Here’s Why Ctrip Thinks That It Can Reach Its Trillion Yuan GMV Target Sooner Than It Earlier Predicted
Ctrip’s management has brought forward the company’s expected timeline for achieving one-trillion-yuan gross merchandise value from the earlier predicted 2020 to 2018. Ctrip’s overall growth plan, with a good balance between organic and inorganic growth and with an eye towards expansion in both domestic and international markets, is expected to spell further success for the company and that might help the company in achieving its current goal.
When it comes to growth, Ctrip has been one of the most successful players in the online travel space. It was no surprise then that during its annual meeting on January 8th, Ctrip’s CEO Ms. Jane Sun said that the company will reach its goal of one-trillion-yuan Gross Merchandise Value (GMV) by 2018 itself, instead of the earlier predicted time frame of 2020. She then went on to add that by 2020, Ctrip will be progressing with its goal of achieving two-trillion-yuan GMV in three years. GMV or Gross Merchandise Value stands for the total value of merchandise sold over a certain period through a particular online business. Hence, Ctrip projects that it will sell over one-trillion-yuan worth of merchandise by 2018. GMV gives a good picture of an online business’s performance since the revenue is a function of the gross merchandise sold and the fees charged.
Ctrip has been growing steadily with the help of its organic business and also through acquisitions. The company bought around 40% stake in each of its chief rivals, eLong and Qunar, to become the second largest OTA in the world in terms of market capitalization (~ $22 billion). Though Ctrip is the undisputed leader in China’s online travel market, it is yet to command the same kind of influence internationally. In the recently concluded annual meeting, Ms. Sun also mentioned that the company’s current focus is to achieve a bigger international presence.
The company is definitely trying to expand its global reach. It has strategic partnerships with both the global OTA leaders, Priceline and Expedia. It is also making strategic agreements with companies abroad to facilitate the travel plans of its outbound travelers. The United Nations World Tourism Organization reported that since 2012, China’s outbound tourism market has been the largest in the world contributing on an average over 13% of the global tourism annual income. The Chinese outbound traffic and spending continued ranking as #1 till the last measurement done in 2015.
Along with satisfying the demands of its outbound travelers, Ctrip is also building its international presence. It enjoys around 10% of online travel agencies’ air ticket market share. This is the highest among all the leading OTAs. Recently, Ctrip bought leading metasearch engine, Skyscanner, for $1.7 billion to further expand its share in the air ticketing market. Ctrip had also acquired a majority stake in Travelfusion, a U.K. based travel distribution system in 2015. Travelfusion operates from London and Shanghai and its client base mostly comprises of low-cost airlines. The company wanted to utilize the fact that low-cost airlines generally witness higher volumes of sales. Ctrip’s strategy was to gain a significant share of the international travel market through low-cost carriers, and a high volume of travel transactions.
While building its international presence, the company also has a sharp eye on its homefront. In China, Ctrip is currently foregoing a portion of its margins to aggressively penetrate into the lower tiered hotel markets through discounts and coupons. It wants to eliminate competition and raise the barriers of entry for this segment.
We believe this all rounded growth plan will bring about further success on Ctrip’s path and the company might be able to achieve its goal of one-trillion-yuan GMV by 2018 itself.
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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
- What Drove Ctrip’s Revenue Growth And Led To Its EBITDA Decline Over The Last Five Years?
- Ctrip: Year 2015 In Review
- Ctrip Q1 2016 Earnings Preview
- Where Can Ctrip’s Growth Come From In The Next 5 Years?
- Which Two Segments Are The Biggest Contributors To Ctrip’s Growth?
- How Fast Is Ctrip’s Hotel Revenue Growing?
- How Can Ctrip’s Expansion In Geographies Like The U.S. Impact Its Share Price?
- How Did The Brexit Decision Impact Ctrip So Far?
- Ctrip Q2 2016 Earnings Preview
- Ctrip Continues Growing Though Its Bottom Line Remained Dampened Due To Investments
- What Drove Ctrip’s Packaged Tour Business In Q2 2016?
- Reasons Why We Upgraded Ctrip’s Stock Price By Almost 20%
- Why Did Ctrip Acquire SkyScanner?
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