest in major cities in Europe and the US and are keen to seek authenticity, simplicity, and a commitment to local environment with customized services, Hoogewerf said.
To meet this need, Orient-Express Ltd launched a series of three- or six-night rail journeys this year,connecting travelers through Thailand, Malaysia, Laos and Singapore, with an in-depth travelexperience...
Chinese luxury travelers also exhibited distinct loyalty to international cachet, the report found.
Shangri-La remains the most popular hotel brand among Chinese billionaires.
For wealthy Chinese an iconic brand is always the dominant factor when picking hotels, followed by service, facilities and locations.
Smaller vendors, too, are taking concrete steps in building brand awareness to gain a bigger sharein this lucrative market.
Small Luxury Hotels of the World, for instance, has conducted a series of advertising campaigns through China's popular social networking site renren.com, which includes a monthly lottery for a 12-night stay in any of its member hotels.
