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For this report, we traveled to Shanghai and interviewed the CEO, CFO, and COO of Ctrip, the CFO and head of China for Ctrip’s Skyscanner, attended ITB China, met with hotel executives, spoke with top private equity investors focused on the China travel market, and stopped by Shanghai Disneyland to gauge how a Western brand can successfully penetrate the market via partnership and respect for local culture.
This resulting analysis is as much a deep dive into Ctrip’s operational and strategic outlook, as it is an assessment of the Chinese travel market overall. Strong economic growth in China over the past decade has led to a rise in the middle class, a boom in domestic leisure travel, and more recently, a robust outbound market that has become the largest in the world.
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In the first section of the report, we dig into Ctrip’s strategic initiatives, provide our expectations for its financial results, offer a valuation framework, and discuss Ctrip’s M&A strategy and key investments. To get a better sense of trends beyond what is provided in public financial statements, we partnered with both YipitData and ForwardKeys.
The former provides hotel data on reservations, rooms, and properties broken down by country or region. The latter gives outbound and inbound airline booking data to and from: Japan, South Korea, Taiwan, Hong Kong, Macau, Thailand, Australia, U.S., Canada, UK, France, Spain, Germany, and Italy. We provide both datasets in the report.
In the second half of the report, we focus on the industry as a whole, looking at the dynamics at play in the domestic, outbound, and inbound markets. There is immense opportunity for companies and destinations in China, but the market has unique risks. We discuss these using the rapid rise and fall of outbound travel to South Korea as a case study. We also spoke with management at Hyatt in Seoul to get a better sense of the dynamics playing out.
Ctrip has gobbled up its pure OTA competitors while Baidu, Alibaba, and Tencent are potential partners and threats. These three companies, known as the “BAT” group in China, have their tentacles touching varied parts of the travel ecosystem. We discuss each of these key players in the report.
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Meituan-Dianping was created in 2015 after the merger of Meituan (a “Groupon-like” business backed by Alibaba) and Dianping (a restaurant review app backed by Tencent). The business model is online-to-offline where price conscious consumers purchase discounted “coupons” to things like restaurants, hotels, and movies and then contact the entity directly to book it themselves if there is availability. Meituan could move upscale to compete with Ctrip while its lower-end price-point already fights for the Qunar consumer. We also look at LY.com, in which Ctrip and Tencent are co-investors. The company is the largest OTA in China outside of the Ctrip owned brands.
What You Will Learn From This Report
- Overview of Ctrip’s products and strategy
- In partnership with YipitData, reservation, property, and room data for China, Africa, Asia ex-China, Canada, Caribbean, Europe, Mexico and Central America, the Middle East, Oceania, South America, and the U.S.
- How Ctrip uses two types of agency models – guaranteed allotment and on-request
- Air travel trends in China
In partnership with ForwardKeys, inbound and outbound booking data for Japan, South Korea, Taiwan, Hong Kong, Macau, Thailand, Australia, U.S., Canada, U.K., France, Spain, Germany, and Italy - What caused the Qunar airline boycott and how it was resolved
- Why Ctrip strategically invested in bus operators in the U.S.
- Mobile and online booking trends in China
- Takeaways from our trip to Asia
- Ctrip’s financial trajectory and our valuation framework
- Rationale and impact of key M&A transactions both through public financial filings and management interviews
- The story of how the Skyscanner deal came about and closed via a lengthy interview with Skyscanner’s CFO
- Why we expect margin to ramp as Ctrip integrates Qunar and eLong and mitigates aggressive price competition
- Behind the scenes look at the Qunar and eLong investments from two of the leading private equity investors in China
- Trends across domestic, inbound, and outbound travel
- Ctrip market share estimates
- WeChat and broader outbound data, analysis, and strategy via our partnership with Dragon Trail Interactive
- The rapid rise and fall of outbound travel to South Korea as a case study on the risk and rewards of outbound Chinese travel
- What the “BAT” (Baidu, Alibaba, Tencent) companies are doing in travel directly and through investments
- A look at two key competitors in LY.com and Meituan-Dianping
- The current value of the financial stake by Priceline and our expectations for the partnership
- Expedia’s divestment of eLong and what that means for its China strategy
- How TripAdvisor is focusing almost exclusively on the higher-end outbound travel market
- Broad China travel insights from leading hotels including Marriott, Peninsula Hotels, Hyatt, Hilton, and Wyndham
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Executives Interviewed
Jane Jie Sun, CEO, Ctrip
Cindy Xiaofan Wang, CFO, Ctrip
Maria Sun, COO, Ctrip
Colin McLellan, CFO, Skyscanner
Steven Pang, General Manager, China, Skyscanner
Daniel Pan, Chief of Staff, China, TripAdvisor
Jixun Foo, Managing Partner, GGV Capital
Tony Jiang, Co-Founder & Partner, Ocean Link
Lawrence Ng, Vice President, Sales & Marketing for Greater China, Marriott International
Frank Sanders, General Manager, Shanghai Marriott Hotel City Centre
Jin Qian, Area President, Greater China and Mongolia, Hilton
William Zhao, VP, Development & Strategic Alliances, Wyndham Hotel Group
Rieko Kibe, Director of Marketing, East China, Peninsula Hotels
Cecilia Lui, Regional Director of Communications, China, Peninsula Hotels
Gloria Lu, Area Director of Sales and Marketing, Korea, Hyatt
George Cao, Co-Founder & CEO, Dragon Trail Interactive
Michaela Mentasi, Marketing Director, Dragon Trail Interactive
Roy Graff, Managing Director, EMEA, Dragon Trail Interactive
Dylan Zhang, CEO, Varitrip
Thomas Griffiths, Director of Distribution, Varitrip
Nicola Farronato, CEO and Founder, B-Sm@rk
Data Partners
ForwardKeys
YipitData
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