Summary of Key Points
After being fined 5.179 billion yuan for monopolistic practices, Ctrip has freed hotels from unreasonable rules such as exclusive partnerships and mandatory minimum pricing, allowing them to choose their distribution channels and set their own prices. However, this is just the beginning of a new challenge: hotels can no longer rely solely on platform traffic to generate business; they must figure out how to attract customers on their own. Essentially, China's hospitality industry has moved from a phase focused on expanding room capacity to one where competition revolves around the ability to attract and retain customers. Only those who can establish systems that encourage repeat business will survive.
Detailed Analysis
1. Platforms are still useful, but not the sole source of revenue
Many hotels mistakenly believe they can completely do without platforms after being fined. The value of platforms lies in reducing the costs associated with unfamiliar transactions. For example, when traveling to Quanzhou, it would be impractical to call each hotel individually; through OTAs like Ctrip, travelers can quickly find information about locations, reviews, and prices, and make payments directly. While platforms remain an important channel for attracting new customers, they should not be the only option.
Example: A Beijing tourist might book a small hotel in Quanzhou through Ctrip for the first time, but if the service is excellent and the hotel has unique features, they are likely to return directly without using Ctrip again. The role of platforms should shift from being the sole source of business to acting as a intermediary for initial interactions.
2. Hotels can be divided into two categories
There are two distinct types of hotel operators:
- Hoteliers that only sell rooms: They focus on costs, occupancy rates, and pricing but cannot explain why customers should choose them. For instance, a small roadside hotel might attract only one-night guests who will not return.
- Hoteliers that offer additional value: These hotels provide reasons for customers to choose them, such as brand loyalty, membership benefits (like those offered by Huazhu Hotels, the parent company of Hanting and Qianji). 73% of Huazhu's orders come from its members, who are drawn to the brand’s reputation and rewards.
The gap between these two types of hotels is widening: the former rely on platform traffic and low prices, while the latter can generate business on their own.
3. A comprehensive customer acquisition system is essential
To attract customers, hotels need a multi-layered customer acquisition system:
- New customers from wide areas: These come from platforms like Ctrip and Meituan and represent basic traffic but often require higher commissions, leading to price competition.
- Scenario-based new customers: These are attracted by content on platforms like Douyin or REDnote (e.g., a homestay that offers stargazing views) or events (e.g., hotels near concerts).
- Organized customers: These include business agreements, conferences, and wedding venues. For example, local hotels can partner with companies to provide convenient accommodations for employees on business trips.
- Repeat customers: These include members, regular guests, and word-of-mouth referrals. They are the most valuable as they return frequently.
A stable customer base requires a combination of these four sources.
4. Small hotels don’t need to become large; they should focus on being “small but excellent”
Most of the 375,000 hotels in China are small, such as 10-room accommodations in county towns or small inns near hospitals. They don’t need to pursue a national membership strategy like chain hotels. Instead, they should build a local presence:
- Business hotels in county towns: Focus on serving local businesses and weddings, offering discounts and personalized services (e.g., breakfast and parking).
- Scenic area homestays: Highlight local experiences by providing transportation, organizing activities (e.g., picking wild vegetables), and sharing photos on social media.
- Hotels near hospitals: Meet the needs of family members accompanying patients, such as offering long-stay discounts and quiet rooms.
The key is to have a stable base of local customers; even if they use platforms, they won’t be at their mercy.
5. Platforms need to change
After the Ctrip penalty, platforms must shift from locking in hotels through exclusive agreements to helping them attract customers:
- Previously: Platforms relied on exclusivity to keep hotels dependent on them.
- Now: They should help hotels find new customers by integrating services (e.g., offering flight-hotel packages or analyzing customer demographics).
For hotels, the future platform will be more of a partner, assisting with customer acquisition, pricing optimization, and room management.
Conclusion
The Ctrip penalty has given hotels the freedom to choose their distribution channels, but not the customers. To thrive, they must move from relying on platforms to attracting customers on their own. The real competitive advantage lies in understanding why customers should choose them and establishing effective customer acquisition systems. The next focus for China’s hospitality industry is not just increasing room capacity but developing the ability to continuously meet customer needs.