Chinese media Sanlian Shenghuo Zhoukan published an article on the 8th titled 'Mass store closures, orders down 50%, Chinese people are abandoning travel agencies.'

The article first reported that in July, a total of 1.23 billion people traveled domestically in China, an increase of 18.7% compared to the same month last year, and total domestic tourism revenue exceeded 920 billion yuan (approximately 21.16 trillion yen), with both the number of tourists and total revenue setting a new five-year record.

It further pointed out that while high-speed rail stations are overflowing with people and tourist destinations are so crowded that shoulders rub together, the travel industry as a whole does not seem to be fully enjoying the benefits of this booming market. "Homestay operators lament that tourists are choosing hotels, and hotels complain that travelers are staying in RVs. With a surge in family and group travel, travel agencies that should be generating huge profits are being forced to close one after another, creating a strangely fragmented atmosphere in the market," the article reported.

According to the article, during a special rectification campaign in the first half of this year, business licenses for over 2,400 travel agencies nationwide were revoked, stripped, or invalidated in accordance with the law. Many of these were shell companies or unprofitable businesses. According to an industry survey, over 80% of operators saw summer bookings decrease by 30% to 50% compared to the same period last year. The wave of closures is not limited to small businesses. From franchise operators and long-established local travel agencies to leading travel-related companies in the industry, signs of financial distress are significantly apparent across all segments, it stated.

The article pointed out that the background to this is "differences in values across generations of travelers and structural changes within the travel industry." It reported, "Previously, travelers relied on travel agencies to secure hard-to-obtain train tickets or book airline tickets and hotels at group discount rates. Travel agencies played a crucial role in the travel industry's value chain by leveraging information asymmetry and price differences in procurement. However, the way people travel has dramatically changed. With the emergence of various travel platforms, booking procedures for tickets and accommodation have been simplified, and the transparent pricing of airfares, hotels, and tourist attractions has allowed travelers to make reservations freely at any time. The domestic high-speed rail network has also been developed, operating with a frequency and convenience akin to short-distance public transport. As a result of major barriers related to booking and transfers being removed, inter-provincial travel has become as easy as going to a station and boarding immediately."

According to the article, travel agencies' profits have fundamentally depended on information and resource asymmetry. As these disparities shrink, the profit margins for businesses relying on commission income and price markups on package tours are significantly declining. Sales commissions on airline tickets, which once reached 8% to 10%, have now plummeted to less than 3%, and routes with zero commission are not uncommon. Negotiated rates with hotels available to small and medium-sized travel agencies can even be higher than the general prices individual travelers can book online. Price transparency has led to fierce price competition, and profit margins are under extreme pressure. In the past, brick-and-mortar travel agencies acquired customers through walk-ins. However, now travelers' decision-making primarily occurs online.

The article states that "the decline of travel agencies is also related to the enrichment of travelers' experiences and changes in their awareness," and adds, "This summer, people are rarely flocking to traditional tourist attractions. Instead, reverse tourism is thriving, where people intentionally avoid crowded famous tourist spots and opt for lesser-known regions or hidden natural gems. As consumers' experience levels rise and platforms provide an environment for accessing all kinds of information, the room for travel agencies to survive is narrowing. This is the broader business environment that travel agencies are forced to confront." (Translation and Editing: Yanagawa)