Research on Evaluation of Business Model Based on Internet Travel Service Enterprises

Headnote

Abstract: This paper constructs the business model of internet travel service and analyzes its evolution law. And the Ctrip.com is taken as an example to validate the proposed business model. The research results show that the evaluation model elements of Internet travel service business model are composed of value group, product and service, resource allocation and profit pattern, on the basis of this, the internal and external resources of enterprise are integrated, ultimately realize the development strategy of the online tourism profit. The evolution cycle of the business model of online travel enterprises is the repeat alternately of the construction process and structure process of business model. The structure process of the business model includes the emergence of new business profit pattern, the competition between old and new business model and the disintegration of the old business model. Ctrip.com is taken as an example to analyze its business model from the above four aspects. In the development process of Ctrip.com, the operation revenue source gradually shows a trend of diversified development, since 2010, the company takes the initiative to change, increases exploitation in two new directions, namely tourism vacation and business travel management, so as to realize sustainable development of enterprises. The research conclusion can be used as a theoretical reference for the development of online tourism enterprises.

Keywords: internet travel service, business model, evolution law, element composition.

1.Introduction

In recent years, tourism has become an important pillar industry to promote China's economic growth, the increasing number of mobile tourism population have greatly contributed to the regional economic development (Chesbrough, 2002). At the same time, due to the development of the Internet, the scale of Internet travel service is also expanded rapidly (Reuver et al., 2009). Figure 1 shows the scale of China's Internet travel service market from 2005 to 2016. It can be seen from the figure that before 2012, the market share of China's online tourism industry has been in rapid growing period, and the growth rate of the annual turnover is basically maintained at 30%, since 2013 Internet travel turnover growth has slowed down, but also maintained at 23% or more (Frías et al., 2008). It can be concluded that the Internet travel service industry has broad development prospects, besides it has changed the original pattern of the tourism industry, China's huge potential Internet travel consumer groups will become the market main force for supporting the Internet travel service industry (Mutch, 1995; Maritza et al., 2016).

Internet travel service has the characteristics of low resource consumption, strong capability of independent innovation, high risk and high expected return. As an emerging business model, Internet travel service lack of more integrated theoretical framework and practical application. At present, the study of Internet travel service mainly including the classification of Internet travel service (Hongbumm et al., 2009); network marketing of Internet travel website (Ho and Lee 2007); evaluation of Internet travel site (Kim et al., 2007), the main concern focused on the application of evaluation model in tourism website, the evaluation of website business travel and evaluation of the tourism website; Business conditions of Internet travel service (Buhalis, 1998); and the successful experience and development trend of the Internet travel service, the application of information technology in the tourism industry, tourism, e-commerce, tourism information management system and business model of Internet travel service and so on.

This paper emphatically analyzes the evolution process of Internet travel service business model, analyzes the dynamic mechanism and law of changes (Rainer and Hans, 2001). Business model of Internet travel service is constructed and its evolution law is analyzed, and the business model is validated by taking Ctrip.com as an example. The conclusion can be used as a theoretical reference for the development of online tourism enterprises.

2.The evolution of business model of Internet travel service

2.1. Evaluation model of business model

Internet travel service is using the Internet e-commerce as its media, to form a new type of tourism enterprise operation pattern on the basis of construction of information technology (Lee et al., 2007). The evaluation model of Internet travel service business model constructed in this paper mainly includes value group, product and service, resource allocation and profit pattern. On this basis, the integration of internal and external resources of the enterprises is carried out, finally to realize the development strategy for online tourism industry to gain excess profits. As shown in figure 2 (Chen and Chiyeh 2004).

Value group is the service and profit targets that the Internet travel service enterprises have chose (Morrison and Leary, 2005). Through the segmentation of the market and the potential profit target, it not only provides the product and service with the feedback information to facilitate the enterprise to improve and innovate, but also provides client resources for the "resource allocation", and finally creates more profits for the enterprise (Connor, 2001). Therefore, it can be said that the value group is the most basic structure elements for construction of the evaluation model of business model.

Product and service is the core interests that Internet travel service enterprises can provide to the value group, mainly including three elements, that is value positioning, target market and enterprise capacity (Pan and Fesenmaier, 2006). The product and service of an enterprise is linked to the value group through marketing, further to be optimized through customer feedback. Product and service is based on resource allocation and accepting the resources provided by them (Hsientang et al., 2005).

Resource allocation refers to the industrial chain of enterprise allocation or the internal and external resources which can be transformed into more competitive product and service, by providing the product and service with its own characteristics, create more profit points for value group based on resource allocation (Bennett, 1993). Resource allocation is an extremely important link of online travel enterprises, to integrate the whole industry chain involves basic necessities of life, entertainment and shopping as one, only to maximize the advantages of the resources, can the enterprise win in the fierce competition in the market (Mahadevan, 2000).

Profit pattern refers to the Internet tourism enterprises through providing competitive product and service to certain value group, and with continuous upgrading of the resource allocation, eventually realization of operating revenue. General business revenue of Internet travel services enterprises mainly includes online advertising, website click rate and extraction of commissions and so on.

2.2. The evolution law of business model

The evolution of the business model of Internet tourism enterprises can be described as the development process of "the generation of business model creativity-the formation of structure-innovation and evolution"(Gamble, 1988). The construction of business model includes the following aspects, namely, adopt consumer demand as the core, fully aware of the resources and competitiveness in internal and external market, establish value capture mechanism or profit pattern and timely capture the market information. The construction of structure of business model generally need to go through the process that generation of creativity, structured design of pattern, testing and evaluation of the formed business model, and ultimately to achieve the scale of the model (Sheldon, 2004).

The development of Internet tourism enterprises has a life cycle. When the enterprises develop into a bottleneck or enter into downturn period, by the methods of restructuring the business model and changing the transaction structure, the enterprises can escape from the original life cycle and enter a new cycle (Buhalis, 1998). The life cycle of online tourism enterprises can be divided into the initial stage, scale revenue incremental stage, scale revenue diminishing stage, merger integration stage, monopoly revenue incremental stage and monopoly revenue diminishing stage. The existing researches show that the reconstruction of online tourism enterprises mainly appears in the initial stage, scale revenue diminishing stage and monopoly revenue diminishing stage. When the enterprise is in the initial stage, due to the small scale of resources and the briefness of organizational structure, in facing of market difficulties, corresponding the encountered resistance will be relatively small; When the enterprise from high-speed development into scale revenue diminishing stage, by converting the form of cost, reducing the proportion of assets to sales revenue, reducing fixed costs and other methods to achieve the flexibility of enterprise funds, and ultimately re-achieve the scale revenue incremental; While for the enterprises entering into monopoly revenue diminishing stage, if they don't have rich product line, then by restructuring the business model as well as the pursuit of new growth point to make enterprises to re-profit.

The evolution cycle of the business model of online travel enterprises is the repeat alternately of the construction process and structure process of the business model. The structure process of the business model includes the emergence of new business profit pattern, the competition between old and new business model and the disintegration of the old business model. While the new business model re-carry out the generation of pattern creativity, the formation pattern structure, testing and evaluation of business model, and ultimately to achieve the scale of the model.. Internet travel services enterprises continuous developing in the process, broaden the market space of Internet travel services, at the same time provide more consumption options and travel experience for tourist, thereby create more value for tourism industry.

3.Instance analysis

Taking the Ctrip.com as an example, the evolution of the business model proposed in this paper is verified. Ctrip.com was founded in 1999, listed on NASDAQ in 2003, the development has mainly experienced the initial development, start and big development these three stages. Today, Ctrip's business mainly includes hotel reservations, air ticket reservations, vacation products, business travel services, vehicle leasing and other services. Ctrip's business model is shown in Figure 3.

The value group that Ctrip.com arming at mainly is holiday travel and business travelers, including tourism groups, among them business travelers accounted for 88% of the total number of tourists, other types of tourists accounted for 12%.

Regarding to resource allocation, Ctrip.com mainly through integration of online and offline as well as tourism upstream and downstream, so as to strengthening the competition. For the internal allocation of the enterprise by enhancing the full coverage of services before, during and after travel, further to enhances the service methods for value group; In terms of external resource allocation, by strengthening the cooperation between hotels, tourist attractions and airlines, achieve the control and cooperation on tourism upstream and downstream.

In terms of Product and service, Ctrip.com has strengthen the online travel services, product introductions and other functions for tourists, covering travel agencies, hotels, restaurants, entertainment, shopping, transportation and other comprehensive information, as well as provide booking, reservations , group reservations, ordering and other services. In the composition of the business of Ctrip.com, hotel reservations, air ticket reservations and tourism vacation accounted for the vast majority of the share, among which hotel reservations accounted for 44%; air ticket reservations accounted for 37%; tourism vacation accounted for 17% , other business income accounted for only 2% of overall revenue, as shown in Figure 4. With Ctrip's vigorously develop the layout of industrial diversification, the share of tourism products and business travel management are growing, therefore the enterprise achieves sustainable development.

In terms of Profit pattern, since Ctrip listed in 2003, the company continues to developing, the overall operating revenue continues to rising, Figure 5 is change curve of Ctrip's operation revenue and growth rate from 2006 to 2015. As can be seen from the figure, from 2006 to 2010 Ctrip's operation revenue has remained at high growth state, with an average growth rate of 53.6%; from 2010 to 2013, due to the slow transition and product is single, a rapid decline in annual revenue, the growth rate is only between 20% to 30%; after 2013, operating revenue re-emerges a significant increase, with annual growth rate of 38% or more. Ctrip's overall operation revenue shows a high-speed growth trend, it reflects the strong demand for China's online travel market from the side.

In the course of development of Ctrip.com, sources of operation revenue have a diversified development. It can be seen from the annual report of Ctrip.com in recent years, that different from the Ctrip's single hotel reservation and ticket reservations during the first decade of the 21st century, at the beginning of 2010, the company take the initiative to change, increase exploitation on the two new direction that is tourism and business travel management. In 2010, China's domestic travel expenses increased by about 17% compared with 2009. Under the background of slowing down of Ctrip's main business growth, the company has made new business growth point through exploiting business travel management. Tourism vacation and business travel management accounted for 38% of total revenues in 2014, compared with 15% in 2009, and total revenues in 2014 increased approximately 900 million dollars compared with in 2009, indicating a significant efficiency in the company's transition , Ctrip. com gradually changes from the "travel reservation service provider" to "one-stop comprehensive tourism service provider".

4.Conclusions

This paper constructs the business model of internet travel service and analyzes its evolution law, and takes Ctrip.com as an example to verify the business model. The conclusions are as follows:

1. The evaluation model elements of Internet travel service business model consists of four parts: value group, product and service, resource allocation and profit pattern. On this basis, the internal and external resources of enterprise are integrated, ultimately realize the development strategy of the online tourism profit. The life cycle of online tourism enterprises can be divided into the initial stage, scale revenue incremental stage, scale revenue diminishing stage, merger integration stage, monopoly revenue incremental stage and monopoly revenue diminishing stage. The evolution cycle of the business model of online travel enterprises is the repeat alternately of the construction process and structure process of the business model. The structure process of the business model includes the emergence of new business profit pattern, the competition between old and new business model and the disintegration of the old business model.

2. Take Ctrip.com as an example, in term of four aspects: value group, product and service, resource allocation and profit pattern to analyze its business model. In the development process of Ctrip.com, the operation revenue source gradually shows a trend of diversified development. Different from the Ctrip's single hotel reservation and ticket reservations during the first decade of the 21st century, since 2010, the company takes the initiative to change, increases exploitation in two new directions, namely tourism vacation and business travel management, so as to realize sustainable development of enterprises. On the whole the operation revenue of Ctrip.com is in the high-speed growth trends.

References

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