China remains a tough market for outsiders but eLong, the Expedia subsidiary which claims to be China’s biggest online travel agent, appears to be making decent progress with sales and operating margins during 2010 well up over 2009. However, hotel commissions remain under pressure in what is a notoriously price sensitive market.

eLong recorded a 49% increase in room night sales to 6.4 million during 2010 and its operating margin was 9.8% compared with a slim 3.1% the previous year. But average commission per property was significantly down (9% on this occasion) for the second successive year (6% slump in 2009) thanks largely to the rapid growth of budget hotels while a discount eCoupon program had an impact.

The extra customers came at a cost with sales and marketing in 2010 up 26% over 2009 due to “increased online marketing expenses, hotel commission payments to third-party distribution partners and loyalty point promotions”.

Air bookings were up with an 11% increase in air segments to 2.4 million and a 16% increase in commission per segment. Commission per segment increased due to a 17% increase in average ticket price, which was partially offset by a decrease in air commission rates compared to the prior year.

The big question, however, is what percentage of sales is actually transacted online?

No clue in the 2010 results from the Nasdaq listed entity.

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