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Ctrip’s Global Push Starts to Pay Off in Diversified Revenue Streams

Sean O'Neill
Ctrip’s Global Push Starts to Pay Off in Diversified Revenue Streams

Ctrip serves the world’s biggest e-commerce market, China. Its next targets are outbound Chinese travelers in Southeast Asia, plus customers in India and Europe. Already more than half of its 300 million monthly customers for its brands, which include Skyscanner and Trip.com, are based outside of mainland China.

Quarter by quarter, Ctrip’s international ambitions — which it has touted since 2016 — have begun to drive its numbers. In the first three months of 2019, Ctrip generated 35 percent of the group’s total revenue from its international business, mostly outbound Chinese travel.

One big caveat: Hong Kong, Macau, and Taiwan may account for roughly half of the international outbound visits of Chinese mainlanders. Ctrip hasn’t publicly ranked the popularity of its foreign markets.

It will take “five to ten years” for Ctrip to get that global share of revenue to 50 percent, predicted CEO Jane Sun during a conference call on Thursday. However, the pace of growth remains dramatic in the history of online travel. It’s profitable growth, too. Ctrip’s gross profit as a percentage of sales is higher for international outbound travel on average than it is for domestic travel, executives said.

While Ctrip isn’t competing directly much yet with other global conglomerates, it is casting a longer shadow across the globe. In 2018, Ctrip claimed to have sold $104.8 billion in gross merchandise volume, compared to Booking Holdings, which processed $92.7 billion in gross bookings in 2018, and Expedia Group, which processed $99.7 billion.

At home in China, Ctrip and its 45 percent-owned-affiliate Qunar together accounted for 52 percent of China’s online travel market, according to Bernstein Research.

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Chinese customers tend to go directly to Ctrip or rivals like Alibaba’s Fliggy and Meituan to book travel, unlike in many Western countries, where travelers often start searches on Google. That saves Ctrip some of the marketing expense that Booking.com and Expedia pay.

However, intense price competition in China depresses Ctrip’s commission rates, which hover at around 20 percent. That’s lower than what its Western rivals can often charge abroad, which is usually more than 30 percent.

No Economic Drag

Late last year, Ctrip had to retool its marketing strategy to cope with sluggishness in the broader Chinese economy and rising costs.

In the first quarter, Ctrip’s net revenue rose by 21 percent, year-over-year, to $1.2 billion (8.2 billion renminbi).

In the three months ended March 31, Ctrip generated net income of $687 million (4.6 billion renminbi), four times as much as a year earlier.

To internationalize its inventory, Ctrip has set up offices in Southeast Asia, Korea, Japan, Australia, and elsewhere. Trip.com, the company’s international platform, runs call centers in Edinburgh, Seoul, and Tokyo.

In the first quarter of 2019, Edinburgh-based Skyscanner’s direct booking program had 250 percent growth in bookings year-over-year. The brand lets consumers buy plane tickets without leaving the site or app.

Ctrip also earlier this month announced a share swap in which it took a 49 percent stake in MakeMyTrip, India’s largest online travel agency. Planned strategic cooperation should deepen Ctrip’s international effort. Less well known are Ctrip’s recent investments in online travel companies WingOnTravel, ezTravel, Yongan Tourism, and Yiyou, to gain more share in the markets of India, Hong Kong, and Taiwan.

Ctrip is also cutting deals with overseas hotel groups. Earlier this month, Meliá, the largest hotel group in Spain, agreed to begin offering “exclusive” offers and benefits to Ctrip users at its nearly 400 hotels worldwide. Ctrip users can now earn stay points along with additional benefits from MeliáRewards, the hotel group’s loyalty program. Soon, the two companies will also launch a loyalty membership tier-matching program, where all tiers of Ctrip’s paid loyalty program could join MeliáRewards via Ctrip’s site and receive corresponding tiers in MeliáRewards.

Ctrip may not take on Western online giants by storm but rather at a pace that’s a bit like climate change — sneaking up on Western companies who know they should prepare but have been whistling in denial.

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