Ctrip’s first report card after returning to Hong Kong.
Following Tong Cheng Yilong, the domestic “OTA giant” Ctrip also released its new quarterly financial report on May 19, which was also its first report card after returning to Hong Kong.
The financial report shows that the decline in Ctrip Group’s revenue has narrowed to 13%, and the revenue volume has exceeded market expectations. At the same time, the net profit attributable to Ctrip Group’s shareholders has also achieved three quarters of profit, an increase of 80% from the previous quarter. , Turning losses into profits year-on-year, showing a recovery trend as a whole.
As the head platform of OTA, Ctrip is now a 22-year-old veteran player. It has been on the U.S. stock market for 18 years. It has been through all the obstacles on the road of online travel. It has successively bought shares or acquired Tuniu, Tongcheng Yilong, Qunar. Form your own Ctrip empire. In the month of returning to Hong Kong for listing on April 19 this year, the market value was approaching HK$200 billion.
With the accelerated recovery of the domestic tourism industry, Ctrip is also focusing on the development of the sinking market, trying to win a wave of growth in the current state of the domestic environment with a good background. Through the latest financial report this quarter, we may be able to see how big is the chance of Ctrip in sinking the market in the post-epidemic era?
Revenue decline narrowed, profit for three consecutive quarters
According to the financial report for the first quarter of 2021, Ctrip achieved revenue of 4.1 billion yuan in net revenue, which narrowed the decline by 29 percentage points to 13%. Performance fluctuations were better than market expectations.
Among them, accommodation booking, transportation ticketing, business travel management, and tourism and vacations achieved revenues of 1.6 billion, 1.5 billion, 252 million, and 169 million respectively. Accommodation booking and transportation ticketing are still the main part of Ctrip’s revenue, and the revenue contribution rate of the two businesses is 75.6%.
From the external environment, the narrowing of revenue decline is due to the recovery of the domestic tourism environment. According to the report “Analysis of Tourism Economic Operation in 2020 and Development Forecast in 2021” released by the China Tourism Academy, it expects that domestic tourism revenue in 2021 will increase by 48% year-on-year.
Internally, it lies in Ctrip’s recovery plan. Since March 5 last year, Ctrip has started the “Travel Renaissance V Plan”, and on the first anniversary, Ctrip announced the “Tourism Renaissance 2.0”. According to statistics, Ctrip has invested more than 2 billion yuan in its recovery plan.
But as a comparison, on May 17, the same Cheng Yilong, also an OTA, also released a performance report for the first quarter, and its revenue growth rate reached 60.6%. Travel in the countryIn the recovery environment, Ctrip’s revenue has not yet achieved positive growth, or it is affected by overseas business.
What is more noteworthy is that many domestic players with huge traffic have also begun to target the OTA field.
In December last year, Douyin established WeiByte (Beijing) Travel Agency Co., Ltd. Recently, Douyin’s OTA brand “Mangosteen Travel” opened a closed beta and further entered online travel; and recently, Didi tested ” On the website of “Xiaoju Travel Agency”, outsiders speculate that this is the first step for Didi to deploy online travel.
In addition to Douyin and Didi, Pinduoduo, Xiaohongshu, etc. have also joined the battle, which may also erode Ctrip’s domestic online travel market share in the future.
But in terms of net profit, Ctrip performed well. During the period, the net profit attributable to shareholders of Ctrip Group reached 1.8 billion yuan, an increase of nearly 80% month-on-month, maintaining profitability for three consecutive quarters. The net profit loss attributable to shareholders of the parent company in the same period last year was 5.353 billion yuan.
This is mainly due to the advantages of Ctrip in cost control. In the first quarter of this year, sales and marketing expenses fell 31% to 952 million yuan; general and administrative expenses fell 65%.
Overall, Ctrip’s financial report for this quarter is generally in line with market expectations. However, in the ever-hot online travel market, the participation of external opponents has obviously disrupted the existing order, and Ctrip needs to establish its own competitive advantage to win.
The R&D investment continues to increase, but the service quality problem is difficult to cure
Ctrip, as an OTA company, essentially provides travel services through App, which requires it to pay more in technology investment, and meet customer needs through continuous design and improvement. In the research and development, we can see that Ctrip’s investment is not stingy at all.
In the first quarter of this year, Ctrip’s R&D investment was 2.2 billion yuan, an increase of 31% year-on-year, and its share of revenue rose to 54%, from 30 to 40% of revenue in the past, more than half in one fell swoop.
Looking back, from 2018 to 2020, Ctrip has invested a total of 28 billion yuan in R&D. In 2020 alone, Ctrip’s research and development expenses reached 7.667 billion yuan, accounting for 42% of revenue. In contrast, in 2020, Meituan’s research and development expenses reached 10.893 billion yuan, but only 9.5% of its revenue.
Similarly, the team design also highlights Ctrip’s emphasis on R&D. As of December 31, 2020,The proportion of employees in the product development team reached 48%, second only to the proportion of employees in the customer service center. From the above data, it is obvious that Ctrip attaches great importance to R&D investment.
Thanks to the investment in research and development, as of the end of last year, Ctrip’s mobile application has achieved 75% automation support, further reducing the problem of labor costs; in the context of state-owned enterprise reform, Ctrip is also building digitalization for state-owned central enterprises Transform the platform and continuously expand its business scope.
Although it is undeniable that Ctrip has invested in R&D, some people question its authenticity. The first is its high proportion of research and development expenses, which far exceeds that of the Internet’s leading technology companies. At present, Xiaomi only has 3.78%, and Huawei has 15.9%, and iFLYTEK’s R&D investment in the first half of the year also accounts for 22.12%.
Previously, the company’s executives explained that the statistical method is different: in addition to the cost of IT technology development, it also includes the cost of communication with various suppliers.
However, no matter what the R&D expenses are, some existing problems on Ctrip’s platform are still there. According to the feedback on Black Cat’s complaint, there is a problem with automatic installment of “Take the Spend”, and the system upgrade during repayment has caused problems such as overdue inability to repay.
It can be seen that some problems cannot be solved through R&D and technology. To improve service quality, Ctrip must first improve its service concepts and methods.
At the same time, technology is a tool. Although Ctrip’s investment in research and development is obvious to all, increasing investment is also conducive to optimizing experience and improving services. However, technology is always just a shell. With beautiful packaging, Ctrip needs a solid content ecology as a foundation.
Will Ctrip make up for the gap in international business by turning the rudder and sinking the market?
From the perspective of Ctrip’s recent actions, sinking the market will be one of its main directions for its next focus and effort. The revenue can be significantly narrowed this time, mainly due to the recovery of the domestic market, but we know that Ctrip’s main business revenue is still derived from international business.
According to the research report of Guosheng Securities, Ctrip’s overall international revenue increased from 20% in 2017 to 35%-40% in 2019. This is why Ctrip’s revenue fell by 13%. But compared with the decline of foreign giants, Ctrip’s decline in decline is obviously due to the dividends in the domestic market.
But the current international tourism market environment is not happyView. According to the financial report of foreign OTA companies, in the first quarter of this year, Booking’s revenue fell by 50.13% year-on-year, and Expedia’s revenue fell by 44%.
So, focusing on the domestic market, can it really make up for the gap in Ctrip’s international business?
From the perspective of the domestic market environment, according to the data released by the Ministry of Culture and Tourism, during the May 1st holiday this year, 230 million domestic tourists traveled nationwide, a year-on-year increase of 119.7%; domestic tourism revenue was 113.23 billion yuan, a year-on-year increase of 138.1% , The recovery trend of the domestic tourism market has strengthened.
Along with the outbreak of domestic tourism, some new features have also emerged. The financial report mentioned that short-distance travel continued to grow in the first quarter; at the same time, according to Ctrip Business Travel’s “2020-2021 China Business Travel Management Market White Paper”, travel destinations have gradually penetrated into the sinking market, with new first-tier, second-tier, and third-tier cities accounting for All have improved.
For this reason, Ctrip has also increased its layout in the sinking market. In March of this year, Ctrip launched a five-year rural revitalization plan in rural tourism, including the incubation of 10 key Internet celebrity villages, the creation of 100 boutique rural tourism routes, and a 1 billion rural tourism infrastructure fund. During the period, it took multiple measures to develop red tourism resources in the cities and counties below Zunyi, Guizhou.
But at the same time, other OTA players are also constantly deepening their plans to sink the market. In March of this year, Fliggy launched the “Scent Live Broadcast, and local homestays in Minjiang Village also appeared on the live page of the Fliggy Shopping Group; in April, Fliggy and Xiaozhu B&B reached a cooperation to focus on the launch of the country house brand” 100 +Accommodation plan”.
In addition, Meituan, which has everything to do, changed its coaching business on May 11 and was handed over to three young managers. On May 15, it reached an agreement with the Zhejiang Agricultural Maker Development Association. Cooperation, including signing a contract with Meituan B&B, aiming to carry out the digitalization process of B&B business It can be seen that there will be a wave of sudden advances in this area in the future.
It is foreseeable that the sinking market, as a blue ocean, has a broad space for development. The incoming Didi and Douyin will be the posterity. In the future, they will establish their own market position. The sinking market is the best breakthrough.
For Ctrip, on the one hand, it has to face these unique opponents and face huge challenges in the sinking market; on the other hand, it must also consider whether the gap in international business can be filled in the short term. In 2019, this revenue has reached the tens of billions level, and the effect of the sinking market will not be so fast.
Reviewing the performance report for the current period, Ctrip has generally met market expectations and has achieved certain results in content creation. However, the international business is restrained by the general environment and it will take time to recover. At the same time, on the sinking track of tourism, in the face of increasingly more competitors, Ctrip needs to continue to create new value for consumers in terms of services and content in order to achieve its own breakthroughs.
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