Report
Chelsey Tam
EUR 850.00 For Business Accounts Only

Morningstar | Ctrip Has a Strong Network Effect with 53% Share in the Online Travel Booking Market in China

Ctrip’s business strategy is to expand internationally, penetrate into low-tier cities in China, and enhance product offerings. Skyscanner, a global travel search site acquired in 2016, Trip.com which is in 22 currencies, and TrainPal, which was launched in September 2018, are Ctrip’s global brands. As of second-quarter 2018, Ctrip had over 7,000 franchise offline stores to penetrate into the lower-tier cities. The Ctrip app is a one-stop shop for travelers providing 60 travel-related products and services including accommodation, airline, ferry, and bus tickets, package tours, and high-speed railway packages. We expect to see subdued margin in the near term but expect non-GAAP operating margin to expand in the long run. After a string of scandals, Ctrip decided to step up its investment in customer services, such as easier cancelation policies. To meet demand from the international businesses, Ctrip invested in new international call centers in 2018. These put pressure on margins in the near term. The 2018 fourth-quarter non-GAAP operating margin guidance of only 0% to 1% was particularly a shock for investors. Ctrip continues to reap the benefits of the rising middle class and outbound travel demand in China. Only 10% of Chinese population travel outbound currently. We think its faster-growing higher-margin international business will raise the overall margin. International products have higher margins as the price is on average 2 times higher than domestic businesses, and take rate for international air tickets is also higher than domestic by 2 times. As Ctrip gradually gains scale in overseas hotels, the take rate is expected to increase even further. The company is also driving operational efficiency with investment in technology such as AI-assisted chat box to reduce staff costs. Ctrip will gradually improve operational efficiency in the service centers, especially after Trip.com becomes scalable in the newly established call center. In the long run, we think investment in customer service will increase customer satisfaction and loyalty.
Underlying
Trip.com Group Ltd. Sponsored ADR

Provider
Morningstar
Morningstar

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.

Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.

We have operations in 27 countries.

Analysts
Chelsey Tam

Other Reports on these Companies
Other Reports from Morningstar

ResearchPool Subscriptions

Get the most out of your insights

Get in touch