China drafts sweeping regulations for online travel players
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China drafts sweeping regulations for online travel players

China’s online travel sector has come under fire after a deadly boating accident in Thailand which involved a number of Chinese tourists. Allegations of lax oversight (according to an anonymous source) have been levelled at online travel agents in the country, and Beijing is responding – with significant regulatory measures. They include a levelling of the ground between online and off-line players in the travel sector, and will hold online providers to higher standards across a range of areas, from personal data protection to rescue and emergency plans.

Ctrip’s share price has dropped by almost 3% over the past week thanks to on-going trade issues between China and the U.S.

graph 1002 china

SOURCE: Yahoo Finance

China’s Ministry of Culture and Tourism acted to propose the country’s first set of online travel regulations (we say ‘propose’ because Chinese law stipulates that public opinion must be consulted before anything is implemented). It was responding to an incident in Phuket last July, which left 47 people dead. There were 127 Chinese tourists involved overall, and 121 of them had booked their travel online. Public outcry in the country was considerable, and it focussed on the lack of accountability these operators face. A Thai government official also placed blame on Chinese providers who had flouted Thailand’s safety laws.

Proposed regulations include better vetting and management of on-ground service providers, a requirement to purchase liability insurance, the improvement of rescue and emergency plans, and tighter control over travellers’ personal data. A person who asked to not be named suggests that Beijing wants to get the ball rolling as soon as possible.

China’s online travel industry has boomed in recent years, and it looks set to continue growing at an incredible rate. One result of this growth is that a multitude of smaller players have emerged, many of which operate without a government-issued operating license or liability insurance. In this regard, proposed regulations would likely favour big players in the sector (like Ctrip), who are best positioned to adjust to new regulatory frameworks.

Disclosure

Dominion holds Ctrip in its Global Trends Luxury Fund.


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