Ctrip backs its expansion plans in China and abroad
Even as Ctrip is continuously gaining market share across all the business lines, the team has assured that they are ready to forego certain short-term financial benefits to ensure that customer-centricity doesn’t get off the hook.
ChinaTravelNews, Ritesh Gupta - Online travel company Ctrip has outlined areas of growth for both domestic and international markets, and emphasized that the team is capable of outpacing others in terms of achieving growth in China.
Speaking during the company’s first-quarter earnings call, Jane Sun, Chief Executive Officer, Ctrip, mentioned, “We look at a couple of baselines. The first one is our GDP growth rate is about 6.5%. And the second baseline is the industry growth line, which can normally double the GDP growth rate at about 10%. And based on our scalability, our service and efficiency, we can outpace the market by doubling the market.” Sun further added, “Our growth forecast is around 20% - 25%.”
Net revenue increased 11% year-on-year to RMB6.7 billion (USD 1.1 billion) in the January-March period.
In China, Ctrip accounts for approximately 10% of the total RMB 5.4 trillion travel market.
The increasing presence of Fliggy and Meituan via their respective platform models plus the entry of other intermediaries makes it for an interesting battle at this juncture. But Ctrip is optimistic about sustaining their position. “China has emerged as a unique, specialized market. There are lots of intricacies involved in the industry and it is not about one business model that all can replicate and end up succeeding here. It is a complicated industry – be it for hotel distribution, air ticketing etc. And lots of products are non-standardized. It takes a lot of manpower effort, we have more than 15000 call center staff…so (the model) is hard to replicate,” a source told ChinaTravelNews.
Taking care of concerns of travellers
Ctrip is ensuring that it doesn’t let down its travellers at any stage.
“We should not sacrifice customer value for short-term financial interests,” said James Liang, Executive Chairman of the Board, Ctrip. He spoke about transparent disclosure of information, such as price, service scope, change or cancellation policies, letting travellers easily cancel and opt out of value-added products, being able to offer consistent prices and service policies for the same product across different web pages and cutting down on price fluctuations through technology improvements and process optimization.
Both Sun and Liang quashed any concerns related to cancellation and return flights charges. “…our policy for these cancellations and change of the tickets is zero service fee. Whatever our airlines and service provider charges, we will just present to the customers without adding any additional cost from Ctrip’s part,” said Sun.
Growth in domestic market
Specifically, the company indicated that accommodation reservation revenue will grow about 20% to 25% year-on-year in the second quarter, transportation ticketing will grow about 0 to 5%, packaged tour revenue up by 25%- 30% and corporate travel business at about 20% to 25%. “In terms of the segments, for lower end, our strategy is to aggressively gain market share so we do not plan to make any money in the lower-end market and the growth rate as demonstrated by our strong growth in that segment at about 40% to 50% year-over-year growth in terms of volume,” said Sun.
The team at Ctrip has stepped up their hotel coverage in the lower tier cities. According to Sun, the lower end of the hotel market is still very fragmented and offline driven. “We have thousands of offline shops that cover the low-end cities. And so far, the concerted efforts from the product offering plus service plus the sales and marketing and our offline strategy has worked very well, which is demonstrated, as our numbers have shown, for the lower end of accommodation to increase its growth to 40% and 50% growth year-over-year,” said Sun. At the same time, as claimed by Ctrip, the market share is going up concurrently in the mid- to high-star hotel segment.
Ctrip’s investment in Travelling Bestone offers it access to offline stores in over 200 cities. Currently, the group has over 6,000 franchised offline stores under different brands. Total gross merchandise volume of the offline stores grew around 50% year-on-year in the first quarter.
Ctrip is optimistic about their outbound business, which grew at a rate of 3-4 times the industry average last year.
The outbound travel category is a big part of Ctrip’s (investment) focus. The group is actively looking at “actively deploying more resources overseas to help travellers from China”. And their investment in travel intermediaries such as tour operators in the U. S., Indian OTA MakeMyTrip.com and meta-search Skyscanner among the others is also facilitating Ctrip’s expansion globally.
“Being a global player will “take time”, it is further down the road (being able to serve global consumers). It is taking one step at a time. At this point of time, our focus in the foreseeable future is on serving outbound travellers. Also, consolidating as well as opening of more offices outside China is important as we intend to have a strong local presence in Southeast Asia, Japan, Korea etc. (for supporting/ offering services in local languages, for working with local suppliers etc.) as well. So serving a bigger pool is traveller is on the agenda but gradually,” shared a source. As for penetrating into foreign markets, Ctrip is balancing the same with targeting those markets where Chinese outbound travellers are interested in. In this context, it is prudent for Ctrip to target some of the largest Chinese preferred outbound Asian markets,” explained a source.
Ctrip shared that their international air ticketing accounted for over 40% of the group’s air ticketing revenue (up from 35% a quarter ago) and this doesn’t include Skyscanner’s contribution. “Over 30% of our international air tickets are non-China related routes,” shared Sun. She added that Skyscanner’s ticketing maintained over 30% year-over-year growth in the first quarter and their MAU increased by around 30% year-over-year reaching 80 million. Skyscanner contributes around 10% of the group’s total revenue.
On the direct booking program, Sun said, “We are still just touching a very small portion of what direct booking can contribute in the long run.”
One of the major developments post acquisition of Skyscanner in late 2016 has been Ctrip and the Skyscanner technology team working closely together to push direct booking initiative. The development of a direct booking engine increased Ctrip’s own conversion rate on Skyscanner by nearly 50%, as shared by Ctrip recently. The direct booking offering posted 600% year-over-year growth in the first quarter. Rather than being redirected to other sites and going out of the meta-search environment, Ctrip’s service capability will empower the customer to make the reservation within Skyscanner’s site, said Sun. She added this move will propel the user experience as well as the earnings ability of Skyscanner. Ctrip also worked together to launch additional transportation products like car rentals and train ticketing on the Edinburgh-based site’s platform.