For those of us watching from afar, China’s economic narrative can often seem like a complex tapestry woven with threads of rapid growth and occasional headwinds. But amidst the broader economic discussions, certain sectors and companies are not just weathering the storms, they are positively thriving. One such standout is Ctrip, known internationally as Trip.com, China’s undisputed king of online travel. For Americans unfamiliar with the Chinese market, imagine Expedia or Booking.com, but deeply entrenched in the unique dynamics of the world’s second-largest economy.
Ctrip’s recent performance has been nothing short of spectacular, painting a vibrant picture of a resurgent Chinese tourism industry post-pandemic. Think back to the global lockdowns, the travel restrictions – for the tourism sector, it felt like an unending winter. But as the world, and especially China, began to emerge from the shadow of COVID-19, a phenomenon dubbed “revenge travel” took hold. And Ctrip, with its dominant position and decades of industry experience, was perfectly poised to capitalize.
In 2023, Ctrip reported a staggering 44.5 billion RMB (approximately $6.2 billion USD) in operating revenue, doubling its performance from the previous year. Even more impressively, its net profit soared to 9.9 billion RMB (around $1.4 billion USD). To put that into perspective, this single year’s profit nearly matched the entire sum of its profits from the preceding decade! And the momentum hasn’t slowed down. Each quarterly report in 2024 has continued to break records, leaving analysts and investors alike in awe.
While some might attribute this success solely to the “revenge travel” phenomenon, that would be a simplistic view. Many travel companies experienced a post-pandemic bounce, but few have reached the heights Ctrip has. The truth is, Ctrip’s remarkable resurgence is built on a foundation of resilience and strategic foresight, honed over more than two decades navigating the turbulent waters of the Chinese market.
From Startup to Industry Goliath: A Brief History of Ctrip
Ctrip’s story began in 1999, a time when the internet in China was still in its relative infancy. Alongside other nascent online travel agencies like eLong (which later merged with Tongcheng), Ctrip recognized the untapped potential of the burgeoning online travel market in China. It was a blue ocean, ripe for the taking.
Imagine a young, energetic startup entering a race where the track is wide open and competitors are few. That’s the early days of Ctrip. From 2000 to 2011, Ctrip’s revenue climbed steadily, unfazed even by major global disruptions like the 2003 SARS outbreak and the 2008 global financial crisis. Profitability followed suit, with Ctrip achieving its first profitable year in 2002 with a net profit of 14 million RMB. This was just the beginning.
Even amidst the bursting of the dot-com bubble in the early 2000s, Ctrip not only survived but thrived, securing crucial early funding, including a significant $4.5 million investment led by SoftBank. By the end of 2003, Ctrip achieved another milestone, becoming the first Chinese online travel agency to list on the NASDAQ, even beating tech giants like Baidu to the punch. On its debut, Ctrip’s stock price surged by a remarkable 88.56%, closing at $33.94 USD, instantly becoming the darling of Wall Street and a symbol of China’s emerging tech prowess.
This early success, however, inevitably attracted competition. eLong followed suit and listed on the NASDAQ in 2004. Tongcheng was founded the same year, and Qunar, another major player, emerged in 2005. The once-blue ocean of China’s online travel market gradually turned red, signaling the beginning of intense competition.
Navigating the Red Sea: Price Wars and Dominance
The period between 2012 and 2014 marked a turning point. Fueled by a wave of entrepreneurship and readily available venture capital, the Chinese online travel market became fiercely competitive. The keyword became “卷 (juǎn),” which roughly translates to “involution” or “intense competition,” often involving price wars and aggressive tactics.
Just like in many other sectors in China, the increasing number of players in the OTA market led to inevitable price wars. Established players like eLong, Tongcheng, and Qunar were joined by new entrants, including tech giants like Alibaba with its Fliggy (formerly Alitrip) platform and Meituan, known for its food delivery and local services, which expanded into travel. Thousands of smaller websites also joined the fray. Industry data suggests that the number of travel websites in China exceeded 50,000 at the time.
Ctrip, facing this onslaught, responded with a massive $500 million (approximately 3.2 billion RMB) low-price promotion campaign that lasted for a year. Competitors quickly followed suit: Tongcheng announced a 90 million RMB cashback program, and Mangguo.com pledged 80 million RMB. The price war was in full swing.
The impact of this price war was immediately visible in financial reports. Ctrip’s net profit, which peaked in 2011 at 1.076 billion RMB, began to suffer. The net profit margin plummeted from over 30% to around 17%. By 2014, net profit had dwindled to a mere 243 million RMB, with the net profit margin hitting a record low of 3.3%.
However, while Ctrip’s profitability took a hit, its competitors fared even worse. In 2014, Qunar reported a staggering loss of 1.847 billion RMB, eLong lost 269 million RMB, and Tuniu, another OTA, lost 449 million RMB. Remarkably, amidst this sea of red ink, Ctrip emerged as the only consistently profitable OTA in the market.
Ctrip’s resilience and deep pockets eventually allowed it to outlast its rivals. In 2015, Ctrip made a strategic move, merging with Qunar. The following year, Ctrip absorbed Qunar’s accumulated losses, resulting in a rare 1.4 billion RMB loss for Ctrip in 2016. Despite this temporary setback, Ctrip emerged from the price wars as the undisputed leader, solidifying its position at the top of the Chinese online travel market.
Weathering the Pandemic Storm and the “Revenge Travel” Boom
Just when Ctrip had navigated the price wars and established market dominance, a new and unprecedented challenge emerged: the COVID-19 pandemic. The years 2020-2022 were devastating for the global tourism industry, and Ctrip, deeply rooted in offline travel activities, was no exception.
Even the industry giant Ctrip had to bow its head, facing another period of significant performance decline. From 2020 to 2022, Ctrip’s annual revenue remained below 20 billion RMB, significantly lower than pre-pandemic levels. Net profits plunged, and for two consecutive years, Ctrip reported losses.
However, just as spring follows winter, the tourism industry began to stir again as China gradually emerged from its stringent pandemic control measures. And in 2023, Ctrip roared back to life, delivering an astounding rebound.
In 2023, Ctrip’s operating revenue surged to 44.5 billion RMB, a 122% year-on-year increase. Net profit reached a phenomenal 9.9 billion RMB, a 607% increase compared to the previous year. As mentioned earlier, this figure nearly equaled its combined profits from the entire preceding decade.
This remarkable turnaround continued into 2024. In the first three quarters of the year, Ctrip’s revenue surpassed the same period in 2023, indicating that the “revenge travel” boom was not just a temporary surge but a sustained trend.
It’s important to note that Ctrip’s revenue has a seasonal pattern, heavily influenced by China’s holiday calendar. With domestic revenue accounting for approximately 80% of its total, peak seasons align with major Chinese holidays. The first quarter, encompassing the Spring Festival (Chinese New Year), and the second quarter, including Labor Day (May 1st), are typically strong. The third quarter, covering the summer vacation and pre-National Day (October 1st) booking peak, is usually the highest-earning quarter of the year. The fourth quarter benefits from the National Day holiday and bookings for the New Year holiday.
Stimulated further by local government initiatives like free admission to scenic spots across various regions, Ctrip’s full-year performance in 2024 is projected to be exceptionally strong.
Decoding Ctrip’s Profitability: More Than Just “Revenge Travel”
While the post-pandemic travel surge undoubtedly played a role in Ctrip’s financial resurgence, it doesn’t fully explain the magnitude of its success. Other OTAs and travel agencies also benefited from the rebound, but Ctrip’s performance stands out.
According to data from the Ministry of Culture and Tourism, in 2023, domestic tourist trips recovered to 90% of 2019 levels, and tourism revenue recovered to 91%. Tongcheng Travel, another major OTA, reported a 51.3% year-on-year revenue increase in the third quarter of 2024 and a net profit of 910 million RMB. Listed travel agencies like China CYTS Tours Holding Co., Ltd. also saw significant revenue growth.
However, when it comes to both revenue scale and profitability, Ctrip maintains a clear lead. Interestingly, data from the hotel and airline industries suggests that profitability in these sectors is becoming increasingly challenging. According to a Guojin Securities survey, the RevPAR (Revenue Per Available Room) and ADR (Average Daily Rate) in the hotel industry declined year-on-year in the first two quarters of 2024. Data from the Ministry of Culture and Tourism also showed a decrease in the average room rate and occupancy rate of five-star hotels in the second quarter of 2024.
So, how is Ctrip managing to generate such impressive profits amidst these industry headwinds? The answer lies in its deeply entrenched supply chain relationships, particularly with high-end hotels, and the loyalty of its premium customer base.
For consumers, OTAs like Ctrip offer convenience and ease of access to travel bookings. Ctrip’s early mergers and acquisitions gave it a near-monopolistic advantage in the Chinese market. By acquiring or investing in competitors like eLong, Qunar, and Tongcheng, Ctrip consolidated its market share early on.
After platform consolidation, Ctrip shifted its focus to securing partnerships with upstream suppliers, especially high-star hotels. This strategy targeted the lucrative business travel segment, which values convenience and quality over price sensitivity. Since 2012, Ctrip has established partnerships with numerous high-end hotel groups, both domestic and international, including Marriott, Jinjiang, BTG Homeinns, HNA, and Accor. By the third quarter of 2020, Ctrip reportedly controlled 80% of the online GMV (Gross Merchandise Volume) in the high-star hotel segment in China, exceeding its competitors in coverage.
Data from Huachuang Securities indicates that Ctrip’s average hotel room rate is around 350 RMB, significantly higher than Tongcheng (200 RMB) and Meituan (150-200 RMB). This reflects Ctrip’s focus on a higher-spending customer base in higher-tier cities, while Meituan and Tongcheng cater more to the budget-conscious market in lower-tier cities.
Ctrip further solidified its customer loyalty by building a robust membership system. By partnering with its upstream suppliers, Ctrip offered exclusive benefits and services to its members, enhancing customer stickiness. These perks included late check-out, airport lounge access, and expedited boarding services. Ctrip’s data reveals that higher-tier members tend to be older and less price-sensitive, indicating that Ctrip has successfully captured the high-spending, mid-to-high-end travel segment.
Beyond accommodation and transportation, Ctrip expanded its service offerings to include international shopping, discounts, financial services, visa assistance, and global emergency support. This comprehensive suite of services sets it apart from competitors like Qunar, Meituan, and Fliggy.
This creates a virtuous cycle: consumers become accustomed to the convenience and exclusive benefits of using Ctrip, making them less likely to switch platforms. As Ctrip’s CEO, James Liang, noted in an interview, the service premium offered by OTAs is particularly valuable to mid-to-high-end customers. This established customer base, coupled with the post-pandemic travel surge, propelled Ctrip’s financial performance to new heights.
Challenges on the Horizon: Supplier Relations and Emerging Competition
Despite the rosy financial picture, not all is smooth sailing for Ctrip. Its two fastest-growing business segments, accommodation and tourism, are facing increasing pressure from suppliers. The narrative of “Ctrip’s dominance” has become a recurring theme since 2022.
Hotels and travel product suppliers initially partnered with OTAs like Ctrip to tap into the burgeoning online traffic and expand their reach. However, over time, a sentiment has grown that “suppliers are working for OTAs,” highlighting a growing tension over traffic distribution and profit margins.
For example, in 2022, Ctrip issued a notice to travel product suppliers, announcing the closure of its “domestic retail tour” model for new partnerships and renewals. This move, dubbed “zero transition to agency,” effectively shifted the relationship from a retail model, where suppliers sold directly to consumers through Ctrip’s platform for a commission, to an agency model. In the agency model, suppliers sell their products to Ctrip, who then resells them at a markup, earning both a price difference and a commission.
While the commission rates may not have necessarily increased under the agency model, some suppliers reported reduced profits as Ctrip gained a larger share of the revenue. Suppliers also expressed concerns about losing control over customer service and data under the agency model, as customer interactions shifted to Ctrip’s staff. Ctrip justified the change as necessary to ensure consistent customer experience and protect consumer rights across all transactions on its platform. This shift occurred during a challenging period for the tourism industry, as both OTAs and suppliers sought to survive in a contracting market.
Hotels are also engaging in a similar power struggle with OTAs. According to a source from a chain of 民宿 (homestay-style hotels), Ctrip charges hotels commission rates of 10%, 12%, and 15%, with higher rates associated with “Gold Medal” and “Special Medal” listings, which receive greater visibility and preferential rankings on the platform. While these are unconfirmed market rumors, commission rates for high-star hotels might be even higher.
However, the actual cost for hotels goes beyond just commission rates. Factoring in incentives for positive customer reviews and participation in platform marketing campaigns, the total cost can reach approximately 30%. While high commission rates are not unique to Ctrip (other platforms like Douyin, Meituan, and Fliggy also charge similar rates), Ctrip’s dominance in the high-end hotel segment and its higher average customer spending make it a crucial channel for hotels. As one hotelier noted, “90% of my orders come from Ctrip, and Ctrip customers are high-quality.”
Despite this, the hotel industry is facing its own challenges, with declining room rates and occupancy rates. There’s a growing debate about whether high OTA commissions are squeezing hotel profits. In an OTA-dominated sales model, hotels are heavily reliant on platforms like Ctrip for traffic. To gain visibility and ranking, they not only pay commissions but also often have to offer membership benefits to platform customers, potentially diluting their own loyalty programs.
Hotels are fighting back by strengthening their own membership programs and increasing chain penetration to reduce reliance on OTAs. The chain hotel rate in China has been steadily increasing. However, a more fundamental issue is the current oversupply in the hotel market, leading to lower room rates and occupancy. Both hotels and OTAs like Ctrip are seeking a new equilibrium in this evolving landscape.
Emerging Competitors and Shifting Travel Trends
Changes in travel preferences and emerging competitors are also subtly reshaping the OTA landscape. The rise of local tourism trends, exemplified by destinations like Harbin, Zibo, and Tianshui, indicates a growing desire for authentic, local experiences rather than standardized itineraries. Content platforms like Xiaohongshu (Little Red Book) and Douyin are making travel information more transparent, empowering younger, tech-savvy travelers to plan their own “free and independent travel” (FIT) experiences.
This shift presents a challenge to Ctrip, whose traditional strengths lie in packaged tours and established destinations. Competitors like Meituan and Douyin, with their massive user bases and local lifestyle ecosystems, are well-positioned to capitalize on these new trends.
Meituan, leveraging its high-frequency food delivery and local service traffic, has expanded into hotel and accommodation bookings. A survey indicated that approximately 41.6% of respondents chose Meituan for booking local experiences, surpassing other OTAs. The advantage of these platforms lies in their content and traffic. Trends like “special forces-style travel” and camping are driven by content and social media buzz, areas where traditional OTAs like Ctrip have historically lagged.
To maintain its competitive edge, Ctrip has been focusing on strengthening its self-operated services. This strategy aims to standardize service delivery, enhance customer experience, and foster loyalty. In 2023, Ctrip launched its self-operated service SOP (Standard Operating Procedure), industry standards, and digital service systems. This involves partnering with merchants to provide services under the “Ctrip” brand, with Ctrip managing service quality and data through digital tools.
This move towards self-operation can be seen as a response to the “platform model” adopted by competitors like Fliggy, which acts more as a marketplace for various travel service providers. While Fliggy offers a wide range of options, the decentralized nature of the platform can lead to inconsistencies in service quality and customer experience. Ctrip’s self-operated model aims to address this by ensuring a more standardized and controlled service experience.
However, Ctrip’s dominance in the high-end segment might become a disadvantage in the increasingly popular lower-tier city travel market. Reports indicate that hotel bookings in third-tier and lower cities are experiencing rapid growth. Ctrip is responding by increasing partnerships with lower-tier cities and expanding into rural tourism, but it faces competition from platforms like Meituan and Douyin, which have stronger penetration in these markets.
International Expansion: A New Growth Engine?
Looking ahead, international expansion may be Ctrip’s next major growth driver. Ctrip’s outbound travel business has shown strong recovery, with bookings exceeding pre-pandemic levels. Its international OTA platform, Trip.com, has also seen significant growth.
Ctrip has been actively expanding its global footprint through its Singapore-based Trip.com Group, acquisitions like Skyscanner and investments in MakeMyTrip. With the easing of visa restrictions and the growing global travel market, outbound and inbound tourism present significant opportunities for Ctrip.
However, Ctrip’s international expansion faces challenges. While Trip.com’s revenue is growing, its growth rate has slowed down compared to earlier periods. Ctrip also faces intense competition from established international players like Booking.com and Expedia. Building brand awareness and market share in new international markets will require significant investment and strategic execution.
Conclusion: Riding the Wave, Navigating the Currents
Ctrip’s post-pandemic resurgence is a testament to its resilience, strategic adaptability, and deep understanding of the Chinese travel market. It has capitalized on the “revenge travel” boom, leveraging its established market position, strong supplier relationships, and loyal customer base to achieve unprecedented financial success.
However, as Ctrip navigates this new era of growth, it also faces a complex set of challenges. Managing supplier relations, addressing customer concerns about “price gouging” and service quality, adapting to evolving travel trends, and competing in a dynamic and increasingly competitive market will be crucial for its long-term success. Its international expansion holds promise, but also presents significant hurdles.
Ultimately, Ctrip’s journey reflects the dynamic and ever-evolving nature of the Chinese market. Its ability to adapt, innovate, and address these challenges will determine whether it can sustain its current momentum and solidify its position as a global travel industry leader. For now, Ctrip is riding high on the post-pandemic wave, but it must remain vigilant and proactive to navigate the currents of change and ensure a smooth and prosperous voyage ahead.
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