What Drove Ctrip’s Revenue Growth And Led To Its EBITDA Decline Over The Last Five Years?
Ctrip, the largest OTA in China (with ~50% revenue share), has been experiencing solid topline growth over the last five years on account of growth in all its divisions, specifically hotel and air ticket bookings. However, its EBITDA decline is quite significant. Over these years, China’s online travel market had been extremely competitive with its rivals engaging in pricing wars to appropriate customers into their own websites. As a result, Ctrip’s adjusted operating margin in 2014 declined to 4.8% from 23.6% in 2013. This cut-throat competition is expected to subside in 2016 due to the consolidation of China’s OTA industry. Ctrip bought a 40% stake in eLong, and entered into a partnership with Qunar and its backer Baidu. Also, Ctrip’s investments on its Open Platform, technological upgradations, and acquisition related activities put significant pressure on its bottom line. Along with the consolidation in the Chinese OTA industry, coupled with a reduction in investments given that a lot of investment activities are on the verge of completion, we can expect Ctrip’s EBITDA margin to gradually show improvement starting from 2016.
Have more questions about Ctrip? See the links below.
- What Is Ctrip’s Revenue And EBITDA Breakdown?
- How Has Ctrip’s Revenue And EBITDA Composition Changed Over 2012-2016E?
- Ctrip Q4 2015 Pre-Earnings Report
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