China’s leading OTAs face challenges on all sides

　　As Chinas online travel market grows, competition among trip booking sites has heated up, with home-grown providers fighting hard to keep and increase market share. The competition isnt a simple dual between two market leadersinternational players are looking for ways to capitalize on the upward trends in online travel here, and at least one Chinese online retail blue-chip recently entered the travel business. Additionally, Ctrip and eLong always face the possibility of losing business to some of their most important partnersairlines and hotel companies, which enjoy better profit margins when travelers book directly on their own sites.

　　The undisputed local leader among online travel agents (OTAs) is Ctrip, with 53.6% of market share,according to Shanghaibased iResearch. eLong, bought in 2004 by Expedia, is far behind with 9% of market share, and no other company commands double digits. Though eLong cant be said to be threatening Ctrips dominance right now, it has closed some of the gapin 2008, Ctrip had 57% of the market, to eLongs 13%. That market share is a portion of a steadily growing pie. In the first half of 2010, 1.097 billion domestic trips were taken in China, marking growth of 8.6% compared to the previous year. While Chinese consumers have been slow to adopt Internet booking, 30% of air tickets will be sold online by 2013, iResearch projects.

　　At the recent China Travel Distribution Summit, hosted by China TravelDaily in Beijing, the CEOs of both Ctrip and eLong discussed their companies priorities and approaches to the competitive market situation.

　　Ctrip

　　Ctrip, which launched in 1999 and went public in 2006, has enjoyed strong growth the past few years. Its share price has more than quadrupled since early 2009. CEO Min Fan attributes the success to service, which Ctrip has made a marketing mantra: Ten years into our existence, our core competitive differentiator remains our commitment to service, Fan said at the Beijing summit. He added that Ctrip has tailored its service to address a very specific set of possible customer complaints. Each time a customer makes a booking, there are 20 activities, which we can turn into 61 assessment criteria, with the potential for 200 different errors, Fan explains. He says that Ctrip works toward mastering those 61 assessment criteria to minimize errors, and this process is a key component of the companys service.

　　Given its current dominance of the Chinese market and its four years of more than 50% annual growth, its no surprise that Ctrip has interest in being a global company. Our growth potential is not limited to China, Fan says. Asked what kinds of acquisitions his company would consider, Fan lists three criteria: It would have to expand our product line Give us access to new areas geographically And the price must be good.

　　In global markets, Fan believes that Chinese companies are at a bit of a disadvantage. China is second in GDP, but we are lagging behind in other areas, he says. Our generation of enterprise leaders has limited international experience. We are limited to our region by culture and language. He says that investors can expect to see Ctrip expand into other parts of Asia first, followed later bypushes into Europe and the United States. In fact, Ctrip has already begun making moves outside of the mainland, acquiring EZTravel, Taiwans largest online travel agency, and Hong Kongbased Wing On Travel, in 2009.12