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Time for travel agents to put service ahead of prices

 

Online travel agents have a pronounced focus on price cutting rather than upgrading product experience and service.

In August, industry leader Ctrip.com launched a new wave of sales promotions with the slogan of "you will discover that you can save more with Ctrip than with other websites." This is widely seen as Ctrip's counter to successive promotions recently launched by other online travel companies, Elong.com, Mangocity.com and Kuxun.cn. Speaking at the end of July, Xie Hang, Deputy General Manager (Marketing) of Mangocity.com said: "We proceeded with the second round of our sales promotion starting on August 1 and invested 80 million yuan (US$12.57 million) to strengthen the marketing plan which we finalized in July."

In response to Ctrip's promotion, Elong declared: "We can beat Ctrip's discounts by 10%", and the company also stepped up its outdoor advertising campaign.

In the wake of this, Ctrip announced that they were launching a " cash for comments" scheme on all of their tours, as well as offering huge discount on hotel and plane tickets.

Yang Yanfeng, associate researcher of the China Tourism Research Institute, said that the price war which has erupted between the firms will lead to a restructuring of the online travel industry, with low-profit small and medium-sized companies being squeezed and likely forced out of business.

In addition to the price war, the war for control of the online travel market has also intensified.

In the second quarter of this year, China's online travel market posted profits of 41.87 billion yuan (US$ 6.58 million), up 35 percent on a year-on-year basis, according to iResearch Consulting Group. The spike is mainly due to an increase in online and offline plane ticket reservations and rapid growth in both the distribution of hotels and OTAs (Online Travel Agent) and the direct selling of budget hotel rooms.

Qunar.com recently published the "China Tourism Faith Service Declaration" in association with a number of online travel agents, including Elong.com, Mangocity.com and 17u.cn. In addition, they established the China Tourism Integrity Services Alliance. However, Ctrip did not join either scheme.

According to industry insiders, the erupting price war will likely stimulate market expansion, which could also result in falling profits for the industry. The value of lower prices to consumers is only one part of the equation, however, with improved user experience and higher quality service often featuring more highly on customer's wish lists during the rapid expansion and development of the online travel industry.