Home > Online > Ctrip’s story isn’t just about growth, margins too coming into the picture

Ctrip’s story isn’t just about growth, margins too coming into the picture

03/19/2016| 11:20:10 AM| ChinaTravelNews

Post consolidation in the OTA space, Ctrip is not only focused on its market share and GMV, but it also looking at hiking the overall margin to improve the financial performance.

ChinaTravelNews, Ritesh Gupta - Chinese OTAs digressed from ruthless competition one that was solely based on irrational pricing in 2015. Waging a war primarily based on unreasonable sales and marketing expenditure has been done away with. In terms of scale and brand recognition, top OTAs have come a long way. 

So what’s new as far as the race for market share is concerned? 

Interestingly, new lines of battle are being drawn.


This comes to the fore, for instance, when we assess what Ctrip and Tuniu have been doing over the past few months. While Ctrip has steadily managed to raise its packaged-tour reservation revenues to RMB1.7 billion in 2015, up by 58% from 2014, Tuniu is already looking beyond the packaged tour business, offering air tickets, hotel bookings, car rental, bus ticketing etc. to monetize the digital traffic on its platforms. As we reported recently, this diversified move isn’t contributing in a big way yet, but the team at Tuniu is working on open-platform model. 

Referring to the packaged tour business during the latest earnings’ Call, Ctrip’s Jane Sun, co-president and COO, said, “We opened up our platform, not only providing the tours that we packaged ourselves but also open to all suppliers to make sure our coverage, pricing and time to market is the best in the market. So, right now, probably half of them are self-made and half of them are from our suppliers.”

In fact, other than group travel and self-tour packages, Ctrip has come up with an offering that meets the needs of a family. 

The team at Ctrip asserts that mobile is becoming an increasingly important platform for packaged tour bookings. During the spring festival, the share of tours booked through mobile exceeded 50% for Ctrip.

Overall, the company has 14,000 packaged tour vendors and travel agencies on its platform. 

Growth and margin going hand-in-hand 

Other than packages, Ctrip is also keenly eyeing the outbound segment. Both are being prepared to yield higher RoI in the future. 

The outbound travel segment is labelled as a growth driver across all business lines. 

Ctrip pointed out that Chinese outbound travelers account for less than 10% of total population. So the OTA is pinning its hopes on this burgeoning segment. According to Sun, outbound travel continued to be a key driver for hotel business. The contribution of this segment isn’t too sizable in the overall GMV today, but a significant portion of the GMV is expected to be contributed by Ctrip’s outbound travel business by 2020. 

“…the outbound business will be high-margin, high-growth area for us,” shared Sun. 

For the packaged tour business, outbound travel already accounts for roughly 60% to 70% of the total packaged tour revenue being garnered.  

As for the margin resulting from packages, the same should be “in-between hotel and air tickets, because it’s a combination of hotel and air”.

It needs to be highlighted that selling packages demands a certain level of sophistication. 

Ctrip already has in place tie-ups with global entities such as priceline.com, booking.com, Agoda.com etc. and this is reflected in the hotel coverage - 750,000 international hotels. Other than accommodation, other trip essentials – air ticket, hotel, insurance, car rental etc. are already in place. It also needs to be mentioned that selling packages isn’t easy as the product isn’t bought regularly, plus personalisation, too, isn’t that straightforward to achieve. This calls for preparing for the so-called long tail advertising opportunity by preparing specific landing pages and personalising the booking flow when a user is active on the OTA site. 

Stronger financial performance 

Ctrip, in its latest financial results for the fourth quarter and 2015, mentioned that the plan is to bring non-GAAP operating margin back to the 20-30% range. This is mid- to long-term forecast of margins.               

Referring to operating margin, the company did indicate that Ctrip together with Qunar had a non-GAAP operating loss at about negative RMB350 million in Q1, 2015. 

And this year, Ctrip and Qunar’s total non-GAAP operating loss is expected to come down to negative RMB100 million to nil, or the breakeven level, as stated by the company. 


The rate of growth is also going to be fuelled by penetration into lower-tier cities. 

Sun pointed out that other than mobile and the outbound business, penetration into the second-tier and third-tier cities is also very important. 

During the company’s latest earnings call, it emerged that Ctrip and other OTAs in its roster will “focus on their core customers who have been traditionally strong in the mid to high-end customer segments, while the invested companies have built a name for themselves in their respective niche markets such as the younger customers in lower-tier cities”. 

Even Tuniu is rapidly increasing its presence into lower tiered cities by establishing regional centers. As we reported recently, these centers serve as hubs for customer acquisition and product localization. In terms of revenue contribution, the impact of these regional centers is increasingly apparent. During Q3, the 58 regional centers that were opened in 2014 contributed to 17% of the total GMV, this is up from 6% during the third quarter of 2014.

So indeed the competition is shaping up in a new way. But, as Ctrip is also pointed out, the industry is collectively building a healthy online travel ecosystem. And this should augur well for the all the players.

TAGS: Ctrip | Qunar | OTA | China
©2016 广州力矩资讯科技有限公司 粤ICP备06070077号-2
Tell us more about yourself!