A year of Investments for Ctrip
Ctrip's Q4 2014 earnings report showed them as the biggest online travel company in China in terms of transaction value.
ChinaTravelNews report by Nicole Sy - Ctrip.com International, Ltd. describes itself as “a leading travel service provider of accommodation reservation, transportation ticketing, packaged tours, and corporate travel management in China.” By the time their Q4 2014 earnings report came out, they were the biggest online travel company in China. Their 2014 net revenues were 7.3 billion rmb ($1.2 billion), up 36 percent year on year. Its stock jumped 22 percent the next morning, the highest in nearly four months.
When measuring transaction value, Ctrip leads China’s online vacation market with 23 percent market share in 2014, followed by Tuniu and eLong with 14 percent and 8.4 percent, respectively, as calculated by China Internet Watch. To note, the other top Chinese online travel company, Qunar is primarily a meta-search site, and is therefore not categorized as an online travel agency.
Ctrip has maintained its leading position through a series of strategic investments and acquisitions. 2014 was especially a big year for the company as it begins to expand internationally, targeting outbound Chinese travelers.
“Their international expansion aims to offer Chinese out-bound travelers or foreign companies in China an extension of their value-chain platform of tourism,” says Labbrand’s Director of Brand Strategy, Feifei Xu. “By international expansion, they are mostly targeting outbound Chinese travelers,” she says.
Ctrip acquired 51% of Tours4Fun, a vacation package site targeting Chinese traveling abroad, in January 2014 reportedly for RMB139 million (US$23 million).
In August 2014, largest online travel agency by market capitalization, Priceline purchased a 10 percent stake in Ctrip for $500 million. The Priceline investment in Ctrip widens audiences for both websites, as they will cross-promote each other and access the other’s portfolio of hotels and more.
In September 2014, Ctrip launched their new cruise-booking platform, making it the largest one in the Chinese language. In November later that year, the company announced a joint venture with Royal Caribbean Cruises Ltd. to create SkySeas Cruises, a cruise company designed to serve the Chinese cruise market. Both Ctrip and Royal Caribbean will own 35 percent each of the new company, which plans to begin operations in mid-2015 with one ship.
In a deal that culminated in January this year, Ctrip purchased a majority stake in London-based Travelfusion, an aggregator site for low-cost carriers and hotels, for a reported $160 million. According to Liang, “the strategic relationship we built with Travelfusion will further extend our leadership in China's international travel market, and enhance the efficiency and effectiveness of our IT system by leveraging Travelfusion's advanced technology.”
Ctrip also partnered with Madrid-based Amadeus to provide “all air content for points of sale outside of mainland China. This initially includes Hong Kong, Taiwan, Korea and the USA, with future plans to move into Canada, Australia, New Zealand, Japan and Thailand, as well as additional markets,” according to Amadeus.
Ctrip also invested with car rental and services provider, Yongche and eHi and has minority stakes in hotel operators, China Lodging Group Ltd., BTG-Jianguo Hotels & Resorts Co., Ltd., and Home Inns (where Ctrip co-founders Neil Shen and Jianzhang Liang are also co-founders).
Ctrip holds 15.1% of the outstanding shares of Homeinns, while it owns 9% of China Lodging Group, which owns and operates the Hanting hotel chains around China, for US$67.5 million (approximately RMB461 million) in March 2010.
Ctrip then sold Starway Hotels (Hong Kong) Limited back to China Lodging Holdings (HK) Limited, a wholly owned subsidiary of China Lodging Group Limited. Starway Hotels paid Ctrip a commission of RMB6 million (US$1 million) for the period from January 1, 2013 to November 30, 2013.
As further signs of the market consolidating, Ctrip invested in its competitors, LY.com and Tuniu.com. In April 2014, it purchased a minority stake in LY.com, a leading local attraction ticket service provider for RMB1.4 billion. According to Ctrip’s recently released annual report, “We have entered into agreements to provide hotel rooms to LY.com. Total commissions to LY.com paid by us amounted to RMB76 million (US$12 million) for the period from April, 2014 to December 31, 2014.”
Ctrip has a total of 4.6% of Tuniu’s total outstanding shares as of the end of 2014, with one out of nine seats in Tuniu’s Board.
They also have non-controlling interests in online trip package service provider, Tujia.com International Co., Ltd. Ctrip and other investors raised shares for Tujia in three rounds of funding, totaling US$126.3 million.
In 2014, Ctrip invested in fourteen companies, with a total investment of approximately 4.2 billion RMB (US$674 million).
“The market is consolidating,” says Xu. “But for this industry, I'm optimistic because the tourism boom is ongoing and it will develop very quickly in the future.”