Ctrip Is Expected To Continue Soaring In Q2 Boosted By Its Organic And Inorganic Growth

August 28th, 2017 by Trefis Team
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CTRP
Ctrip

Ctrip is slated to release its Q2 2017 earnings results on August 30th. In line with its 2016 performance, Ctrip’s earnings in the first quarter revealed that the company is making impressive progress in all the market segments where it operates. Even though Ctrip is the undisputed OTA leader in China, it is still striving to achieve dominance in the lower tiered Chinese cities. Towards that end, the company had entered into a partnership with Traveling Bestone last year and with the help of its offline stores and its greater presence in these regions, Ctrip is slowly on its way to capture that market as well. In the international front, Ctrip’s acquisition strategy entails treading into markets like East Asia where the preferred tourist destinations match those of the Chinese travelers. Along with this, Ctrip is also looking for lucrative options in the West as is evident by some of its recent collaboration with Spanish travel entities. Finally, after acquiring Skyscanner last year, Ctrip is now trying to expand the air ticket metasearch company to provide direct booking options, as well. If the transition is successful, Ctrip might capture a larger chunk of global air ticket booking market share.

Ctrip’s Acquisition Strategies

Ctrip is looking to expand its presence in emerging markets that are close to home. Along with taking advantage of China’s travel industry (which is the largest in the world currently with a huge scope for future growth), Ctrip also wants to take advantage of its growing scale to provide services to customers abroad, especially in East Asia. The advantage of this strategy is that the company can capture a lot of growing markets where competition from established players are relatively less. For example, 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.
Another strategy that Ctrip follows is to grow its presence where it already has a bigger market share compared to many of its competitors. Last year, the company bought U.K. based, leading air ticket metasearch platform, Skyscanner, for $1.74 billion. Currently, it is 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 might 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. According to Shiwei Zhou, Ctrip’s vice president of investments and investor relations, Ctrip looks for the scope of the market outside China where the target company operates or how its partnership with the company can aid it in growing its presence or help it with technological know how. Ctrip is also a very careful bidder and doesn’t like overpaying for its acquisitions.
Ctrip’s Interests In Spain

In June, Ctrip signed a strategic alliance with Madrid Region Tourism Bureau to further explore destination marketing and product development scope in the future. Madrid has emerged as a popular travel destination for Chinese travelers and its rich background in football, culture, and history makes it a potentially bigger attraction site for Chinese tourists in the future, as well.

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Also in June, Ctrip announced the strengthening of its existing partnership with the largest Spanish hotel group, Melia, to share expertise and knowledge in areas including big data, product, services, and marketing techniques. Melia is one of the most famous international hotel chains in Europe with around 400 hotels spanning across 40 global locations. The partnership might prove valuable to Ctrip’s Chinese outbound travelers looking for hotel options while traveling in Europe.

According to data gathered by Ctrip, Spain’s popularity as a tourism destination is surpassing that of other European regions such as France and Italy. The above agreements might help Ctrip in capitalizing on Europe’s popularity among its customers, especially Chinese overseas travelers, in order to further build a larger customer base for itself.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Priceline

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