Chinese online travel agency eLong has said that room night growth is the only thing that matters into 2015, not only for its own business but for its competitors as well.
Speaking to analysts about its Q4/FY results, chief executive Guangfu Cui said:
"Growth of room nights will be key indicator and a key focus of every player in the market...eLong has decided to increase investment to deal with this trend. Some people have described the Chinese online travel market as hyper-competitive, I agree."
During 2014, eLong recorded year-on-year room night growth which would be cause for celebration in most other markets - a 32% increase to 34.2 million room nights compared to 25.8 million in 2013. Hotel revenue was up 9%.
But this is not good enough, Cui said:
"On its own, volume growth may appear reasonable, but we fully realise the gap between us and our competitors. Their growth has been driven by increased spending, and we must increase our spending too."
He identified three areas of investment for eLong, intended to bridge the gap and put it on a level footing.
- Mobile product and technology
- Lodging partner service teams for inventory, better product and better price for customers
- Marketing to encourage downloads of our app.
It is keen to increase the take-up of its apps. Only in China would 132 million downloads be a cause for concern - he pointed out that this is about one-third of the number of downloads
Ctrip is reporting.
Interesting to note that mobile bookings made up about 55% of eLong brand room nights (excluding non-brand distribution partners) in the fourth quarter.
However, Cui was also keen to tell analysts the reason why, he thinks, eLong will survive this hyper-competitive landscape, namely by focusing on becoming a mobile-based hotel-booking site.
Of his competitors who are trying to be full-service OTAs, he said:
"In this hyper-competitive market, the more product lines you have, the more money you lose."
He added that air, which is only about 10% of eLong's business, is of little interest to the company moving forward.
"With commissions now at only 1%, it is lucky we made the decision years ago to not focus on air."
As an aside, it is worth noting that the market for 2015 is likely to be so competitive, eLong has taken the decision that it can no longer provide the markets with quarterly guidance.
To read the results in full and link to a webcast of the analysts call, click here.