Case: CTRIP: Scientifically Managing Travel Services.

Distinctive characteristics of the Chinese travel market

In 1999 when CTRIP was established the Chinese travel industry comprised
of small travel agencies. These agencies were fragmented, weak and poor at
service. The firms were either small, independent operators or were state
owned with self-governing and loosely controlled operations.
The travel agencies at that time focused more on group tours and attracted
customers on basis of low prices. But these tours offered low quality food
and compulsory shopping trips to the customers so that the guides could get
commissions.
There were no aggregators for the hotels and the airlines, the hotels
belonging to hotel groups were less than 5 percent at that time. Most of the
hotels operated independently.
Before the internet boom, the hotels had only one way to promote
themselves that was to advertise in the national newspapers, which was
costly. Due to this reason most of the customers were unaware of which
hotels were available and in which cities.
The airlines at that time were all owned by the state government and etickets did not exist, people could only book flights through a local travel
agent. The travel agencies received information on the government policy,

prices and commission and then checked ticket availability and calculated
price for the consumers. The government regulated air ticketing and
packaged tours in order to minimize the fraud cases.
The travel agencies only had information on local flights. The airlines had
different policies and airfares for different cities. The demand for travel
services started rising due to the quick growth in private enterprises of
China.
CTRIPs competitive advantages
When CTRIP entered the hotel reservation business it used internet to
compete with the offline competitors. The use of internet provided the
company with comprehensive and up-to-date information about a larger
base of hotels. The internet also helped them build a database about the
consumers historical orders and their preferences. The use of internet made
the company eliminate competition and gain good profits margins on hotel
reservations.
The CTRIP team developed an EBooking network, which connected the hotels
with CTRP through the internet and enabled both these entities to exchange
the booking information. This Ebooking system is now being developed into
the companys hotel global distribution system (GDS) in China.

The company introduced the pay-upon-check-in model in order to ensure and

facilitate instant confirmation for the customers while they book both online
and offline.
The company used two approaches for acquiring customers, distributing
membership cards and brochures on the airports, offices etc, and by building
alliances with airlines and banks so that their customers would become
members of CTRIP. But the first method was easily imitated by the
competitors.
The company equipped its sales staff with PDAs and supported them with an
IT system. With the use of this system the sales personnel could register the
customers through their phone numbers and identified the consumer
segments to which a specific customer belonged, the system then provided
the sales people with tips of how to handle that specific customer.
This system tracked the number of customers dealt with, the length of calls
and also helped the firm in managing the sales staff that was dispersed in
about 50 cities around the country.
CTRIP partnered with air ticketing companies and established an online
platform for ticketing, at that time no other company had the technology to
issue a ticket for a flight that departed from a third city. But this practice is
now widely used by many other companies as well.

CTRIPs IT system was so developed that it could modularize all information

and the young and inexperienced staff can easily quote accurate prices,
while traditional travel agencies had to provide proper trainings to their
employees in order to interpret complex codes and quote the prices.
Proposed entry
The budget travelers segment includes customers which have income of
RMB 60,000 or less. This market segment is quite large, the main competitor
of CTRIP in this segment is eLong. Taobao in the largest online retailer of
China and has recently entered online travel market and is a new competitor
of eLong and other firms.
Although Taobao offers low prices in order to attract budget conscious people
but the service standards vary because the customers get products and
services through different agents and individuals.
On the other hand CTRIP has the edge as it provides one-stop full service no
matter what the package, hotel or ticket is bought. So CTRIP should position
itself based on this fact in order to attract this segment of customers.
CTRIP should develop a model that suits this market segment, so that it can
have repeat customers and the products can also be used over and over
again.

The luxury travelers segment includes customers with annual income more
than RMB 1 million. These travelers value cross-cultural contacts over the
trips and prefer both high end foreign and local Chinese cuisines.
The two segments have different needs and expectations, and in order to
cater their needs the firm needs to develop new resources and skills sets.
If CTRIP decides to go for budget travelers it will have to offer prices that
match the competitors and there would be the issue of the brand image
dilution.
If CTRIP goes for luxury travelers segment they would have to work harder to
meet the customers expectations as the company has less experience with
these customers.
I would recommend that CTRIP should target luxury travelers segment
because the experiment done on this segment showed how fast all the
tickets sold and that there is a market yet to be explored. And the branding
in this segment would be five times as effective as other tours of the
company.
Recommendations
In targeting the luxury travelers segment CTRIP should offer the food of the
customers choice for people who have less overseas experiences. Also the
company should place customers with different backgrounds and cultures

together as the travelers in this segment like to build cross- cultural

relations.