Ctrip’s Strong Growth Momentum Continues In Q3; Promises An Even Better Future With Strategic Investments

CTRP: Ctrip logo
CTRP
Ctrip

Ctrip, (NASDAQ: CTRP), the Chinese online travel giant, released its Q3 2017 earnings on November 1st. In line with Ctrip’s last few quarter performances, its revenues continued growing at over 40%. To be precise, the top line grew by 42% y-o-y to $1.19 billion. The main driver to this growth was the 36% growth in its accommodation bookings to reach $424 million. The operating margin for the company stood at 17%, which was one percentage point lower than its Q2 2017 operating margin. The company’s management feels that Ctrip’s gross operating margin might reach the 20% to 30% range over the next couple of years. Ctrip’s air ticketing segment is currently receiving a major boost after its acquisition of the flight metaserach engine, Skyscanner, and specifically after expanding Skyscanner’s role to include direct booking. Ctrip acquired Trip.com recently, in order to further enhance Skyscanner’s features, and it also invested in Tujia.com, Airbnb’s biggest competitor in China. We have a $53 price estimate for Ctrip’s stock, which is around 10% higher than the current market price.

Skyscanner’s Success In Its New direct Booking Role Is Boosting Ctrip’s Air Ticket Sales

Ctrip’s transportation ticketing revenues grew by 41% in Q3 to reach around $515 million. Ctrip’s acquisition of Skyscanner in 2016 is definitely boosting its air ticketing revenues. The UK-based flight-metasearch engine Skyscanner was bought by Ctrip for $1.74 billion. Though Ctrip offers metasearch options in China, Skyscanner being one of the global leaders in this field, helped significantly increase Ctrip’s international reach. Along with metasearch, Ctrip also offers booking capability and recently, Skyscanner has also started offering direct booking services. The total direct booking transactions grew three-fold since the feature was launched on Skyscanner in May 2017. This might not be surprising given that Skyscanner is one of the leading flight metasearch engines in the world. Hence, one extra step of giving the users the booking option after their search criteria is met is expected to work to Skyscanner’s advantage. In fact, Ctrip has reported that the number of conversions, that is people who convert to ticket buyers after searching for flights, has increased by almost 50% for the company after Skyscanner’s entry into direct booking.

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Ctrip’s Recent Investments

  • Trip.com: Ctrip announced its acquisition of the Palo-Alto based travel recommendation website, Trip.com on November 1st. The start-up, having so far raised $39 million in funding, has investors like Expedia’s HomeAway, Redpoint, and Battery Ventures. The acquisition is expected to complement the services of Ctrip’s Skyscanner by providing details and reviews about tourist attractions, restaurants, etc. The expectation is that users will also be able to add their reviews to the platform in the future. This might make the Skyscanner platform similar to TripAdvisor. Another interesting fact to note here is that while TripAdvisor faltered in generating enough interest for its Instant Booking website, the role it expanded into after being one of the leading metaserach platforms in the world, Skyscanner seems to have no problems in generating user interest with its direct booking functionality. If Trip.com further elevates its services with reviews etc, Skyscanner might go on to become one of the most sought after metasearch platform offering direct booking options in the future. This will surely help Ctrip not only with the growth of its air ticket sales, but also with its global expansion ambitions in the future.

  • Tujia.com: A few days back, Tujia.com, Airbnb’s biggest competitor in China, raised $300 million to fund its international expansion efforts. Ctrip, along with All-Stars Investment Ltd. led the round of financing. Tujia is currently valued at around $1.5 billion, reflecting a 50% increase from its 2015 valuation. Being the market leader in China’s vacation rental market, Tujia’s platform includes around 650,000 listings, mainly catering to the Chinese tourists who incidentally enjoy the top position among both the international and domestic tourist populations in the world. This might be Tujia’s counter move to Airbnb’s latest move of quadrupling its Chinese tech team in order to capture a bigger portion of the China market. Tujia’s rivalry with Airbnb will transcend China and include other international markets, chiefly destinations that are popular among Chinese travelers. Going by the past trend, it is possible that Ctrip acquires Tujia sometime in the future, thereby strengthening its position in the alternative accommodation market even further.

 

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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 Ctrip 

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