OTAS TIPPED TO BENEFIT MOST FROM CHINA’S TRAVEL RECOVERY, WITH GEN Z DRIVING GROWTH

OTAs are tipped to be the key beneficiaries of the Chinese travel market, which is expected to grow 13% per annum post-Covid, according to a report by DBS, Singapore’s major bank.

The report, “China Online Travel Sector”, states that more than 60% of online bookings are via online travel agency (OTA) platforms.

Said the report, “China’s online travel bookings revenue made up 46% of total travel bookings revenue in 2021, below the globe’s 66% in 2021, according to Statista. There are two major channels for online travel bookings, namely, (1) merchandise sales and (2) online travel agencies (OTAs). In terms of GMV, OTAs contributed c.60%/80%/80% of online transportation/online accommodation/other online travel.”

The report called out Gen-Z as an emerging force with 70% of them travelling two to three times a year.

Said the report, “Young travellers with high travel frequency like OTAs. The younger the generation, the higher the online travel penetration rate. Gen-Z forms 30% of the online travel user base, and 90% of Gen-Z books their trips via online platforms.

“This generation has enjoyed material affluence, and 70%+ of them travelled more than two to three times a year – higher than the other age groups. They will be the emerging force driving the domestic travel recovery in the next few years.”

Another catalyst is that “independent travel favours OTAs”.

“Travellers are shifting their preference from group tours to independent travel, with 69% choosing independent travel when planning their next trip – this increased from 41% pre-pandemic, according to Oliver Wyman.

“The Covid outbreak in the past two to three years has reshaped travel preferences, as the pandemic favours independent travel with a small family size. The increase in travel sophistication, to now include African safaris, diving, skiing, photography trips, etc., also favours OTAs, as travellers require tailor-made itineraries that cannot be satisfied by group tours.”

It concluded, “Our analysis concluded that the China online travel market will sustain a CAGR of 13% per annum from 2024F-2032F, even after a 24% per annum recovery during 2021-2024F due to the lifting of travel restrictions post-COVID. The sector benefits from (1) continuous expansion of domestic travel spending, (2) structural increase in online travel penetration, and (3) expansion of product offerings and advertising.”

*Source: Pacific Asia Travel Association