eLong, Expedia’s online travel agency subsidiary in China, has carried out a very substantial shift to online hotel bookings in the past year.
More than two-thirds of eLong’s hotel bookings took place online in the first quarter of 2012, the company reported last week in its first quarter results, while less than half of its hotel bookings occurred online a year earlier.
The China travel market is, of course, much different than other global markets, but one concern expressed by Guangfu Cui, eLong’s CEO, has parallels to parent company¬†Expedia Inc.’s¬†fears over Google’s acquisition of ITA Software and the impact on flight search.
Guangfu noted during the earnings call that travel search engine Qunar, which is majority-owned by Baidu, China’s dominant general search engine, announced it plans to test the IPO waters in the US. Guangfu added:
And, we also know Qunar may receive preferential upside to traffic from its controlling shareholder Baidu, which is China’s monopoly search engine. So we believe these sorts of practices harm consumers and suppliers and the entire supply chain, and we encourage all players in this market to compete fairly.
The eLong CEO also complained that “some companies” also use their “monopoly power” ¬†to dissuade hotels from setting their own rates “or to work with us or other distributors.”
It’s unclear what impact, if any, Guangfu’s comments may have.
Along with eLong’s channel shift, it is seeing a surge in lower-commission bookings from its online and mobile GroupBuy hotel vouchers, which debuted last year, and has 10 million followers on the somewhat-Facebook-like Qzone¬†microblog, which eLong uses for branding and customer service.
Qzone is the creation of Tencent, an investor in, and an affiliate of, eLong.
“Another benefit we are getting from Tencent is we are working very aggressively with them on social network marketing,” said Guangfu. “We got over 10 million followers in Tencent microblog and Tencent page which is the same — kind of like Facebook in China. So that is a tremendous uplift of eLong‚Äôs brand awareness among the Tencent [Qzone] users.”
Just as many airlines and hotels have gone to social media for customer service, eLong is staffing the microblog 24/7, Guanfgu said, adding that that the online travel agency addresses complaints and concerns about reservations within an hour.
Since launching the GroupBuy service online and in eLong’s Android and iPhone apps last year, about half of eLong’s hotel bookings come through GroupBuy vouchers and budget hotels, said Mike Doyle, eLong CFO.
The trend has reduced eLong’s commission per room night, as has lower average daily rates, the company says.
Officials said that the GroupBuy voucher purchases tend to skew toward budget hotels.
Still, the push to online and mobile hotel bookings helped eLong notch a 67% increase in hotel room nights booked to 2.8 million in the first quarter.
And, net income increased 58% to $1.9 million on $24.3 million in revenue, a 23% jump.