Ctrip Shows How It Is Possible To Grow Even Without Competing Directly With The Global OTA Leaders

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Ctrip is growing and how! After its consolidation of the Chinese online travel market with the buying of around a 40% stake in each of its closest rivals, Qunar and eLong, Ctrip is currently the second largest OTA in the market in terms of its market value of almost $25 billion. However, in terms of revenues Ctrip (~$3 billion) has a long way to go when compared to Priceline (~$11 billion) or Expedia (~$9 billion). For the full year 2016, net revenues grew by 76% y-o-y to RMB 19.2 billion ($2.8 billion). In fact, Ctrip's growth 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. But Ctrip's unique strategy for growth might help the company grow even further without even entering into direct competition with the existing leaders. The reason behind the same is that while international players are growing their global market shares and aspiring for new markets, Ctrip's main focus is China.

Be it Chinese outbound travelers or China's domestic market, Ctrip is aggressive in its pursuit of growth in China. In a recent interview , Ctrip's CEO Ms. Jane Sun admitted that China is Ctrip's main focus and then the company might try expanding in the neighboring Asian regions. There is a huge scope to grow through this strategy even if Ctrip doesn't put a lot of focus in the international markets. Ctrip offers a host of different services and keeps adding new ones to its platform. Starting from accommodation including flash sales, short-term rentals and vacation homes, transportation including railway, bus, ferry, chauffeur, taxi, special tickets, leisure travel, packaged tour, cruises, and corporate travel, Ctrip offers a plethora of options and the good news for the company is that China is one of the largest markets for online travel booking and it is expected to keep growing over the next few years. According to the China Tourism Academy , Chinese outbound tourism grew by 4.3% y-o-y to 122 million travelers in 2016. The total spend by these travelers is estimated to be around $109.8 billion. On the other hand, 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.

Ms. Sun also mentioned that in terms of accommodation offerings, Booking.com is significantly bigger than its competitions and it might be a difficult task for Ctrip to compete with it. However, Ctrip's competitive advantage is its complete product suite, that is offered neither by Priceline or Expedia, which can help it grow further in the Asian market.

It is noteworthy to mention that even though Ctrip plans on growing in markets near home, it is not completely detached from growing its international presence. Besides having partnerships with both Priceline and Expedia, last year Ctrip bought Skyscanner, the leading metasearch engine, for $1.74 billion. Ctrip currently enjoys around 10% of online travel agencies' air ticket market share. This is the highest among all the leading OTAs. In 2015, it acquired a majority stake in Travelfusion, a travel distribution system that operates from London and Shanghai whose client base mostly is comprised of low-cost airlines. The Travelfusion and Skyscanner team are both based in the U.K. and the two teams will be working on the synergy to improve the customer experience and provide a greater array of services to both businesses and customers. Ctrip's global reach in the airline booking market might significantly increase due to this synergy.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Stocks , US Markets , Investing Ideas
Referenced Symbols: CTRP , PCLN , EXPE , TRIP , TZOO

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