Costs are up and commissions are down at Ctrip.com, China’s leading online travel agent, leading to a 40% year-on-year fall in net income for the 3rd quarter to US$31m. That is despite a 20% boost in net revenue.
Some might think otherwise but Min Fan, President and Chief Executive Officer of Ctrip, declared the result satisfactory. “We are pleased with the solid results in the third quarter of 2012,” he said.
It seems Ctrip.com has decided to invest for the future, tweaking its business model in the process. Talking points include:
- Revenue was RMB1.17 billion (US$187 million), up 20% year-on-year.
- Net income was down 40% year-on-year to RMB194 million (US$31 million).
- Hotel commissions fell 21% per room per night offsetting an increase in booking volume of 40%.
- Airfare sales revenue rose 24%.
- Strong growth in holiday travel led to 31% year on year increase in package tour revenue.
- Product development expenses 51% year on year.
- Sales and marketing expenses grew 74% year on year and was up 39% on the previous quarter.
- General and administrative expenses were up 39% year on year.
Ctrip shares were trading around US$20.35 today, much better than the late July low of US$12.48, but still well off the 12 month high of US$35.10 one year ago.