Ctrip.com International Ltd. (ADR) Is Winning the Mobile Travel Wars in China
Chinese citizens hoping to see the Great Wall are increasingly using Ctrip's mobile app to book their travel.
For a long time, Ctrip.com had a first-mover advantage in online travel booking in China that allowed it to earn outsized margins. That era came to an end a few years back when eLong and Qunar -- respectively backed by Expediaand Chinese search giant Baidu --came on the scene.
What ensued was a classicrace to the bottom, with each company trying to outsell the other with lower prices and tiny margins. That drove down both Ctrip's profitability and its stock.
Last quarter, however, the company highlighted results that led many to believe it would eventually win this e-travel war. Those sentiments were only reinforced yesterday when the company released quarterly results that came in well ahead of expectations, and forecast more of the same for the current quarter.
The important metricsOn the top line, revenue grew by an impressive 46%. Ctrip was also profitable on a non-generally accepted accounting principles basis, which is crucial for a company fighting to show it can be profitable in this highly competitive environment.
The company's three main segments all reported healthy growth in booking volume and revenue.
Source: Ctrip.com
All of these results came in ahead of expectations, which says a lot because management's heightened expectations three months ago led to the stock's 25% jump in one day.
Airfare volume increased 64%. When combined with a small but quickly growing base of train and bus ticketing, that doubled overall transportation bookings.
It's all about that appWhile having the first-mover advantage has been crucial to Crtip's success, management knew it couldn't rest if it wanted to beat eLong and Qunar. That's why the company poured its resources into developing an app that could become the "one-stop shop" for all of a Chinese citizen's travel needs.
Customers can book hotels and airline, train, and bus tickets with the app, which can even help process documents needed for visa and passport applications. The company's app had a total of 800 million downloads at the end of last quarter, up from 600 million at the end of 2014 and 550% from the same time last year. Investors will need to watch the number of "active" mobile app users, though, as that's at a much more modest 50 million.
That app will be the linchpin in Ctrip's strategy, and it seems to be working. Last quarter, mobile bookings accounted for 70% of all transactions.
The future = more of the sameLooking ahead, management said it believes it can sustain the recent trend of explosive revenue growth. For the second quarter, revenue is expected to grow between 45% and 50%. While airfare margins are shrinking, Ctrip believes volume increases will more than make up for the difference.
Given the company's reputation for meeting or exceeding its own forecasts -- and the fact that we're already halfway through the second quarter -- there's no reason to think Ctrip won't deliver on this promise.
The article Ctrip.com International Ltd. (ADR) Is Winning the Mobile Travel Wars in China originally appeared on Fool.com.
Brian Stoffel owns shares of Baidu and Ctrip.com International. The Motley Fool recommends Baidu and Ctrip.com International. The Motley Fool owns shares of Baidu. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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