Here’s How Ctrip’s Strategic Investments Differ From Its Peers, Thereby Helping The Company Grow

 While Ctrip is performing brilliantly in the online travel market, we know that the company is not stopping anytime soon. One of the biggest drivers for Ctrip’s unprecedented growth lies in its insightful investments and acquisition strategies. Not only does Ctrip not follow the footsteps of its international rivals when it comes to acquiring entities, Ctrip also knows how to grow its market dominance by complementing its existing portfolio with companies that suit its growth strategy. Below we discuss Ctrip’s acquisition strategies and how those provide it with a competitive advantage to grow further.

In its last Q1 2017 earnings call, Chinese OTA leader, Ctrip’s management spoke about how it is looking to expand its presence in emerging markets that are close to home rather than look far West in the more established travel markets. The advantage of this strategy is that the company can capture a lot of growing markets where competition from established players are relatively less. If we think of Western Europe or the U.S., the two OTA leaders, Priceline and Expedia, have major strongholds in these regions. Along with this, there are numerous smaller competitors, too. However, if we look at countries like India, there is a huge scope for growth as a significant portion of the online travel market is still untapped. Ctrip bought a more than a 26% stake in MakeMyTrip, India’s OTA leader. With the help of a local player, it will be easier for the company to capture a greater part of the lucrative Indian travel market, which currently is at a place where China was 10 to 20 years before, according to Ctrip’s CEO, Jane Sun. Along with taking advantage of China’s travel industry (which is the largest in the world currently and has a huge scope for future growth as well), Ctrip also wants to take advantage of its growing scale to provide services to customers abroad, especially in East Asia, where travelers have similar travel destination preferences to the Chinese.

Another strategy that Ctrip follows is to grow its presence where it already has a bigger market share compared to many of its competitors. For example, last year, the company bought U.K. based, leading air ticket metasearch platform, Skyscanner. It invested a massive $1.74 billion for the acquisition and is now converting the metasearch platform to a direct booking one. Ctrip has its own direct booking model for airlines and Skyscanner might follow the same path. Skyscanner is expected to help Ctrip gain an even bigger share of the air ticket booking market where currently Ctrip has around 10% market share, a considerably higher share when compared to Expedia (~5%) and Priceline (less than 1%).

 

With its performance soaring in the recent quarters and a strong cash position, it can be expected that Ctrip will acquire some more entities this year. Other than Skyscanner, some of its important strategic investments since 2016 has been: investment in Mobike, a smartphone enabled bicycle renting service; acquisition of the ground transportation company, TangReng World; entering into a strategic alliance with Travelling Bestone, a travel agency based in China with over 5,000 outlets; and strategic investments in three tour operators based in the U.S. In 2015, the company acquired over 40% stake in each of its biggest rivals, Qunar and eLong, which helped it in consolidating the Chinese online travel market.

So, how does Ctrip’s investments provide a competitive advantage for the company? According to Shiwei Zhou, Ctrip’s vice president of investments and investor relations, Ctrip considers some of these points while making an investment in another entity: