China is Expedia’s Achilles heel
Expedia wants to expand outside the North America but making inroads into the world’s most influential travel market will be a tough ask in the face of increasingly fierce competition finds EyeforTravel’s new report into Expedia
With a projected compound annual growth rate in outbound journeys of 8% to 2020 and an even faster growing domestic market, Expedia needs to get a slice of the Chinese market but since its sale of eLong, the competition has only got stronger and it may be too late to make inroads according to EyeforTravel's new report into the company.
Expedia faces not only a series of rapidly growing brands that are beginning to establish themselves but an increasingly interconnected web of investments between these players that threatens to lock them out of the market. The key player is Ctrip, which is now reaching a point of near-dominance in the market. Other key brands in the market include Qunar, eLong, Tujia, Alitrip, and Meituan-Dianping, making it a competitive market place, but already several of these brands are falling under key rivals. Ctrip is the biggest player in the field, snapping up Expedia's former brand in China, eLong, alongside Qunar, and it also has a subtantial investment into Tujia.
Expedia's great rival Priceline is also deeply embedded into the market. It has investments and distribution partnerships with both Ctrip and Meituan-Dianping, tapping into two already key players, with explosive growth rates. In the case of Ctrip, Priceline's investment gives them up to 15% of the shares in the company and also an observer on Ctrip's board, allowing them a degree of influence in the company, one that is unlikely to be friendly to Expedia.
Although Expedia's weakness in the market is noticeable, it's not just Expedia that has struggled in the Chinese market. Other tech giants, such as Uber and even Google, failed to truly make inroads despite putting in big investments, emphasizing the complexity and unique dynamics of the market. It appears that for now Expedia is choosing to focus on other Asian markets, recently announcing that it is investing into regional OTA player Traveloka. Traveloka focuses on Southeast Asia and Expedia reported in 2017 that the area is its fastest growing regional market.
Nonetheless, the situation leaves Expedia largely bereft of options to open up the Chinese market currently and potentially facing a very large bill if they do want to establish themselves, both in marketing and platform terms. However, one potential route in the long term might be through its investment into SilverRail. Rail travel is already critical in China, making up the largest segment of the digital travel market in the country and is set to grow substantially in the coming years. A foothold in rail therefore could be a key competitive advantage, especially as Priceline is so heavily focused on accommodation and not as diversified in terms of revenue streams as Expedia. However, it remains a longshot in the context of an increasingly powerful number of localized and interconnected players.
To preview and buy EyeforTravel's Expedia report, click here, or here for the Priceline report. These are part of the Future of the Online Giants series, which will cover Expedia, Priceline, TripAdvisor, Ctrip and Google. Keep a look out through EyeforTravel On Demand for the rest of these reports.
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