When I arrived at Orrick, Herrington & Sutcliffe LLP in Menlo Park yesterday, the presentation had already started. Jane Jie Sun, the CFO of Ctrip – the Expedia equivalent in China, was giving an enthusiastic talk about the company’s success. The room was full of aspiring entrepreneurs, mostly Chinese, who are trying to catch a slice of China’s economic boom, or at minimum, to admire what others have achieved.
This is one of the events put on by HYSTA – an entrepreneurial association in Silicon Valley. Standing in the audience, I couldn’t help to be impressed. Just look at the following facts:
– China’s travel industry is growing double digits every year and there is no sign of slowing down due to the emergence of the middle class.
– Ctrip aggregated more than 80 % of a fragmented market, which was typically characterized by mom-and-pop hotels, and handles a daily volume equal to the volume one travel agent does in a year.
– The company’s revenue is growing at 50 % year to year, with a gross margin as high as 80 percent (whew, where on earth can you find a business like that?!).
Although Ctrip is a copycat of Expedia, it successfully adapted to China’s situation and provides the services that are “China unique.” For example, we already know about the call-center and free ticket delivery, but its “express service” is quite remarkable. In Beijing and Shanghai, because traffic is so bad and people cannot predict how soon they will get to the airport, Ctrip invented a service that allows people to call while riding their taxis to the airport, and issues the air ticket including boarding pass within one hour. Wall Street analysts said Ctrip is the only company in the world that is doing this.
Other things I have learned are: since 2006, GDP growth in the second-tier cities in China has surpassed that of first-tier cities. Recently, China relaxed visa restrictions for people to travel to the U.S. as tourists. It is predicted that by 2020, China will be the largest outbound travel country in the world. A minor point, it will certainly help the huge trade deficit between the United States and China.
A friend of mine told me that her sister, who works in IBM Beijing, travels every year, and each year to a new country. For the young Chinese middle class, travel to see the world is an essential component of their lives. Some consider it an important achievement in their lifetime. We will see the Chinese are coming.
I read somewhere that they did over 1 million tickets online last month…Amazing…
I had to laugh: A Macau travel site did not want to cater to China consumers because they thought that credit card issues stood in the way…
Ah, ya win some, ya lose some, aye?
Lonnie, thanks for the comment. I would think the Macau people should know better than that…. Ctrip has the free ticket delivery in 60 cities so customers can pay cash. It can be done in China because cheap labor cost.
Good article. Me thinks they have arrived. 🙂
Amazing how much things have changed for so many people in China in just a single generation.
I’m glad to hear this. Thanks for the article.
Very interesting to learn this . I have plan to visit China this year. Do you think US will also relax its visa policy for Asian under developed countries and get out of the terrorism phenomenon in coming years? because people want to visit America too and to get inspired by their progress and learn new things.
Though its very informative article to know about the global presence and reach out of Chinese people in tourism.
I wonder how Ctrip is doing with the Great Chinese Blizzard of 2008- do they have quite a few stranded clients right now?
Interesting article. I have no doubt that the Chinese will be a huge factor as the century wears on.
This is great news, Helen. With a trip to China on my “wishlist” we will have to check out some of these options. Thanks for the tips. Hope you are well.
Helen- you stress the process of China becoming a force in the world economy, and I accept the inevitability of that. My concern is that China so far declines to face the challenge of dealing with climate change or the serious environmental damage created by uncontrolled and unplanned industry that endangers the lives of many Chinese citizens.
As an american citizen, I am not claiming to be holier-than-thou regarding climate change- because it is very painful for me to admit that the USA has totally refused to exercise leadership on the subject. The Chinese so far have a smaller per capita carbon footprint than we do. But if they manage to join us in the land of conspicuous and unsustainable overconsumption, I doubt that our planet can survive it.
Money is great, I love it personally. It’s just that there is a downside to the Chinese economic miracle, both for the Chinese themselves and for the rest of us.
Chris: “My concern is that China so far declines to face the challenge of dealing with climate change or the serious environmental damage created by uncontrolled and unplanned industry that endangers the lives of many Chinese citizens.”
The Chinese government is investing $265 Billion in renewable energy by 2020. This will provide the equivalent of the 15% renewable porfolio standard that senate republicans blocked in this year’s energy bill.
I hope the U.S. understands that solutions to global warming are profitable before the Chinese understand this. Either way, the Germans and Japanese are already onto this.
Thanks, Steve, for the article. I’d like to chat with you regarding some of the issues. I will cover the energy issues and global warming in my upcoming book.
Hi Helen,
Nice article, I wish I could have attended. Jane Jie Sun’s tone has been very upbeat, at least from what I can tell from the webcasts. Then again, who wouldn’t be with their growth rate.
I’ve been very bullish on CTRP for some time now, and I can’t wait to see the returns from the upcoming Olympic Games.
If possible, would you be willing to share a few email ideas from time to time? China is one of my favorite places to make long term investments, so your insights would be helpful.
Thanks,
Matt
http://www.fingad.com/review/investor/VTCastle