If there is one online travel company in China, which consistently garners accolades for its performance, it has to be Ctrip.com. (9/10/2007)
Recently, it was shared that the company has recorded double-digit year-over-year per-share profit growth for 11 straight quarters, excluding stock-based compensation charges. Its year-over-year sales have risen at least 46 percent every quarter since mid-2003. In the second quarter, sales rose 59 percent to $37.8 million.
A media report recently emphasised on Ctrip’s credentials. “The question is not whether Ctrip can compete against Expedia, but whether Expedia can compete against Ctrip,” Piper Jaffray analyst Aaron Kessler had said.
In order to evaluate Ctrip.com’s performance, EyeforTravel.com’s Ritesh Gupta spoke to Kessler. Excerpts from an interview.
From distribution perspective, considering the huge requirements in the wake of the Beijing Olympics in 2008 and World Trade Expo in 2010, what role do you foresee online travel players playing in China in the next few years?
Online travel will play an increasing role in China , especially as middle class in China increases. I don’t see Olympics a huge catalyst in itself though.
Till mid-2005, it was being acknowledged that online travel agencies in China accounted only a small share of total travel bookings with less than 5% of total travel bookings. How do you assess the situation today especially in the context of major player like Ctirp.com?
Ctrip cited that they are roughly five percent of the market today, but that includes their call center activity which is about 70 percent of their total revenues. Pure online travel bookings are still less than five pecent by our estimates.
For Ctrip.com, you had referred to one of their strengths being understanding of the local market and consumers. How do you assess their distribution strategy especially in the light of an offline travel agency this year?
Ctrip is attempting to expand in China and to be able to offer all products to customer whether it is online, phone-based reservations, or a local travel agency. I wouldn’t expect hundreds of offices though.
A senior executive from Ctrip.com admitted that improvement in Internet infrastructure, encouraging online booking by giving extra incentive/saving, real-time information update for hotel/air services, and increase in leisure FIT reservation can stimulate the growth of online travel booking in China. Despite limitations, do you think a company like Ctrip.com is exceeding the expectations with the kind of earnings it has managed?
I think the continued strong growth rates is somewhat of a surprise as growth rates really have not slowed and in some cases have accelerated. But when you take the strength of the macro economy into account, probably not a big surprise.
Recently, eLong recently decided to make structural improvements in its hotel and air products, its customer service and its overall management talent. Despite Expedia’s knowledge, being an established travel brand, exclusive marketing channels, seasonal management team and strong financial resource, what’s holding back eLong?
Brand name of Ctrip should not be underestimated in China. eLong is still number two player, but Ctrip has really cemented a strong brand over the last couple of years.
Going forward, Ctrip intends to leverage the Ctrip brand to attract new travel suppliers and negotiate more favorable contractual terms with its existing suppliers, expand its hotel supplier network and room inventory, and expand air-ticketing and other travel product offerings. How do you assess such plans?
Really nothing new. This is a continuation of their long-term strategy to expand their offerings, acquire more inventory, offer good rates to consumers.
Ctrip.com also intends to pursue selective strategic acquisitions and expand into Hong Kong, Macau and Taiwan . Where do you see the company headed or how do you finding the timing for such expansion?
We wouldn’t be surprised to see Ctrip to expand its inventory to other Asian countries. We would view this mainly for China travelers as opposed to setting up in other countries.