Going the low-margin, high-volume route for young travellers: Wing On Travel

The travel market in Hong Kong is intensely competitive with 1,650 registered travel agencies, many of them still very traditional in their approach, meaning that they use face-to-face travel agents to sell packaged tours or customised ones to fully-independent-travellers (FIT).

A household name in the territory, the 48-year-old Wing On Travel has 20 branches in Hong Kong with overseas offices in Macau, Canada and the UK. Targeting the middle-to-top range of domestic and outbound travellers, it has been developing new travel products, such as tours to China's Silk Road or to Antarctica, in order to differentiate itself.

These high-end tours are sold at its front counters, with one-stop conveniences thrown in including a cafe, shops selling seasonal travel necessities, and even an in-house currency exchange service. "I specially arranged for smaller bank notes so travellers can use them for taxis and tips," Leung said.

When research from Nielsen highlighted the fact that 60 per cent of local users are shopping online while watching television, and travel-related purchases were one of the top three purchases, Leung realised she needed to break away from the old business model. "We must renew ourselves, we must enter the online travel market in HK".

With that, Wing On began an e-commerce push earlier this year, riding on the group-buying wave in Hong Kong. Travel advertisements are very tightly regulated in the territory, so Leung chose the Yahoo Deals platform (since she knew its management personally) and started experimenting with a local tour offering.

That experiment got more than 2,000 bookings. "I was surprised that people are willing to pay upfront with their credit card, and we noticed that the peak hours of bookings were from 12 to 2pm during lunchtime, 5 to 6 pm before the end of the workday, and 10pm to 12 midnight," she said.

Leung was pleased with the outcome, since online users can can do tour registrations simultaneously without her having to worry about small shop spaces and the corresponding high rents to accomodate the same number of customers offline.

Taking cues from parent company Ctrip.com, an purely-online travel service provider that acquired 90 per cent of Wing On's tourism unit in 2010, Leung now targets the younger crowd with simpler, cheaper tours on Yahoo Deals such as Hello-Kitty themed tours to Japan for under HKD4000, Malaysia for under HKD2000 or Macau for under HKD1000. These tours are not duplicated with front-counter offerings.

When asked about the cons of selling package tours via group-buying deals, she revealed that the move is a long-term awareness strategy to pull in more customers at the beginning with lower prices.

"Yes, we are sacrificing higher margins for higher sales, but putting up our offers on a group-buying site has saved us some manpower costs and staffing hours at face-to-face counters. Even though gross profit may be lower for now, we want to make some noise and create buzz in the market," Leung explained.

"Once we get the numbers, then we can have more bargaining power with government tourism boards, airlines and hotels. The advantage of achieving mass outweighs a lower profit margin," she added.

Mark Liu, director of e-commerce at Yahoo Hong Kong, also told Campaign Asia-Pacific that the response to Wing On's offerings compared to others like Hong Thai Travel is better. "We as a group-buying aggregator also pick our merchants carefully. We had a few customers who claimed to be sick or complained about the quality of the tour due to bad weather, and Wing On gave them free repeat tours to make up for it."

Leung is optimistic about the strong momentum of the outbound travel market, as for one, the public holiday placements in 2013 are very favourable to boosting travel volume during long weekends. "Our gross profit growth was in the double-digits last year, and we aim for the same this year".