uploads///Hotel

These Segments Will Contribute the Most to Ctrip’s Future Growth

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Sep. 2 2016, Updated 7:04 p.m. ET

Hotel reservations

At 39% in 2Q16, hotels formed a significant part of Ctrip’s revenue, much like other OTA (online travel agency) players Priceline (PCLN), Expedia (EXPE), and TripAdvisor (TRIP).

In 2Q16, Ctrip’s hotel revenue rose by 61% to $267 million. This was achieved via high volume growth and the consolidation of Qunar’s (QUNR) financials. The company’s management stopped providing volume numbers in 4Q15.

In 1Q16, Ctrip’s hotel revenue rose by 70% year-over-year (or YoY) to $250 million.

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Transportation

Transportation revenue formed 44% of CTRP’s 2Q16 revenue. In 2Q16, it rose by 90% to $302 million due to the strong volume growth in bus tickets. CTRP expects to become a hub for this market. Train and bus volumes are expected to exceed air ticket volumes, mainly due to a low base effect. However, in value terms, they continue to remain small.

Consolidating Qunar’s financials has definitely helped Ctrip, as QUNR has a strong travel portfolio. In 1Q16, its transportation revenue rose by 106% to $302 million.

Packaged tours

Packaged tours formed ~10% of CTRP’s 2Q16 revenue. In 2Q16, packaged tour revenue rose by 44% to $71 million, driven by growth in organized and self-guided tours. In 1Q16, packaged tour revenue rose by 41%.

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Corporate travel

Corporate travel formed 3% of CTRP’s 2Q16 revenue. It rose by ~22% in 2Q16 to $21 million and by ~25% in 1Q16 to $18 million.

Outlook

The transportation segment is expected to contribute the maximum share to CTRP’s revenue, driven by volume growth across all travel streams. For 3Q16, the segment’s revenue is expected to rise by 90%–95% YoY. The hotel segment’s revenue is expected to rise by 50%–55% YoY, and the packaged tour segment’s revenue is expected to rise by 35%–40% YoY.

Ctrip is targeting long-term revenue growth at a 30% CAGR (compound annual growth rate), with a gross marketing value of 1.2 trillion–1.4 trillion Chinese yuan by 2020 compared to a 350 billion gross merchandise volume in 2015.

CTRP forms 7.6% of the PowerShares Golden Dragon China ETF (PGJ).

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