China's OTA Platforms: A High-Efficiency Miracle Under Low Commission Rates

Tech 2025-02-28 10:38:34 Source: Network

China's OTA Platforms: A High-Efficiency Miracle Under Low Commission RatesRecent years have seen DeepSeek make waves in the global AI field with its low-cost, high-efficiency approach. A similar "efficiency revolution" is unfolding in China's tourism industry

Recent years have seen DeepSeek make waves in the global AI field with its low-cost, high-efficiency approach. A similar "efficiency revolution" is unfolding in China's tourism industry. Q4 2024 and full-year financial reports reveal that major domestic and international Online Travel Agencies (OTAs) like Booking, Airbnb, Expedia, and Ctrip all maintained revenue growth exceeding 10%. Remarkably, Chinese OTA platforms, facing intense market competition, achieved comparable Gross Merchandise Value (GMV) to their international counterparts with a combined commission rate roughly one-third lower, demonstrating significantly higher operational efficiency.

OTAs, acting as third-party service providers connecting tourism supply and demand, primarily generate revenue from transaction commissions. Therefore, the commission rate is a crucial indicator of an OTA's operational efficiency and its relationship with merchants. Booking's 2024 total revenue was $23.74 billion on a GMV of $165.58 billion; Expedia reported $13.69 billion in revenue on a GMV of $110.92 billion; and Airbnb generated $11.10 billion in revenue on a GMV of $81.8 billion. This calculates their combined commission rates at 14.3%, 12.3%, and 13.6%, respectively.

In stark contrast, Chinese OTA platforms boast significantly lower commission rates. Ctrip's 2024 GMV reached RMB 1.2 trillion (approximately $170 billion USD), with net revenue of RMB 53.3 billion (approximately $7.5 billion USD), resulting in a combined commission rate of only 4.4%, far below the international average of over 13.5%. Another major Chinese OTA, Tongcheng, reported RMB 13.11 billion (approximately $1.8 billion USD) in revenue for the first three quarters of 2024, with a GMV of RMB 201 billion (approximately $28 billion USD), achieving a commission rate of just 6.5%, less than half that of international giants.

This high efficiency under low commission rates not only highlights the strong competitiveness of Chinese OTA platforms but also injects new vitality into the high-quality development of China's tourism industry. So how do Chinese OTA platforms achieve comparable transaction volumes with significantly lower commission rates than their international counterparts?

Firstly, the domestic tourism market is exceptionally competitive. Compared to foreign markets, the Chinese online travel market is still in a development stage, characterized by fragmentation and fierce competition. The influx of numerous new players, including other OTAs, content platforms, and local life service platforms, forces platforms to lower commissions to attract merchants, thereby fueling their own growth.

Secondly, Chinese OTA platforms enjoy significant advantages in operating costs. International OTAs are often multinational operations, requiring substantial investment in R&D for localization and facing diverse regulatory challenges across different regions, leading to high overall costs. Chinese OTAs benefit from lower labor costs and the economies of scale offered by a large, unified domestic market, enabling lower operating costs. This cost advantage allows them to maintain healthy platform development even with lower commission rates.

Thirdly, Chinese OTA platforms are more proactive in adopting new technologies. Ctrip, for example, actively utilizes AI, large language models, and other new technologies to improve user decision-making efficiency and reduce labor costs. Ctrip's intelligent customer service system can independently respond to most inquiries, with an automation rate exceeding 70%, significantly enhancing service efficiency. Furthermore, Ctrip leverages AI-generated content to stimulate travel desires and provides customized services, further enhancing user experience and platform competitiveness.

It's noteworthy that the low commission rate and high-efficiency operating model of Chinese OTA platforms is not an isolated case. Domestic food delivery platforms like Meituan and Ele.me employ similar strategies, achieving larger GMVs with lower commission rates compared to their international counterparts. They also possess significant advantages in operating costs and technology application.

A veteran tourism industry observer commented, "In recent years, the competitive logic of domestic online travel platforms has undergone a fundamental shift. The previous mode of extensive growth driven by 'commission wars' is being replaced by a high-quality development path driven by 'efficiency wars.'"

In the early stages of the industry, low commission strategies were an effective means for OTAs to rapidly seize market share. By drastically reducing commission rates, platforms sacrificed profit margins to quickly aggregate resources from hotels, airlines, and other supply chain partners, achieving scale expansion. However, this model gradually revealed its drawbacks: continuous price competition led to declining profits for both platforms and partners, pushing some small and medium-sized businesses into survival crises; severe product homogenization hindered service quality and user experience improvements, trapping platforms in a cycle of "increased revenue but not increased profit."

With the upgrading of tourism consumption and digital technological innovation, leading platforms have begun to reconstruct their business models with an "efficiency war" approach. Technological innovation has become the core engine, with AI algorithms optimizing supply and demand matching and dynamic pricing systems improving resource utilization. Fine-grained operations cover the entire industry chain, from intelligent customer service to itinerary planning, deeply mining the value of the entire user lifecycle. Diversified revenue streams are breaking away from commission dependence, with the proportion of value-added services such as membership services, data empowerment, and marketing solutions steadily increasing.

This transformation not only creates a "cost reduction and efficiency improvement" community of interest between platforms and merchants, but also drives the industry towards "service premium" competition. Industry analysis suggests that current average domestic OTA commission rates are 30%-50% lower than their international counterparts, but the marginal gains created through efficiency improvements are becoming new growth points.

Against the backdrop of high-quality development in the tourism industry, this technology-driven, efficiency-first development model will reshape the landscape of China's online tourism ecosystem. Chinese OTA platforms, with their low commission rate and high-efficiency operating model, not only dominate the domestic market but also provide a new development paradigm for the global OTA industry, showcasing the innovation and competitiveness of Chinese internet companies. The success of this model lies not only in cost control and technology application but also in the precise grasp of market demand and the continuous optimization of user experience. Future competition will not just be a battle of commissions, but a contest of efficiency and service. The successful experience of Chinese OTA platforms deserves to be learned from and emulated by their global counterparts. The continued development of this low-commission, high-efficiency model will further promote the prosperity and progress of China's tourism industry and bring new inspiration to the global tourism industry. This success will also enhance China's influence in the global tourism market and further improve China's competitiveness in the global tourism industry. Ultimately, the continued development of this low-commission, high-efficiency model will bring consumers a better, more convenient, and more affordable travel experience.

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