Ctrip: A Chinese SuperNova
04/14/2006 12:00 am EST
"China has become the largest domestic travel market in the world, with over 1.2 billion people traveling within the country in 2005," notes Charles Norton, editor of SuperNova Stocks, a service focused on high growth opportunities. Here's his latest.
"China is now the fourth most visited country on Earth. The World Tourism Organization predicts that by the year 2020, China will become the most traveled destination in the world. Those statistics alone bode well for Ctrip.com International (CTRP NASDAQ), a leading consolidator of hotel rooms and airline tickets in China.
"According to the World Travel Trend Report, leisure travel is the only sector showing growth in the US market. People are venturing out to explore China and seeking an easy, low cost and simple way to get there. The growth in Americans traveling to China is largely in part to the Generation X age group, those born between 1965 and 1980. Plus, as baby boomers continue to retire, a trip to China could be on their wish lists as well.
"But US citizens aren't the only ones visiting China. Foreign travel to China increased 20% in 2005, compared to 2004. Since 1999, Ctrip.com has been helping people travel to China by offering hotel accommodations to over 2,900 hotels in China and 650 hotels abroad, giving customers a wide selection based on their needs.
"Ctrip.com also offers packaged tours that include air ticketing and hotel reservations covering a variety of domestic and international destinations. The firm has a healthy relationship with all major domestic airlines, especially Air China and China Southern. Ctrip generates around 70% of its online business from Ctrip.com, its Chinese website, while 30% comes from gotochina.com, its English counterpart.
"Having two Web sites reduces web traffic to one site, eliminating possible server issues, and allows customers to book travel in their preferred language. And though it's a dot-com, the company doesn't just market its product online. In fact, Ctrip.com has traditional brick and mortar stores with on-site promotion staff in approximately 37 major cities in China.
"Providing plenty of options makes it easier for customers to make their travel plans with Ctrip.com rather than the competition. Ctrip.com generates over two and one-half times as much revenue as its main competitor, eLong. The former is roughly six times larger in terms of air ticketing, and has 3% higher gross margins as a result of its larger revenue base. Overall, online travel sales are expected to increase 50% this year. To keep up this tremendous growth, the company plans to continue to market its product, further strengthening the Ctrip.com brand.
"The company primarily markets to leisure travelers in China who do not travel in groups, an underserved but fast-growing segment of the Chinese travel industry. As disposable income increases, more travel-crazy Chinese consumers will take to the friendly skies. Walking through a Chinese airport or subway, you might be greeted by a Ctrip.com associate handing out membership cards for added discounts. The card gives customers incentive to use Ctrip.com for its future travel arrangements by offering points for travel rewards.
"Along with effective marketing, Ctrip.com provides great service and support that gives customers a reason to come back again. Customer service is available around the clock, seven days a week, by representatives that are specifically trained travel specialists. This improves customer satisfaction by having informed, knowledgeable staff that understand customer needs.
"Travelers coming to China at an exponential rate brings great news for Ctrip.com. The company has the staff to meet the demand and knowledge to help get people where they want to go. With the rapid expansion of Internet access in China, over 15 million Chinese people per year are finding their way onto the web - and Ctrip.com will be there waiting for them."