Why Did Ctrip Sign A Strategic Deal With The Hungarian Tourism Agency?

Ctrip‘s (NASDAQ: CTRP) focus on strategic partnerships is going ahead at full steam. Shortly after partnering with Big Bus Tours, the world’s largest operator of open top buses for sightseeing tours, Ctrip has now announced its partnership with the Hungarian Tourism Agency. This will be an important development towards the strengthening of both China and Hungary’s tourism and trade relations. While Ctrip is the undisputed leader of China’s online travel market, the two areas where it is strengthening its position are: i) in the lower-tiered Chinese cities where it still lacks a major presence and ii) in expanding across the markets beyond China, specifically to cater to the outbound Chinese travelers — the most coveted consumer group in the travel world today. The current agreement might aid Ctrip in its second objective. There might be a few more reasons behind why Ctrip specifically chose the Hungarian Tourism Agency which we will discuss here. We have a $53 price estimate for Ctrip’s stock, which is around 14% higher than the current market price.

Why Might This Deal Be Important for Ctrip?

• Ctrip tries to be the one stop shop for Chinese travelers and hence it tries building partnerships with entities that deal with destinations popular among Chinese travelers. Eastern Europe and Hungary are currently two of the most popular destinations among Chinese travelers. According to Ctrip’s statistics, in November, Hungary experienced a 40% year-on-year growth in incoming Chinese tourists. The average spend per tourist was over 9,000 RMB. The searches for flights to Hungary, among the Chinese has increased by 70% during the last 11 months of this year.
• A Chinese TV Series ‘Love Actually’ which was shot in Budapest, heightened the interest of the Chinese with respect to Hungary as a travel destination. The series was sponsored by Ctrip and supported by the Hungarian Tourism Agency.
• Hungary was also the first European country to sign China’s ‘One Belt, One Road’ MOU deal.
• The current deal will further strengthen the ‘Cooperation between China and Eastern and Central European Countries’ (CEEC) agreement. Ctrip aspires to strengthen its connection with the partners belonging to CEEC.
• This partnership is one more step by Ctrip towards expanding its international footprint. Previously, it had acquired the U.K.-based metasearch giant, Skyscanner, to gain a greater presence in the international air ticketing market. Ctrip is currently integrating the booking option into Skyscanner’s platform and that has met with tremendous success so far.
• Ctrip’s deal with Hungary also suggests that European countries are slowly gaining prominence among Chinese tourists. A recent Skift report shows how the United States is slowly losing its popularity among international tourists, including Chinese tourists and hence collaborating with European partners seem to be a prudent move by the Chinese OTA giant.