How the Marriott and Alibaba JV will grab Chinese travelers

The battle for the Chinese traveler just got a lot hotter. Alibaba Group Holding—the largest e-commerce company in the world—and Marriott International—the largest hotel company in the world—have formed a joint venture that aims to bring the growing number of Chinese travelers to Marriott hotels both at home and abroad. Through the new partnership, Chinese users will be able to book Marriott hotels directly through Alibaba's website, and will be able to use the popular Alipay payment app when staying at select Marriott properties. 

A Natural Evolution

Marriott’s relationship with Alibaba goes back years. In 2015, the hotel company signed a deal with Ant Financial Services Group, an independent financial group and an “ecosystem partner” of Alibaba, to roll out the Chinese conglomerate's Alipay program at select hotels. Since then, both sides have sought new opportunities with one another.

“It’s a natural evolution of the relationship that we’ve had,” Marriott International Global Chief Commercial Officer Stephanie Linnartz told HOTEL MANAGEMENT. Alibaba controls 80 percent of e-commerce in China and has 500 million active monthly users on its sites, she noted, while Marriott has more than 6,000 hotels in 125 countries following the 2016 acquisition of Starwood Hotels & Resorts Worldwide. (Starwood, Linnartz said, was bigger in China and Asia as a whole than Marriott was before the acquisition.) 

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China’s online travel-sales market this year will be worth $86.9 billion, up more than 20 percent from 2016, according to a report from Euromonitor International. Chinese travelers, meanwhile, are expected to take an estimated 700 million trips over the next five years—150 million this year alone, Linnartz said, making the market a lucrative one for any business to capture.

Making Travel Smarter

In a LinkedIn blog post, Marriott CEO Arne Sorenson said that the global middle class is expected to see an increase of 3 billion people by 2031, with China leading the way. “While travel is already booming in China, it is estimated that less than 10 percent of Chinese nationals have passports,” he wrote. “Imagine the potential for major growth that lies ahead as more Chinese join the ranks of the middle class and choose to travel.”

China, he continued, continues to lead global outbound travel, after registering double-digit growth in tourism expenditures every year since 2004. “Spending by outbound Chinese travelers in 2016 alone reached US$261 billion, as the total number of outbound travelers rose to 135 million. That’s why our partnership with Alibaba was a priority for both companies—together, we want to make travel smarter.”

That goal will require new technologies that will create “a digital traveler identity, built with unique biometrics,” Sorenson wrote. This is where e-commerce and travel meet, and can aid one another. “Companies like Marriott and Alibaba are advancing the development of these capabilities, as are others who are pioneering completely digital passports and visas, secure biometric technology, and more.”

User Data

The JV with Alibaba will give Marriott key access to the thing businesses want most these days: customer information. “They have significant consumer data and significant insights into the Chinese consumer,” Linnartz said. “The deep insights and data that Alibaba has on Chinese consumers through their platform will help us through data analytics and will help us curate offerings that will resonate with the Chinese consumer at the individual level.”

But that’s the tip of the iceberg. Marriott, she continued, is examining on a broader scale how the company can use data and analytics to target consumers with a marketing offering that’s tailored to them—“this whole idea of marketing to one, offering the right product to the right customer at the right time at the right price,” she said. “That’s something we’re doing holistically as a company, and when you partner with someone like Alibaba, with so much data and digital expertise, and so much analytical expertise, we’re going to be able to make the offering for the Chinese consumer that much more relevant and personal.”

Another key element of the partnership will be the use of Fliggy, Alibaba’s travel service platform, as a direct booking channel offering loyalty points or member rates. “The relationship is good because Alibaba’s objective is not to get in between the company and the consumer,” Linnartz said. “Even though the JV will run the storefront, we’ll own the inventory and the rates and the customer data and the marketing.”

Personalization will also be a key factor of the partnership. Marriott launched a program last year that is dedicated to aiding hotels with Chinese guests in the Asia-Pacific market and in key gateway cities like New York City and Paris. Li Yu provides Chinese travelers with assistance and support at the property level, including staff members that are fluent in Mandarin (and who can recommend local activities of interest) and Chinese dishes available in the hotel restaurants. “We know from the Chinese consumers that it's very important to have the food that they like, especially for breakfast,” Linnartz said. “People like to venture out for dinner, but want to start day with food they find at home. The program makes sure we have food on-property that resonates with consumers.”

Scratching the Surface

“The biggest hotel company in the world partnering with biggest e-commerce player in China to tap into one of the biggest marketplaces in the world—the Chinese traveling public—is going to be a tremendous competitive opportunity for both companies,” Linnartz said. “Together, we’re going to win disproportionate share of this growing consumer marketplace.”

Marriott’s acquisitions and partnerships have made headlines in recent years, and Linnartz doesn’t expect that to end anytime soon, even though she acknowledges that this partnership is unique. “We’ll always be looking for new opportunities to work with partners in deeper and richer ways,” she said. “China is a unique situation and this deal with Alibaba is a unique situation, so this JV we're doing with them is where we’re focused now. But growing other partnerships—of course, that will always be something we look out for.”