The nine countries are Guyana in South America; Ecuador and Dominica in Central America; Mali, Cape Verde, and Ghana in Africa; Papua New Guinea in Oceania; Montenegro in Europe; and the United Arab Emirates in the Middle East.
SeekinAlpha thinks Ctrip cannot maintain it's past performance. Some good points but I think profit margins will not be squeezed as much as the article fears. "Ctrip.com fits the “optimistic” category as the stock is currently nearly 40 times the estimates for this year. The high valuation is largely justified by the expected growth as CTRP continues to capture market share and is expected to grow earnings by 28% next year. The company also recently made a stock purchase of Home Inns & Hotels Management Inc. (HMIN) to increase its stake in the company from 9.52% to 18.25%. The purchase was made at a price of $13.31 (Total value of $50 million) which has quickly produced a 24% unrealized gain. As long as HMIN continues to trade higher, that investment appears to be a wise move. However, HMIN has some of the same dangers as CTRP and could simply leverage the risks already associated with the company. During the first quarter, Ctrip realized a healthy if not expected growth in both revenue and earnings. However, it appears the company is having to work harder and harder in order to manufacture these attractive numbers. Revenues from hotel bookings account for 43% of total revenues for the company. While the category saw sales increase by 9%, the total increase in volume was 17%. This means that margins on hotel bookings were significantly lower as a weak economy resulted in low pricing power. Similarly air ticketing revenue (which also accounts for 43% of total revenues) increased by 16%. But in order to outpace the weak pricing, the company actually had to sell 40% more tickets. The obvious question (although I haven’t hear too many people asking it) is what happens when the company is only able to sell 10 to 15% more tickets and the price continues to drop. The result could quickly become lower sales which would set off alarms for institutional and retail investors alike."
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China TravelDaily Exclusive by Maggie Rauch
Beijing’s recent rapid hotel growth contributed to a huge occupancy rate drop last year--the biggest of any major global city between November 2007 and November 2008, according to STR Global. Average occupancy in China’s capital during that period declined 32 percent, dipping just below the 50 percent mark.
While Beijing’s high-end hotel market may be an example of over-development run amok, the travel industry as a whole is a different story.
“If you look at its overall development, the Chinese travel market is still growing quite strongly despite the economic downturn,” said William Bao Bean, partner at Softbank India and China Holdings, speaking recently at the China Travel Innovation Summit in Beijing.
In sessions at the Beijing conference, travel industry players discussed the market’s evolution, ways that it is changing and opportunities for investment in areas from online booking to corporate travel to rental cars. The ability for all those disparate aspects of travel to work together was identified as key to the industry’s maturation in China.
“It is a scattered industry. To integrate the pieces, it takes time,” said Wu Hai, CEO and founder of Orange Hotels Group.
“A Web site is not the travel industry. An airline is not the travel industry,” said Liu Erhai, managing director of Legend Capital. “The travel industry is one that can promote a lot of other industries.”
Liu added that with integration comes professionalism: “It is my impression that there are not a lot of professionals in the travel industry, but there are more talented people joining it now. The inflow of professionals will lead to more capital flowing into the travel industry. If we have good people and money, opportunities will appear.”
One area that’s been identified by investors is China’s online travel booking. Despite China’s high online penetration rate, only about 10 percent of travel is booked online. But it has grown, and will continue to grow, said Softbank’s Bean. “Two years ago, online was less than five percent,” he said. “I think if you look a year or two down the road, you’ll see online going to 20 percent. And I think we’ll see, in maybe three or years, half of all travel booking happening online.”
Singapore-based online travel agent Wego.com should like the sound of that. The company is set to launch three Chinese-language sites, but CEO Martin Symes acknowledges that there’s still a lot to be learned about tapping the market here. "There’s a lot of traffic [in China], but making that traffic profitable still appears to be a challenge", Symes said.
So where are the best opportunities online? “I still think there’s some room for niche travel sites,” Bean said, adding, “Generally, I think Chinese people don’t look at travel every day. If you can be front and center when they do go online to look at travel and give them a good experience in terms of planning, pricing and then sharing back into their online social community, there are opportunities there.”
A specific niche that Bean sees as under-served is corporate Web-based booking. Only 27 percent of companies in China, including multinationals, use IT systems for corporate travel booking, according to PhoCusWright’s latest report, “Corporate Travel Management and Travel Practices in China.” Less than half contract with a single travel management company.
“Working with Chinese companies, the biggest challenge is educating them on the role of working with a travel management company and how it's different from booking leisure travel,” said Gregor Lochtie, Greater China vice president for American Express Business Travel. But he is optimistic that Chinese companies will make the transition, saying, “There’s so much need out there. China is a market built for online booking of corporate travel.”
Other areas mentioned at the conference as having strong investment potential included amusement parks, car rental and destination management. Of these three, the car rental opportunity was discussed the most, although its potential was called into question. While the Chinese market lacks a strong rental car company brand, it’s debatable how much demand there would be for it here, since taxis are such a viable alternative for travelers.
“In China, taxis are not very expensive,” said Allen Zhu, a partner at GSR Ventures. “From the airport to downtown in most cities is 70 or 80 RMB. In the United States, from the airport in San Francisco to the city center costs $140-plus. In China, it’s also not very convenient to drive because of population density and traffic. In the United States, in many places it’s more convenient.” But Zhu adds that Chinese rental car companies don’t currently cooperate with hotels, implying that a company looking to grow in the Chinese market might benefit from a strong working arrangement with hoteliers.
While he’s a bit skeptical about the rental car business, Zhu is bullish about the wider market. “China's leisure travel market is coming up,” he said. “I think the travel industry can maintain the momentum of its development.”
Media Contact:
Gary Chan, Marketing Specialist, TravelDaily
Tel: 86 20 87605706 Fax: 86 20 37615190 email: gary@traveldaily.cn
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As we run headless-chicken-like into EXPO year, Shanghai has a problem - basically nobody wants to come here. According to theShanghai Tourism Administration, from January to April, the city received just over 1.94 million inbound tourists, down about 11%from the same period last year. Tour agencies have been closing, airlines cutting back on flights, the exhibition and conference industry is bruised and battered and (most of all) the big losers are the four and five star hotels who are bleeding royally onto their luxurious carpets. The administration also revealed that hotel occupancy rates in the city were only 45.9% from January to April, down around 10%from the same period last year. Yes, that's right less than 50% occupancy - think of all those stale minibar Kit-Kats!
Thanks to the glut of upmarket hotels (and there are more to come too, ridiculously) the situation is even worse for some, as the overall average occupancy includes the budget chains (Green Tree, Motel 168 etc - who are mostly doing OK). Now the average hotel price in the city is justRMB468 (US$68), down nearly 19% from last year.Luxury hotels are currently offering up to 50% discounts. Boo hoo! The gougers in turn get gouged themselves.
Of course, this is the PRC, so officially nobody in China can be to blame for this disaster. Rather, as official media is ordered to argue, it is the global economic recession and swine flu. Certainly these two factors are at play, but hotels and tourism have been in trouble for a lot longer than the economic crisis, and swine flu is a very new factor - the sour cream on the already stewed coffee if you like.
And as long as this 'it's everybody else's fault' line persists, the spiral will continue downwards. There are some things the city can't do much about. Shanghai was fashionable and trendy and headline worthy for a time, but now it is not as the media circus moves relentlessly on. There are only so many features on Shanghai that even Condé Nast Traveller can write. Shanghai has had its media moment in the sun, and now it is elsewhere: Mumbai, Budapest, Berlin ( who knows, but it isn't Shanghai anymore). And so, the conferences and business visitors have moved on too.
Then there are the other factors nobody can talk about. Clearing the old buildings - smashing the art deco and the temples, widening roads and destroying the old lanes and streets (every year there is less and less worth coming to Shanghai to see; less that makes it unique). Tourist attracting heritage has been sacrificed for shopping malls and tower blocks that appeal to few. The last remaining bits of countryside around Shanghai have largely been concreted over. Despite the views of the tourism officials who worship the "modern", few tourists are rushing to Shanghai to see a Nike store or a Starbucks outlet, or even the Barbie store.
Every city in China now has better hotels and conference facilities - it's a buyers market, and people are buying inland. To organise a supposedly 'cutting edge' event in Shanghai is just sad and behind the curve now - think inland, think tier 2/3 - China is far more accessible and knowable than even five years ago.
Shanghai will remain (maybe) a great city, but it will never be a major destination for tourists and it will decline as a destination for business travellers, conference goers and business people. The times have changed, tastes have changed, accessibility to the booming hinterland is easy - Shanghai got it wrong; destroyed its USPs, smashed its attractions and built shopping malls and McDonald's to become the Everywhereville it is now, but twice the price of anywhere else in China. Hence the collapse.
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