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Who will challenge Ctrip?

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question_2 June 23, 2010 (Jiayu Tian) The Chinese online market is expected to reach the size of RMB5.4 billion RMB ($790.63 million) by the end of 2010, representing an increase of 38 percent from 2009. By 2013, industry analysts expect the market to grow to RMB15.91 billion ($2.3 billion). At present, online travel market represents 10% of the total travel market, but it is expected that the online travel market will make up for 15% to 16% of the whole travel market in two years. Driven by increasing demand the online market is expected to keep a fast growth rate and is expected to reach a total size of $2 billion in 2013.

JT_CTRP_2010623_2

2008-2013 China online travel market size (Source: iresearch)

In 2009, Ctrip.com (NASDAQ:CTRP) had a market share of more than half the online travel market, which shows Ctrip’s obvious monopolistic advantages.

The potential market in this online travel is very significant, therefore a lot of other companies are trying to muscle additional market share from Ctrip.com (NASDAQ:CTRP) and eLong (NASDAQ:LONG). CYTS and Cendant Corp established Aoyou, and CIT established Mango in order to enter this market. It is expected that Ctrip.com (NASDAQ:CTRP) and eLong Inc. (NASDAQ:LONG) will surrender some of their market share to new rivals.

JT_CTRP_2010623_1

Source: iresearch (data from each company’s financial report, only including their online sales and income such as internet and Call center )


  • Ctrip’s main competitors are:

1. eLong Inc. (NASDAQ:LONG) is the biggest competitor for Ctrip.com Int. (NASDAQ:CTRP). Expedia (NASDAQ:EXPE) is one of the big shareholders of eLong Inc. (NASDAQ:LONG), a Nasdaq listed Chinese company.

2. Auyou and Mongo are all backed up big national corporations, CYTS and CIT.

Online travel market remains the profit driver of Ctrip.com (NASDAQ:CTRP), a market full of new competitors such as Mongo, Aoyou, Qunar, and so on. See first chart above. The problem for Ctrip.com (NASDAQ:CTRP) is that the company lacks diversification.

eLong’s parent company, Expedia Inc. (NASDAQ:EXPE), took over Kuxun which is an accommodation and air ticket vertical search website. Thanks to this acquisition, EXPE has expanded into Elong, Daodao, Kuxun and Egencia, and those companies provide whole online services including online booking, vertical search, user reviews and business travel.

Meanwhile, Mango has officially finished its acquisition over 1rest and launched a new brand Qmango, the first online booking website targeting on new travelers and back-packages in China.

Another potential trouble spot for Ctrip.com (NASDAQ:CTRP) is its relationship with old partners. Airlines and hotels have been trying to escape from Ctrip’s control and establish their own sales channels. On Nov 2009, China Eastern Airlines (NYSE:CEA) singed a strategic corporation agreement with Alibaba (HKG:1688) and opened a store on eBay (NASDAQ:EBAY) which could directly bring it to the market.

China Eastern Airline’s action trigged the whole market to follow; China-SSS, Hainan Airline, Xiamen Airline, Shenzhen Airline and Shandong Airline all signed agreement with Alipay, which is an online paying service supplied by Alibaba.

Facing all the above challenges, investors want to know how far Ctrip could go.


  • Market structure: Ticket booking revenue will get close to accommodation booking revenue

According to the latest research, ticket booking revenue represented 45.4 percent of the total online travel market revenue while accommodation booking made up 44.1 percent.

JT_CTRP_2010623_3

2003-2013 China online travel market structure (Resource: iResearch)

Investors have to consider that due to the increasing use of internet, online air ticket booking is getting easier and more standard compared with the past. Therefore, revenue generated from online air ticket booking will increase. On the same time however hotel booking will grow at a much slower pace. Third, due to the more flexible holiday rules and the potential appreciation of the RMB, the size of China's travel market is expected to continue to grow at a relatively fast pace.



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