Ctrip CEO throws open his war chest
Ctrip CEO James Liang announced the OTA giant is allocating RMB1 billion for a price war to introduce zero-profit products in different price ranges and categories.
December 4 – Ctrip CEO James Liang announced in a Ctrip product launch that the OTA giant is allocating RMB1 billion for a price war to introduce zero-profit products in different price ranges and categories.
Stating that Ctrip has no direct competitor in the online travel industry, Mr Liang said Ctrip’s revenue from accommodation is several times higher than eLong and Qunar, and the revenues in air ticketing and tour operation are above Qunar and Tuniu respectively.
Explaining the projected RMB500 million loss for Q4, Mr Liang said: ”Ctrip was profitable in the first three quarters but has set aside funds in Q4 to launch large-scale marketing initiatives (including the December 12 sales day promotion). While we project a major loss, we expect the investment will bring about good returns in market share.”
“The capital market is quite rational in analyzing market shares and short-term profit assessment of internet companies. That’s why Amazon and domestic companies with significant long-term losses can still receive high market valuation,” he said.
He said that Ctrip has abundant funds and positive cash flow this year but it will pay close attention to the effectiveness of its future investments including operations and the market.
Explaining Ctip’s strategy of making minor investments in companies, Mr Liang said: “We go for holdings when we want full integration of the expertise of both parties, but when the companies have relatively independent business lines we can maintain the company’s independence and innovativeness with a minor investment. This will also be much more effective than a mutual partnership with no investment relationship.”
Ctrip has announced that it will launch a price comparing function for hotels and airfare and hopes to have more partners in price-comparing platforms and major travel companies. Ctrip reiterates its aim is to offer the best value rather than the lowest prices for products.(Translation by David)