Chinese OTA Ctrip has reported a strong start to the year, with air, train and bus ticket volumes seeing bigger percentage increases than hotels.
Air, train and bus comprise its transport reporting line, which saw volumes up by 104% compared with the same period last year. Air grew by 64% and reached a record high in terms of tickets sold. Train volumes were ahead by triple-digits, while buses were ahead 200% compared with the last three months of 2014.
The 104% increase in volumes generated revenues of RMB948 million (US$153 million), 46% up year-on-year.
Management said on the earnings call that air will continue to grow. China's airlines have been reducing commissions and the average is now 1%. Ctrip said that "volume increases will offset these drops in commission" and that customers will book their air travel with Ctrip because of "the efficiency of our booking process and the 24/7 support we offer."
Meanwhile, its accommodation unit generated almost the same amount of revenue - RMB952 million (US$154 million) which was a 45% increase year-on-year from a volume hike of 60%. It added that accommodation reservation revenues increased by 13% quarter-on-quarter.
Ctrip did not talk in terms of "room night bookings" specifically, so comparisons with eLong's performance in Q1 need to factor this in. However, eLong, which sees itself primarily as a hotel business, reported that its room night growth this quarter was 34% up year-on-year with revenues down by 7%.
eLong admitted that "in order to remain price competitive in the market, we increased spending on coupons and price discount." Ctrip said that it would" continue to match its competitors" in terms of discounting, but that it was taking "a scientific approach" to loss-leading promotion."
Sequentially, eLong saw a drop in room nights between Q4 2014 and Q1 2015, which indicates that Ctrip's 13% revenue lift is a positive sign that its scientific approach is working.
As well as a scientific approach, management often referred to discipline as a core Ctrip attribute, such as being disciplined when it comes to valuations of investments. It said the discipline results in a focus on the synergies between Ctrip and its investee companies.
Elsewhere, it also talked about the disciplined approach to long-term ROI which is at the heart of its "Baby Tigers" program. These are new business units operating within the group which are tasked with growing the top line revenues while keeping an eye on long-term ROI.
Again, this discipline seems to be working as half of the baby tiger initiatives will be in the black by the end of the year with the other half in profit at the end of 2016.
Car hire was highlighted as one of the most successful new business lines.
Ctrip's mobile performance is also impressive - more than 70% of transactions in the quarter came from mobile devices, with 75% of hotels and60% of air tickets bought by mobile. Its apps now have a cumulative download number of 800 million, although the number of active users comes in a 50 million.
Finally, Ctrip is convinced that there is still room to grow in China, with second and third tier cities very much in its sights. Ctrip works on the principle that once GDP per capita reaches a certain level then individuals become interested in travel, and it believes that there are millions of people in hundred of cities across China about to reach the "sweet spot".
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