After paying for travel reservations online, it’s incredibly frustrating to find out you’d neglected to uncheck a box that automatically added unwanted travel services to your purchase, and by the time you find out what happened, it’s too late to change your overpriced order. Fortunately, this is one painful aspect of e-commerce that China is addressing.
China’s new e-commerce law went into effect on New Year’s Day, and while most of the attention has been focused on the law’s effects on China’s daigou (personal shoppers who make tax-free purchases overseas for resale in China) and the major online e-tailers, OTAs (online travel agencies) are also busy adapting to changes in the law.
A major consumer complaint against online travel agencies was upselling on their platforms — a practice where OTAs sign up customers for additional services like travel insurance unless they manually uncheck the options before purchasing. Now, it seems that the law is falling on the side of consumers as extra services can no longer be checked as a default on e-commerce sites.
Value-added services are no longer automatically selected on China’s online travel platforms
In connection with this change, some platforms have opted to make these extras more visible in an attempt to entice customers to opt for these purchases. Many of these additional services appear insignificant in comparison to the overall cost of travel — flight delay insurance, for example, is only an additional $3 (RMB 20) on Ctrip — but buying multiple services for a trip can quickly add up.
This form of bundling has helped increase revenue for online travel agencies, but the proportion of revenue remains small. In 2017, The Wall Street Journal reported that Ctrip.com International’s revenue from bundling services with travel purchases accounted for about 5 percent of the company’s total earnings in the second quarter that year. The exact amount companies like Ctrip made last year from selling travel insurance was not reported in financial statements.
At the end of last year, the Chinese government required travel agencies to offer insurance to customers as a way to safeguard against travel-related accidents such as the Phoenix boat capsizing in Thailand, which killed 47 Chinese tourists. Some travel agencies added the insurance as a default setting in orders, forcing users to search for a way to “uncheck” the box to purchase the service, often among small type on the page.
These changes due to China’s new e-commerce law are a step toward greater consumer protections, but it will likely take a bite out of online travel agencies’ revenue in the coming year as they search for ways to lure customers to consciously buy their value-added travel products. As the largest travel services provider in China, Ctrip will probably take an initial hit based solely on their volume of sales. A company representative, however, told Jing Travel that Ctrip’s revenue from value-added services is “very small.”
In the long term, it might be smaller online travel agencies that suffer from the lack of revenue these value-added services once provided.