What Are The Key Takeaways From Ctrip’s Q4 2016 Earnings Results?

In line with its strong performance in the first three quarters of 2016, Ctrip delivered a robust Q4 and ended 2016 on a high note. Ctrip is expanding its services, aggressively pursuing markets with growth opportunities, and catering to Chinese outbound travelers (which are the largest in the world in terms of spending and traffic). In fact, Ctrip’s solid growth path has been so promising that its newly elected CEO Jane Sun recently mentioned that the company will reach its 1 trillion yuan gross merchandise value target by 2018, two years before the earlier predicted timeline of 2020. Ctrip’s revenues grew by 76% y-o-y in Q4 while its non-GAAP operating margin stood at 16%, 600 basis points higher than Q4 2015. For the full year 2016, net revenues grew by 76% y-o-y to RMB 19.2 billion ($2.8 billion). However, the company’s bottom line remained dampened on account of several strategic investments and its diluted earnings per ADS were RMB-3.02 (US$-0.44) and after excluding share-based compensation charges, Non-GAAP diluted earnings per ADS were RMB4.05 (US$0.58)

Ctrip Grew Solidly Over 2016

Ctrip ended last year with over 1.2 million hotels in its network and its revenues from accommodation bookings grew by around 58% y-o-y in 2016 to RMB 7.3 billion ($1.1 billion). The air and train packages by the OTA connected around 225 airports in China and 93 cities without airports. Its transportation ticketing revenues grew by 98% to RMB8.8 billion (US$1.3 billion) in 2016. Ctrip’s package tour revenues for last year rose by 39% y-o-y to RMB2.3 billion (US$333 million). Ctrip’s visual tour and app program has grown so popular that over 10 million travelers signed up for it in 2016. The program brings together individual travelers and local experts at their destination. Its corporate travel business currently caters to 8 million users across 6,000 large enterprises and 16 small and medium-sized enterprises. In 2016, Ctrip’s corporate travel revenues were RMB608 million (US$88 million), a 29% y-o-y increase. Ctrip was recently named as one of the most innovative travel companies and as one of the most innovative companies in China in 2017.

Ctrip’s Growth Strategies Are Reaping Benefits

• The domestic travel market in China reached 4.4 billion trips in 2016 and according to the government, it is expected to reach 6.7 billion by 2020, reflecting an 11% CAGR. Being the market leader with a 40% stake in two of its closest rivals, Qunar and eLong, Ctrip is expected to grow even further due to the secular trends in the Chinese market. Ctrip’s strategic acquisitions and product launches will further help the company on its growth path.
• In 2016, the company released new services such as an online travel guide, airport parking service, and currency exchange services.
• Also, despite being the market leader, Ctrip left no stones unturned in attempting to capture a larger share of the competitive low-budget hotel segment in China. Notably, the company has foregone its profits in order to invest more in this segment as well as offer competitive prices and low discount rates to lure more customers. Ctrip wants to eliminate the smaller competitors from the low budget hotel segment. It seems that the company’s investment in this segment has been paying off, with an 80% increase in Ctrip users in second- and third-tier Chinese cities over the last year.

• Ctrip is focused on growing its outbound Chinese traveler base along with the expansion of its own global presence. Notably, in a recent interview with Skift, Ms. Sun revealed that instead of focusing on established markets such as the U.S., Ctrip might try building its markets in the emerging markets where travel is growing fast. For example, the company has around a 26% stake in India’s leading OTA, MakeMyTrip. Ctrip has been strengthening its hotel and flight booking services and it has also made a few strategic investments and alliances in order to claim a bigger portion of both outbound travelers and the global markets.
• Ctrip acquired Skyscanner for a whopping $1.74 billion in 2016. It also invested in Mobike, a smartphone enabled bicycle renting service, and it acquired ground transportation company, TangReng World. It entered into a strategic alliance with Travelling Bestone, a travel agency based in China with over 5,000 outlets, in order to increase its presence in the lower tiered cities. Ctrip also made strategic investments in three tour operators based in the US.
• The company is not satisfied with typical sightseeing offerings and wants to go beyond that to provide cultural and social experiences to its outbound travelers. It is building its products towards this end, along with the recent launch of a global SOS service to ensure travelers of their safety and well-being.
• Ctrip’s acquisition of Skyscanner is being hailed as a major step by the company to increase its market share in global air ticketing in the future. Currently, Ctrip has around 10% share of global air ticketing, which is the largest among all leading OTAs. With Skyscanner, the world’s leading metasearch engine for air travel, and Travelfusion (the travel distribution system in which Ctrip has a majority stake), Ctrip’s global air ticketing business has a high probability of growing significantly in the future.

See our complete analysis for Ctrip

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