Ctrip eyeing rewards from seeds sown over the years
The Chinese online travel company believes its first quarter results are giving ample indication that its perseverance is about to pay off
ChinaTravelNews, Ritesh Gupta - Ctrip has stated that the organization is now starting to see fruitful results from its major investment areas that the OTA has heavily focused upon during the course of past few years. The effort and resources are starting to pay off, ones that were put into the development of a user-friendly mobile app, its Baby Tiger and Open Platform initiatives, as well as the decision to target leisure markets in tier II and tier III cities. The same emerged as Ctrip disclosed its first quarter results.
A major highlight that the company referred to was the much-awaited performance of the mobile channel.
Speaking during the company’s first quarter earnings call, James Liang, chairman of the Board and CEO of Ctrip underlined the fact that convenience or user-friendliness has been the hallmark of Ctrip’s mobile investment. He said engineers and product managers have always strived to make mobile app richer with relevant product and content offerings, and simplified navigation. As for the massive user base that the company has managed to establish in a matter of few years, the aggregated mobile app downloads figure has now risen to around 800 million at the end of March this year. This reflected a jump of over 550% from a year ago. Comparing with previous quarter, cumulative downloads for Ctrip mobile app exceeded 600 million by December 31, 2014.
Overall mobile channels accounted for around 70% of total online transactions in the first quarter with 75% of online hotel and 60% of air transactions accounted by mobile in the first quarter.
A positive cycle
Liang further added that the key business lines continue to be driven by expanding product offering and price range. Accommodation reservation and transportation ticketing services reached 60% and 104% year-over-year growth in volume, respectively. Total air tickets sold increased 64% on a yearly basis, a new record high. The company mentioned that the mix of its rising mobile channel efficiency as well as the contribution of its open platform is resulting in robust growth in the air tickets sold. In terms of markets served, the growth in volume was buoyed by tier-II and tier-III cities that stand out for their GDP per capita figure. And this share is being grabbed from “traditional and other players in the market”.
So what’s contributing to such impressive growth?
Liang said the blend of heavy traffic and service capabilities are attracting 3rd party partners to its Open Platform, which now features over 5000 third party partners. He said the same results in fast growth marked by the addition of newer product range. In the first quarter, 5-10% of hotel transactions, 60% of air transactions and 20% of organized tour category transactions were associated with products from 3rd party partners. Liang also mentioned that the Baby Tiger initiative (15 baby tigers) that target meeting traveller’s needs with strong growth potential have started to create another kind of virtuous cycle. New products not only build momentum and help in achieving scalability with existing customers, but they are also proving to be entry level products and bring huge traffic from the group’s major businesses. And referring to GDP per capita figure for tier II and tier III cities, he said that there are indications that demand for leisure travel and outbound travel is set to hit the “sweet spot” for growth.
Referring to content for foreign markets, the company mentioned that it offers most comprehensive offering in this segment, too. (It should be pointed out that priceline, in its first quarter results earlier this month, did point out that a lot is in store to capitalize on its partnership with Ctrip. Darren Huston, president and CEO, Priceline Group mentioned that the team is exploring the need to ramp up its own efforts in China to bring on inventory).
The company has stood for its strategic alliances in the last year or so. Most recently, Ctrip.com strengthened its investment in Tuniu. Earlier this year, the company completed an investment transaction acquiring a majority stake in U. K.-based Travelfusion. Among other investments, Ctrip acquired a minority stake in Tongcheng Network Technology Share or LY.com, a local attraction ticket service provider, for an aggregate cash consideration of $228 million in April last year. During the earnings call, the company emphasized that such alliances are focused primarily in the travel sector, ones that bring incremental value to the company – new customers, new business lines or new technology.
Other highlights for this quarter were Ctrip’s domestic hotel coverage touching 270,000 hotels, growing by 3 times when compared with the same period last year (as for the exact number of accommodation listings in the market, Ctrip mentioned that there wasn’t any official figure and the market is hugely fragmented, with definition of a hotel being also not clear. So it’s tough to put a figure to it), total hotel volume growth was 60% year-over-year, and open platform hotel revenue tripled year-over-year even though the base is relatively smaller as of now. Ctrip also mentioned that it doesn’t intend to increase the commission percentage in the hotel segment, and also if any competitor goes ahead with an aggressive couponing strategy, it would definitely match it. Accommodation reservation revenues increased by 13% quarter-on-quarter.
As for transportation ticketing revenues, the same increased by 23% quarter-on-quarter.
In terms of performance of new initiatives, Liang said that the investments that made over the past few years have managed to sustain strong momentum and the majority of new initiatives grew 200%~800% year-over-year in the first quarter. For instance, as the last mile of transportation, the car rental segment witnessed 700% growth year-over-year. The company expects half of its Baby Tiger initiatives to be profitable by the end of this year.