China’s largest online travel player, Ctrip, wants to get more global so it can serve travelers outside of China while domestically it is taking profits from high-end hotel-room sales and investing them into subsidizing the rates at lower- and mid-priced hotels to ward off competitors.
Ctrip posted a net loss of USD 78 million in the second quarter of 2016 compared with net income of USD 23 million a year earlier. Revenue grew 75% to USD 664 million. Both figures reflected Ctrip’s substantial investment into rival Qunar and the consolidation of the latter’s results as of the end of last year.
CEO James Liang said the company seeks to increase its focus on travelers outside of China by getting more comprehensive in its international product offerings. Internationally, he said, Ctrip currently offers airline tickets, hotels, car rentals, attractions and shopping.
Currently, sales of hotel rooms outside China amount to 10-15% of Ctrip’s hotel volumes and 15-20% of hotel revenue, according to Wang.
New Hotel Strategy In China
CFO Wang said hotel discounting in the form of Ctrip-provided hotel coupons is decreasing because of industry consolidation and the company believes it can further diminish its couponing in the mid- to long-term.
Wu said Ctrip’s strategy is to invest profits from selling rooms at high-end hotels into low- to mid-tier hotels to undercut potential competitors.
This strategy to subsidize hotel rooms at the lower end of the market, said CEO Liang, won’t add a lot of margin or profits for Ctrip but can potentially add lots of incremental volume.
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