A newly issued notice by China National Tourism Administration regulating the commissioning of unlicensed travel agents will deal a blow to the small and medium sized tour agencies (SME) without outbound tourism licenses and have a major effect on the market in third and fourth tier cities.
Ban on commissioned outbound tourism sales
The Notice on solicitation by licensed tour agencies, to be implemented on June 1, states that licensed travel agencies may commission third parties, including travel agents or individuals without outbound tourism licensure, to solicit customers for outbound tourism on their behalf.
Travelling Bestone's CEO Li Zhang said the notice covers commissioning of third party agents for domestic, cross-border and outbound tourism but specifically requires operating licenses for outbound and cross-border tourism transactions and as such unlicensed agents in these segments will be hard hit. “Some very capable SMEs can only dream of meeting the requirements to get an outbound tourism license needed to procure or sell outbound tourism products,” he said.
One observer said that unlike many first- and second-tier city tour agencies with outbound tourism licenses, many tour agencies in third- and fourth-tier cities don’t have such licensure and instead rely on commission to sell such products. The policy to stop unlicensed business means that these tour operators or individual agents will not be able to continue this business.
The impact on the tourism industry in third and fourth tier cities
Professor of Beijing Jiaotong University economic management faculty tourism management Yan Wang said the move to enforce licensing is one way to clean up and bring some order to the chaos reigning in the present market.
However, Mr Zhang expressed doubts towards this. “Very few tour agencies have outbound tourism licensing in third- or fourth-tier cities and OTAs can’t always provide complete services, so this policy will severely limit options for residents in these cities. So I don’t think singling out unruly SMEs for the axe is the solution,” he said.
One observer who wished to remain anonymous said the outbound tourism license policy has never been suitable for the market economy and restricting unlicensed business by tour agencies will hurt the enrichment and healthy development of the market.
Golden opportunity for OTAs
OTAs are the clear winners in this policy as online operations are exempt from the licensing requirements that apply to offline travel agencies. Aggressive OTAs with outbound tourism services like Tuniu are constantly on the lookout for a chance to muscle in on competition so it won’t be long before the vacuum left in third and fourth tier city markets is filled by them.(Translation by David)
