Travelzoo eyes 200 million Chinese travellers

Travelzoo Asia-Pacific's Jason Yap talks about the impact of mainland travellers on the industry

PUBLISHED : Friday, 16 May, 2014, 11:27am
UPDATED : Saturday, 17 May, 2014, 2:30am

Jason Yap Thian-seng, of Travelzoo Asia-Pacific, is in the early stages of a journey.

By 2020, the number of individual Chinese going overseas each year will have doubled to 200 million from last year, brokerage CLSA estimates.

And China is just one country among many boasting a fast-growing middle class eager to travel.

By 2030, there will be 1.8 billion people travelling internationally, the World Travel and Tourism Council says. Just last year, one billion people crossed an international border.

Yap, chief executive of Travelzoo Asia-Pacific, an online publisher of travel deals founded in 2007, wants to help guide new travellers around the world as they start exploring the globe for the first time.

People in China have grudgingly agreed that if they want higher quality, they have to pay more

His company is a licensee of Nasdaq-listed Travelzoo and has 3.6 million subscribers.

Travelzoo differs from traditional travel agents by offering only a small number of keenly priced weekly gourmet and travel deals. It operates in five markets in the Asia-Pacific.

Business revenues have grown at 20 per cent year on year, and Yap sees no sign of this slowing down. In fact, he said he was preparing to expand. Yap talks about his outlook for the travel market and plans for the near future.

Q: How do you see the Asia-Pacific tourism market changing over the next decade?

A: It will be very economy-driven. China by itself is such a big market.

People from the top-tier cities are generally younger, with high disposable income, ambitious, well-read and know what's going on around the world. They are adventurous and travel by themselves. They want to arrange their travel schedule.

Everyone is talking about the Chinese. They want to make it hospitable for the Chinese

The third- and fourth-tier cities have new-found wealth and created an increase in outbound travel with tour buses, guided by tour guides in the Chinese language. Fifty yuan (HK$62.80) makes a lot of difference to this group. But that's where the volume is.

Seventy per cent of people travel in groups; 30 per cent are independent. This 30 per cent are concentrated in the top-tier cities and are growing at a rate a lot faster than group travel. They are growing at 60 per cent per annum, and within the next 10 years, the ratio of group to independent travel will flip.

Q: How many tourists are we talking about?

A: China Tourism Agency said there were 98 million trips taken overseas last year, up 18 per cent on 2012. The projection was that by 2020, outbound travel will be 200 million. In 2012 tourism dollars, China outspent everyone at US$102 billion. This was a 40 per cent increase since 2011.

Q: What are overseas markets doing to prepare for this?

A: Everyone is talking about the Chinese. They want to make it hospitable for the Chinese. The hotel groups are putting Chinese tea in their rooms. They are having Chinese congee in the breakfast, Chinese speakers in shops and in reception making it convenient and easy for the Chinese to communicate.

Larger entities are making changes to accommodate Chinese tourists. Branded shops are hiring Chinese speakers. These are all changes that are beginning. It is not unlike the '80s in the Gold Coast in Australia. It was like Japan. Many shops and restaurants had menus and prices in Japanese.

Travellers are asking for more personalised things. Self-drive tours. Real estate buying holidays. Education tours to the UK. These are very specific and purposeful tours.

Q: Is the infrastructure capacity in destination markets able to absorb these numbers?

A: Let's take Hong Kong. Now you are seeing more and more boutique and apartment hotels catering to the Chinese. Serviced apartments that used to take a minimum three-month rent now take a five-day rent. These are all responses to the demand from mainland China.

But when expanding facilities, you need to be careful. A case in point is the Sydney Olympics. They overbuilt. The Chinese enjoy travelling, but if they visit one place, will they come back?

For example, according to a Travelzoo survey, Australia used to be in the top 10 as a destination for Chinese visitors. In the last survey, Australia dropped out of the top 10.

Building infrastructure to accommodate a big group may be a bit ambitious.

Q: What about other Asia-Pacific markets?

A: These emerging markets will be the growth engine to global travel for the next 10 years. Americans and Europeans are fairly mature. Emerging markets are realising they want to see the world. How are we educating them to travel? How are we providing them with tools to travel with ease?

People in China have grudgingly agreed that if they want higher quality, they have to pay more. Whether it is a BMW or a can of milk powder.

Here we give them an opportunity where if you want to go to Madison Square Gardens to watch an NBA basketball game, you pay the same as an American Travelzoo subscriber.

Ctrip and eLong may be able to get tickets, but they have to go through intermediaries, and every layer is cost of intermediaries added.

Q: How much market share do you have, and who are your competitors?

A: We have 3.6 million subscribers in the Asia-Pacific. One million from Japan, 1.1 million from mainland China, 440,000 from Hong Kong, 750,000 from Australia, and so on.

From a revenue perspective, China and Japan take 33 per cent each. Ctrip and eLong serve the local Chinese market. TripAdvisor is a little bit of a competitor, but they are into volume. We are very targeted. Yahoo Travel is a competitor. Online travel agents are competitors, but they do buy traffic from us.

Q: How will you grow your business?

A: Travelzoo has been around the last 15 years and survived several global economic crises. The reason for its survival is very easy. Discipline and focus on high-quality content.

We will only publish deals after going through a rigorous evaluation research and test. We publish qualified deals, and we maintain a set of high-quality subscribers. These are the two principles that have allowed Travelzoo to survive so far.

The big boys like Sina and Ctrip try to do what we do, but they cannot get the essence of how these deals are published. The amount of work we put into the top 20 we publish on a weekly basis is enormous.

We are a B2C [business-to-consumer] business. We are not going to put a supplier and retailer together. The next stage of growth will come in the form of partnerships. A lot of Western companies have tried to go into Japan and China, with failure.

Ebay is insignificant in China, after spending hundreds of millions of dollars. Google has nothing to say in China, for whatever reasons. Expedia is in China in the form of a joint venture that is far from No 1. TripAdvisor in China is called Baodao. They are doing quite badly.

Our next phase is not going to be doing it by ourselves. The next phase of growth will come from partnerships with partners who can see the value we can bring to Chinese travellers.