China’s Independent Travel Market Takes Off

By Martin Kelly

Excellent sales growth from China’s leading online retailer Ctrip once again exceeded market expectations and set a cracking pace in the world’s most exciting travel market.

Results from rival China travel retailer eLong told a different story – that of a company still establishing itself … strong sales were counter balanced by increased spending on acquisitions and marketing.

Consequently a clear split has emerged between China’s two big independent travel brands in the eyes of regional travel industry analysts.

That is, Ctrip, which is already making money, will remain dominant for the foreseeable future, while eLong focuses on building for the longer-term.

Analyst William Bao Bean from Deutsche Bank commented: "In light of eLong’s focus on customer acquisition rather than profitability, transaction metrics are the key to measuring success.

"eLong is getting traction as its relationships with portals are driving much higher traffic – but it is now up to the company to convert traffic into customers."

He said other players such as CYTS and Cendant (via their www.aoyou.com joint venture) are not yet having impact on the independent travel marketplace.

eLong’s net sales for the second quarter were RMB52 million ($US6.42 million) driven mostly by hotels, although the growth in airline ticket sales exceeded expectations.

Ultimately, though, eLong lost RMB11 million ($US1.35 million) for the quarter.

Ctrip powered on, recording net sales for the second quarter of RMB129 million ($US16 million), up 60% year on year. Net income was RMB56.5 ($US6.8 million), an 80% increase on last year’s result.

President and Chief Financial Officer of Ctrip, Neil Shen, who is leaving the company, said the results "highlighted our strength in strong organic and balanced growth.

"We have a healthy business model that we believe will continue to enable us to take full advantage of the vibrant travel industry in China."

Analyst Bean said: "Ctrip hit the ball out of the park again in the second quarter and is gradually cementing its position as a category leader in the China market based on its execution, high barriers and strong growth.

"While risks remain, including the economy and execution, we believe the outlook for Ctrip in the near and long term is good as it leads the small but fast growing independent travel market. "

Revenue at Ctrip is dominated by hotels at a ratio of around 2.5 for every airline dollar. Hotel bookings are also growing marginally quicker, although the most spectacular growth is coming from package tours, albeit from a very low base.

Online transactions are steady at 30%, compared with 20% for eLong.

Ends.

 

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