How CTS (HK) aims to drive China's tourism

6 July 2001

Q: What does the restructuring of CTS mean in terms of it developing the core business of tourism?

Zhang: Over the past 20 years, CTS (HK) has grasped the opportunity of China's "open door policy", to expand from a small, local travel agency into a multi-national business corporation with diversified businesses. However, in light of such rapid growth and build-up of diversified products, our core business objective has become less apparent.

That is why the decision was made to restructure the business. The main objective is to centralise our resources so that we can further develop tourism. This involves gathering all the tourism-related businesses into CTII (China Travel International Investment), a publicly listed company and setting up the flagship of our travel business to concentrate on the development of our core business.

(In March, CTII bought CTS HK; a stake in China Travel Net and a hotel property in Macau. CTII has also announced plans to acquire a number of other travel businesses over the next couple of months).

The tourist industry will have higher growth than any other industry worldwide. There is no reason for us not to build on our strengths. We have extensive experience and a strong faith in the effective expansion of our tourism business. The CTS restructuring has set the course for the company to leverage on its accumulated resources to develop tourism as our core business.

Q: How has this impacted the other branches of CTS, and how will it effectively strengthen the brand? What are the negative spin-off effects?

Zhang: The company restructuring has generated a great deal of attention from both the trade and the general public, and fortunately, it has been quite positive. Since one of our main objectives in this restructuring is to concentrate on expanding the China tourism business, it helps to promote our brand and the entire China CTS network.

In fact, a number of relatively large travel agencies in China have already approached us with alliance proposals in the hopes of working together in the industry.

This proves that industry players and our partners have a positive outlook on the future of the company after the restructuring. You have asked whether there have been any negative effects, and I can tell you that up until the present time, there have been none.

Q: The role of the agent is threatened by airlines that want to reduce commissions, and an increasing number of well-researched travel consumers search the Internet and book on-line. In your opinion, how important is the role of the agent?

Zhang: Let's face it, the market changes. Although some traditional travel agencies have been pressured by airline commission reductions, and they might have to change their own roles, it would be incorrect to presume that the middleman is no longer needed based on this alone. Change is inevitable. The travel agency role will not remain the same forever, and in my opinion, it will change along with shifts in the market.

Many products today are sold directly rather than through channeled sales.

Airlines, hotels, tourist attractions, and car rental agencies always seek to have a closer relationship with customers by cutting out the middleman. Why? Because they want to extend their services within the entire supply chain, increase their revenue and reduce costs. This in turn heightens competition within the industry. We can already see this as travel agencies today face competition from not only other agencies but from their own partners as well. Worse yet, they must face competition with their suppliers who are selling direct to consumers online.

But it's not the end of the world. We should rise to the challenge and find a way to adapt to this change. Travel agencies still have room to expand; it is all a question whether they can follow the new rules and trends.

The old-fashioned middleman's role is certain to change, but it does not mean that it will cease to exist. I believe that travel agencies offer many essential services beyond just the sale of air tickets and booking of hotel rooms.

At the end of the day, whoever provides the best value-added products and services and the most convenience will be the winner.

Q: CTS, CITS and CYTS are the largest agencies in China. After the restructuring of CTS, how will the roles of each organisation differ? How long will each of these agencies remain the largest in China? Are other potential agencies starting to emerge out of the woodwork?

Zhang: The duty of CTS (HK) is to help to expand the tourism industry in China. Earlier this year, CTS (HK); CTS (Beijing); CITS and CYTS were invited to a tourism industry conference in Beijing to discuss the tenth 5-year plan on national tourism development.

I do not think we have any differences as travel agencies. We will all join forces in the same goal to re-shape the Chinese tourist industry. The only difference might be that our respective locations provide us with different strengths. For example, since CTS (HK) is located in Hong Kong, it provides us the opportunity to encourage Hong Kong people and overseas tourists to visit China.

At the same time, we also encourage mainlanders to visit Hong Kong and other countries. This sets CTS (HK) apart from the others. Additionally, we are working hard to expand our business network both domestically and internationally by creating our website: chinatravelOne.com

With China's entry into WTO, the market will be open to the outside world and more overseas tourism operations will set up offices in China. It is not difficult to predict an increase in competition within the industry. That's why it is essential for us to seek out any opportunity to expand our business so we can be ahead of the game.

Q: What is the key toward continued growth in the inbound travel market?

Zhang: There has already been substantial growth of inbound tourism. Twenty years ago, China was ranked 44th worldwide, and today we are ranked 5th. The World Tourism Organisation predicts China will be the world's leading tourist destination by 2020.

China still has much room to grow and offers a wealth of resources waiting to be discovered. There is little doubt that tourism in China will grow significantly in the future. However, we also need to improve our product strategies, marketing and management skills since there is still that gap between overseas travel companies and ourselves.

This gap means there is room to expand and considerable potential for growth. The priority now, is to improve the quality of our staff through proper recruitment and professional training. This is essential so that we can provide a wide range of services from the most basic to the highly professional.

More importantly, technology is becoming increasingly important in the industry, and we need higher quality managers and employees who understand the new technology and make them work to improve current business.

Q: What advice would you give your fellow Chinese travel industry members as tourism matures in China?

Zhang: I am pleased that China's tourism industry is recognised as maturing. My advice is to accept the market change and take more time to study these changes. We are all facing the same challenges, but on the upside of this, we all face the same opportunities.

If we can identify our weaknesses and strengths, we can set up our goals. At the Beijing tourism conference, people talked about the status quo of the Chinese travel companies and summarised the problems of today's travel industry in ways: "Small (in size), unconsolidated (in operation), unregulated (in competition) and Poor (in Management)".

This situation must be changed, and travel agencies should work together to overcome these problems. As long as we recognise the problems and make an effort to improve, our travel agency business will succeed as the industry matures.