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Ctrip takes global expansion to reduce risks from geographic uncertainties

09/10/2019| 6:13:44 PM| ChinaTravelNews 中文

Trip.com has achieved "quite sustainable profitability" in Hong Kong, and is very close to break-even point in Japan and South Korea, according to CEO Jane Sun.

Ctrip reported its second-quarter results with robust growth momentum in international business and increased presence in lower-tier Chinese cities.

During the conference call, the company's chairman James Liang said that Ctrip has increased its share in the domestic travel market with GMV growth rate for both domestic hotels and air ticketing are accelerating, even against the backdrop of a softer market environment. 

Mr. Liang said that international business is also seeing great performance with a growth rate for international hotels and air ticket more than double of China outbound traffic growth.

Mobile app accounted well of over 80% of features total bookings. The company "open platform" connects several 100,000 direct intermediate suppliers ranging from individual professionals to worldwide travel leaders.

Ctrip also announced a proposal to change the company name to Trip.com Group Limited, following similar steps taken by its international counterparts Booking Holdings and Expedia Group. 

"The new name reflects the services of products we provide and it can be easily remembered by global users," said Mr. Liang. Trip.com Group includes a range of brands, including Ctrip, Qunar, Trip.com, Skyscanner, and many more.

The company will celebrate its 20th anniversary in October. 

The company's CFO Cindy Wang revealed that Ctrip's branded low-star hotel room nights increased over 50% year-on-year, attributing directly to the effectiveness of its promotions in this segment. 

"We will continue to extend our promotions in this segment, as long as we see good return on investment," said Ms. Wang.

In the second quarter, GMV for Ctrip's offline stores continued to see strong growth, with the daily transaction value peaking at RMB120 million. The large majority of its offline stores become profitable within 12 months.

For the third quarter of 2019, the company expects net revenue growth to continue at year-over-year rate of approximately 10% to 15%. This forecast reflects potential impact of about 400 to 500 basis points on the growth rate due to short-term macro and industry headwinds.

 

How would Ctrip mitigate the short-term and the long-term impact of macro and industry headwinds? 

James Liang: We see headwind in some of the Asia markets due to the difficult geopolitical situation. So, I think these are short-term impact as people will rearrange the plan to travel later this year in the future for their holidays. Overall, in the long run, I think, particularly in Asia, we're still very positive, because China is still going to be the fastest-growing – one of the fastest-growing large economies in the world and overall Asia is still going to be remaining the fastest-growing economical region in the world. And Ctrip with our strong presence in Asia, we are very well-positioned to take advantage of that.

So, in the long run, we're still very positive about our growth prospect in China and internationally, because Ctrip has a strong presence in the fastest-growing Asia market.

Jane Sun: In the first half of this year, outbound travel to Hong Kong and Taiwan accounted for about one-third of total Chinese outbound travelers. Therefore, we included some negative impact from these two markets in our Q3 guidance. And in addition, based on the TravelSky report, average price of outbound air tickets dropped about 750 basis points year-over-year in July, as a result of softer demand and macro uncertainty.

However, in the mid- to long-term, as James said, not only the most comprehensive extensive destination offerings, but also our expansion into the other global markets will help us to reduce or even mitigate risks for certain geographic uncertainties. 

 

Ctrip's segment guidance for revenues, and update on competition with Meituan? 

Jane Sun: In the third quarter, our accommodation revenue will grow at about 13% to 18% year-on-year and the transportation revenue will grow about 3% to 8% year-over-year, and packaged tour revenue will continue to grow at a healthy rate of 15% to 20% year-on-year, corporate travel will grow at about 20% to 25%. So, here comes the total revenue will grow about 10% to 15%.

Cindy Wang: Regarding the competitive landscape, our goal is for high-end, we will double industry growth rate and continue to serve as high-end customers very well with our high qualitative services, comprehensive products. And for lower tier cities, Ctrip brand will deliver about 50% year-over-year growth. We will keep up with our strong investment, both online and offline to make sure we stay ahead of the game.

 

Is the 400-500-basis-point impact from Hong Kong and Taiwan mainly related to hotel and air ticketing rather than packaged tour? How much is the Hong Kong and Taiwan revenue coming from this Trip.com? 

Jane Sun: The packaged tour business has two parts. One is the group tour and the second one is like the dynamic package product to bundle hotel and air tickets together. So, majority of the packaged tour business contributed from the group tour, because Ctrip and most of the Ctrip customer towards the mid to high-end.

When they choose a destination like Hong Kong and Taiwan, they tend to travel independently rather than travel with a group. This is one of the reasons why you see a less impact of these two destinations from the packaged tour versus the other accommodation and transportation business.

Most of the customers of Trip.com are coming from markets other than domestic China market. And Hong Kong is one of the focused markets for Trip.com. But the targeted customer of Trip.com mainly is the Hong Kongers traveling to mainland China or to the world, which is less impacted by the recent event. 

 

Can we just get some comments on the B side and the C side, it seems like there's less impact on geopolitics and these are the headwinds? 

Jane Sun: For the Trip.com business, we covered more than 20 markets in the world that currently mainly focused on the Asia Pacific region... We will set ROI threshold for each individual market.

For the more matured market, for example, the Hong Kong market, we already achieved quite sustainable profitability in that market. And for the Korea and the Japanese markets, we are very close to the break-even point already. But again, we are still in the very early stage of expanding our market share in outside world.

So, we are still expecting some investment in not only marketing, but more importantly, in product development to make sure that we have the best product to serve the local market.

 

How much of the revenue is contributed by the international business? And if we further break down the international business, how much of the international revenue is coming from the Chinese up on travel? And how much of that is contributed by pure overseas markets, i.e., serving non-Chinese travelers? 

Jane Sun: For the hotel accommodation business, international revenue contributed about 20% to 25% of our total revenues. And for the air business, international has already contributed about 40% to 45% of our total air ticket revenue. And in packaged tour, mainly contributed from the outbound travel. And the international revenue contributed about 40% to 50% of the total packaged tour revenue.

In the split of outbound versus international, outbound contribute about 20% to 25% overall of our total revenue and the pure international, including Skyscanner and the Trip.com contribute about the 10% to low-teen percentage of total revenue. The outbound business contributes higher margin, compared with our average margin level. And for the pure international business, especially Trip.com, we are still in the stage of early investment. But again, we will closely monitor the margin profile for each individual market based on their different growth stage.

TAGS: Ctrip | Trip.com Group | Skyscanner
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