HONG KONG (Nikkei Markets) -- Ctrip.com, China’s largest online travel agent with a 60% share of the market, expects international business to outpace domestic expansion and bring in half of its total revenue within five years, according to its Chief Executive Jane Sun.
A growing outbound tourism market in China and the rapidly increasing scale of business for travel websites such as Skyscanner that are owned by the group are behind the optimism.
Nasdaq-listed Ctrip, which also controls the Qunar and Trip.com online brands and is now the largest shareholder in the company behind India’s MakeMyTrip.com, earned about 35% of its first-quarter revenue of 8.2 billion yuan ($1.2 billion) from international business, according to its earnings statement.
The company aims to benefit from an unfolding trend wherein a growing number of Chinese nationals are holidaying abroad each year, seeking to explore the world and shop for everything from unique tourist experiences to luxury goods. The country, already the world’s largest outbound travel market, is set to expand further, generating outbound traffic of 160 million by 2020, according to a McKinsey report in November.
Ctrip’s Trip.com, a service targeting outbound travelers from China, has at least doubled air ticketing volumes for nine consecutive quarters. Revenues at U.K.-based Skyscanner, which Ctrip acquired in late 2016 for 1.4 billion pounds ($1.7 billion), have meanwhile soared by at least 200% for five quarters. While Sun acknowledges the heady growth has come off a small base, she expects “triple-digit" percentage growth to continue at the Europe-focused service.
Having made multiple acquisitions in recent years, the company is now betting on growth from its existing properties. International business should bring in more than half of its revenue within five years, if the company is able to execute its strategy, Sun said.
"Organically, we are very aggressive," Sun said. Although Ctrip does not rule out acquisitions, it will only "make a move" when suitable deals present themselves, such as when Skyscanner was put on sale in late 2016 by its shareholders at the time, she added.
Shares of Ctrip fell 1.7% to $33.96 in New York on Monday, giving the company a capitalization of $18.80 billion.
Within China, Ctrip's focus is on digging deeper into the country by adding stores and expanding hotel room inventory in lower-tier cities as new rail services improve their connectivity with urban centers.
“We have opened a lot of offline stores along the high-speed railway," Sun said.
The company, which has 7,000 stores across the country, plans to expand its offline presence by providing hotel owners with tools to load their rooms inventory on the company’s platforms - a move she says will save Ctrip’s support personnel trips to remote areas.
Ctrip currently covers about 700,000 hotels in China, and an equal number in overseas markets.
While rival online groups such as Meituan Dianping and Alibaba Group Holding have been scaling up their presence in the tourism sector, the company is confident of holding its ground.
Issuing tickets may look "very simple, but the barrier of entry is very high" as profit margins are thin and the process involves multiple steps at the back-end, requiring investments in technology infrastructure as well as high service quality to generate a high volume of business, Sun said.
"It is just not easy," she said.
In India, meanwhile, the company will aim to improve MakeMyTrip’s operating efficiency by sharing technological capabilities, such as airline and tour package bookings, but let the local management operate independently.
Ctrip, which acquired a 10% stake in MakeMyTrip in 2016, had in April announced a share swap with South African internet services major Naspers. Under the terms of that agreement, it acquired most of Naspers’ stake, boosting its stake in the Indian company to 49%, while giving the South African company a stake equal to 5.6% in Ctrip.
“It is always our intention to keep the management independent. We let them do their own job,” Sun said. “India is also a very special market, so the company needs to be run by Indians.”
-- Amy Lam and Carrie Chen