Downranked by Largest Chinese Travel Agency, Marriott Tried Again with Smaller Competitor

In August 2017, Marriott International announced a joint venture with the Chinese tech giant Alibaba and its subsidiary Fliggy. The joint venture would market Marriott to Alibaba’s Chinese customer base, and Alibaba would eventually run Marriott’s Chinese-language websites and apps.[i] [ii] Coverage in Western media outlets touted how the deal could enable Marriott to reach millions of Chinese travelers.[iii] [iv] [v] [vi] Marriott’s stock shot up 1.1% on the news.[vii]

But the U.S. press did not report that the Alibaba deal came in the wake of a conflict between Marriott and Ctrip, the most dominant player in the Chinese online travel industry. Ctrip held what has been described as a “near monopoly.”[viii] [ix] A report by Thomas Cook in September 2017 estimated Ctrip’s share of the online travel market at 65%, compared to Fliggy’s 15%.[x] Ctrip had inked an agreement with Marriott with similar features to the deal with Alibaba. However, the relationship between Marriott and Ctrip was unraveling at the time of the Alibaba deal, and would conclude only a few months later.

Despite the positive coverage, it is not clear if the Alibaba deal represented a step forward for Marriott, or a step back.

Marriott-Ctrip relationship unraveled after revelation of price disparity

In October 2010, Marriott and Ctrip signed an agreement that made Ctrip Marriott’s first online travel agency partner in China. The deal enabled Chinese travelers booking hotels through Ctrip to receive the same specials and rates found on Marriott.com.[xi] The agreement was expanded in 2012 with the announcement of a joint reward program between Marriott and Ctrip.[xii]

But in June 2017, users of the Chinese social media platform Weibo reported that Ctrip had downranked all of Marriott’s properties, which meant that Marriott hotels were pushed to the bottom of searches.[xiii] Following the report, journalists from scxxb.com.cn [市场信息网] confirmed that on Ctrip’s official app, Marriott’s hotels were ranked last on both Ctrip’s popularity ranking and review score ranking.[xiv]

The Guangzhou-based Time Weekly reported that, prior to the downranking, Marriott had been providing extra rebates for travelers choosing to book from Marriott directly instead of via third parties. The revelation of the price disparity damaged the Marriott-Ctrip relationship and prompted retaliatory actions from Ctrip.[xv]

Marriott announced its deal with Alibaba in August 2017.[xvi] In November 2017, three months after the Marriott-Alibaba deal, the Marriott-Ctrip joint reward program ended.[xvii]

In early April 2018, nearly one year after Ctrip first downranked Marriott hotels, a search for hotels in Shanghai on Ctrip returned no Marriott hotels on the first page.[xviii] Marriott hotels were similarly absent from the Shanghai hotel listing of the Ctrip affiliated travel websites Qunar and eLong.[xix] [xx] In contrast, on Alibaba’s Fliggy, the Renaissance Shanghai Yu Garden was ranked number one among all hotels in Shanghai.[xxi]

On the left: Top 10 search results for hotels in Shanghai on Ctrip. On the right: Top 10 search results for hotels in Shanghai on Fliggy

 

After Ctrip Agreement Expiration, Marriott Reliant on Much Smaller Alibaba

What has happened since the Marriott-Ctrip agreement expired?

In January 2018, all of Marriott’s Chinese-language websites were taken offline after Marriott sent an email to Chinese customers listing Tibet, Hong Kong and Macau as countries.[xxii] As of April 16, 2018, Marriott’s Chinese-language webpage still doesn’t have a direct-booking feature; the webpage instead redirects visitors to other booking systems such as Marriott’s Chinese language smartphone app or its international website in English.[xxiii]

The Marriott-Alibaba deal entrusted Marriott’s future Chinese online presence in the partnership with Alibaba. Fliggy was actually Alibaba’s third entry into the online travel business, after two previous companies were rebranded.[xxiv]

The questions that arise after a careful examination of Marriott’s Ctrip experience are:

  • As Marriott seeks to cut the commission fees from online agencies, what will happen to its relationship with Alibaba?[xxv]
  • If Ctrip maintains its dominance over the Chinese online travel market, will Marriott be able to regain its lost market access?

 

[i] Marriott International (2017, August 7th), Alibaba Group and Marriott International Announce Innovative Joint Venture to Redefine Travel Experience, retrieved April 18th, 2018, http://news.marriott.com/2017/08/alibaba-group-marriott-international-announce-innovative-joint-venture-redefine-travel-experience/

[ii] Reuters (2017, August 7th), Marriott set to woo Chinese tourists with Alibaba deal, retrieved April 18th, 2018, https://www.reuters.com/article/us-marriott-intnl-alibaba/marriott-set-to-woo-chinese-tourists-with-alibaba-deal-idUSKBN1AN1JN

[iii] Reuters (2017, August 7th), Marriott set to woo Chinese tourists with Alibaba deal, retrieved April 18th, 2018, https://www.reuters.com/article/us-marriott-intnl-alibaba/marriott-set-to-woo-chinese-tourists-with-alibaba-deal-idUSKBN1AN1JN

[iv] Barron’s (2017, August 7th), Alibaba & Marriott Form JV To Tap Millions of Travelers, retrieved April 18th, 2018, https://www.barrons.com/articles/alibaba-marriott-form-jv-to-tap-millions-of-travelers-1502111778

[v] The Wall Street Journal (2017, August 7th), Alibaba, Marriott Team Up to Serve Chinese Tourists Abroad, retrieved April 17th, 2018, https://www.wsj.com/articles/alibaba-marriott-team-up-to-serve-chinese-tourists-abroad-1502103604?mod=searchresults&page=1&pos=3

[vi] Bloomberg (2017, August 7th), Alibaba, Marriott Will Team Up to Tap a Chinese Tourism Boom, retrieved April 18th, 2018, https://www.bloomberg.com/news/articles/2017-08-07/alibaba-marriott-will-team-up-to-tap-a-chinese-tourism-boom

[vii] Bloomberg (2017, August 7th), Alibaba, Marriott Will Team Up to Tap a Chinese Tourism Boom, retrieved April 18th, 2018, https://www.bloomberg.com/news/articles/2017-08-07/alibaba-marriott-will-team-up-to-tap-a-chinese-tourism-boom

[viii] CNBC (2017, May 10th), Market consolidation allowed China’s Ctrip to realize ‘monopoly power’, retrieved April 18th, 2018, https://www.cnbc.com/video/2017/05/10/market-consolidation-allowed-chinas-ctrip-to-realize-monopoly-power.html

[ix] Economic Times (2017, February 23rd), Chinese travel major Ctrip maps route to become China’s next web giant , retrieved April 18th, 2018, https://tech.economictimes.indiatimes.com/news/internet/chinese-travel-major-ctrip-maps-route-to-become-chinas-next-web-giant/57314196

[x] Thomas Cook (2017, September 17th), THOMAS COOK CHINA STRATEGY UPDATE, pgs. 4 and 15, retrieved April 18th, 2018, https://www.thomascookgroup.com/wp-content/uploads/2017/09/Thomas-Cook-China_Morgan-Stanley-Investor-Trip_19.09.17_v-FINAL.pdf

[xi] Bill Marriott (2010, December 22nd), Partnering with Ctrip: China’s Largest Online Travel Booking Website , retrieved April 18th, 2018, http://www.blogs.marriott.com/marriott-on-the-move/2010/12/partnering-with-ctrip-chinas-largest-online-travel-booking-website.html

[xii] Hospitalitynet (2012, March 2nd), Ctrip and Marriott International Take Next Step in Global Partnership, retrieved April 17th, 2018, https://www.hospitalitynet.org/news/4055118.html

[xiii] China.com (2017, June 16th), 网曝携程对万豪、洲际等高端酒店排名置底, retrieved April 18th, 2018, http://economy.china.com/jykx/news/11179727/20170616/25073963.html

[xiv] China.com (2017, June 16th), 网曝携程对万豪、洲际等高端酒店排名置底, retrieved April 18th, 2018, http://economy.china.com/jykx/news/11179727/20170616/25073963.html

[xv] Sina Finance (2017, July 18th), 高端酒店与OTA再角力:万豪壮大直销反击佣金上涨, retrieved April 18th, 2018, http://finance.sina.com.cn/roll/2017-07-18/doc-ifyiakwa4302789.shtml

[xvi] Marriott International (2017, August 7th), Alibaba Group and Marriott International Announce Innovative Joint Venture to Redefine Travel Experience, retrieved April 18th, 2018, http://news.marriott.com/2017/08/alibaba-group-marriott-international-announce-innovative-joint-venture-redefine-travel-experience/

[xvii] Marriott International, Marriott Rewards and Ctrip Partnership News, retrieved April 17th, 2018, http://www.marriott.com/marriott-rewards/earn/ctrip-partner.mi

[xviii] Ctrip, retrieved April 2nd, 2018, http://www.ctrip.com/

[xix] Qunar, retrieved April 2nd, 2018, https://www.qunar.com/

[xx] eLong, retrieved April 2nd, 2018, http://www.elong.com/

[xxi] Fliggy, retrieved April 2nd, 2018, http://www.fliggy.com/

[xxii] The Wall Street Journal (2018, January 11th), Marriott Makes China Mad With Geopolitical Faux Pas, retrieved April 18th, 2018, https://www.wsj.com/articles/location-location-chinese-officials-slam-marriotts-designation-of-hong-kong-macau-as-countries-1515663854?mod=searchresults&page=1&pos=10

[xxiii] Marriott International, retrieved April 17th, 2018, http://www.marriott.com.cn/reservation.html

[xxiv] Jing Daily (2016, October 31st), Alibaba’s Alitrip Rebrand Reveals Big Bet on Chinese Millennial Travelers, retrieved April 17th, 2018, https://jingdaily.com/alibaba-abandons-alitrip-brand-and-bets-on-chinese-millennial-travelers-with-new-brand/

[xxv] Reuters (2018, April 3rd), Marriott aims to cut commissions for online agencies: CEO, retrieved April 18th, 2018, https://www.reuters.com/article/us-marriott-intnl-india-onlinetravel/marriott-aims-to-cut-commissions-for-online-agencies-ceo-idUSKCN1HA1U3