Time to rebook

Not a good season to travel

Who’d want to be a boss in the travel industry right now? Hotels are closed, airlines are grounded, and countries are closing their borders to non-nationals.

Some of the worst trading conditions in history are the backdrop to a story from Beijing Business Today that Marsha Ma, the boss of Booking.com’s China unit, has been ousted and that its one year-old China division will be restructured. Instead of running its own product development and sales team, the unit will now report to the head of the Asia-Pacific region.

Company executives had been outspoken in the past about the need for their Chinese business to run as a standalone unit so the restructuring is being seen by some as a reversal of strategy. A case in point was an article on Huxiu, a news portal based in Beijing, which interpreted the changes as a sign of Booking.com’s challenges in the Chinese market, where its growth has been slower than anticipated.

Some of the other coverage of the online travel platforms in the local media has been critical, noting poor customer service and problems in refunding bookings as a result of the disruption that the coronavirus has created. Yet the priority for the travel sites at the moment is cash preservation, amid the catastrophic conditions brought about by the pandemic.

Trip.com (better known as Ctrip in China) was one of the first to feel the pain because it focuses so heavily on the China market, where the virus struck first. Its shares have dropped more than a third since the start of the year and its chief executive and chairman said they would stop taking salaries until conditions improve.

Expedia Group and Tripadvisor – two booking platforms with a more global profile – are now being confronted by the same crisis.

Booking Holdings – the Amsterdam-basedparent firm of Booking.com and the biggest of the travel sites, with offerings across hotels, plane tickets, home and apartment rentals and rental cars – is in the same boat. Its shares have plunged more than a third since the start of this year and it withdrew its earnings guidance last week, citing the “rapidly evolving situation”.

In fact, Booking Holdings had kicked off a round of cost cutting before the pandemic arrived in Europe and North America in its deadliest form. This was spurred partly by the impact of the trade war between Beijing and Washington, which contributed to a dropping off in Chinese visitor numbers to the US last year. Company CEO Glenn Fogel knew that the coronavirus was going to be a body blow for bookings, talking about a significant drop in sales over the first quarter during an earnings call in late February. That meant that he has been focusing on more centralised approach to management, bringing his brands (Agoda, Kayak, Priceline and OpenTable as well) closer together.

Booking Holdings has already taken a different approach in China by opting to rely on partnerships as a way of broadening its sales and distribution. It has done this by taking stakes in some major players, typically the leaders in their respective sectors. The strategy has been anchored around more than $1.3 billion of investment in Ctrip, the leading online travel agent in China, since 2012. Another $450 million was splashed on a stake in Meituan, the delivery app, and $500 million more went into a shareholding in Didi, the ride-hailing platform.

The idea is that Booking Holding’s brands will sell millions ofrooms, flights and car rentals in markets outside China to its partners’ domestic customers. China’s online tourism market grew from Rmb307 billion ($43.8 billion) to Rmb1.51 trillion between 2013 and 2018, according to iResearch, which also forecasted that sales were going to exceed Rmb2 trillion this year.

The pandemic will put a hole in those numbers, although Fogel is looking longer-term. “In the long run, there’s going to be a lot more Chinese travellers outbound, so it’s important that one doesn’t just pull back because of any sort of short-term blip,” he explained last year. “And we’ll continue to do what is appropriate to build our Chinese business.”

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