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China's travel market is growing and this company stands to benefit
China's travel market is hugely lucrative and growing, and travel giant Ctrip (NASDAQ: CTRP) is poised to benefit grandly. But the company isn't resting on its laurels: It's focusing on capturing a larger segment of the mainland travel market, its CEO said. "We have two fields that we're working on. Outbound, definitely, is very important for us, so we made lots of investment in outbound business. And also, [the] domestic market is huge too," Ctrip CEO Jane Sun told CNBC's "Managing Asia."The Chinese travel market has grown as disposable incomes have risen on the mainland."People, after they buy a house, buy a car, the rest of the money, they would like to use to explore the world. Secondly, with the income level that's increasing, visa restrictions by many countries are being lifted so we're free to go [to] many countries," Sun explained.Outbound trips from China grew 18 percent in 2016, according to the annual World Travel Monitor survey from consultancy IPK International. That growth doesn't show signs of letting up in the near future: Chinese outbound travel will grow at an average of 8 percent annually between 2016 and 2021, Mastercard projected in a report published in January. Domestic travel has also picked up, with most of the more than 700 million people in the country traveling during the October Golden Week holiday visiting domestic destinations. Given those upbeat numbers, Ctrip's expansion remains focused on the Chinese travel market, its CEO said."I think our brand works very well in China and maybe we can test [it] out in greater China and also the rest of Asia. But I think we focus mainly on our customers, what they need. So as they are growing more global, we will offer more and more globalized products," said Sun.Chinese travelers represent the majority of Ctrip's customers, she explained.The company currently has around a 50 percent market share in the sale of business and first class flights, but its share of the overall market is "way below" 30 percent, Sun said. "There is still great room for us to expand," she added.To do that, Ctrip has been spending big on technology in an effort to improve efficiency at the company."We spend lots of effort investing in ABC. 'A' stands for artificial intelligence, 'B' is big data, 'C' is cloud computing," Sun said.With data on its customers' buying power, hobbies and travel preferences, Ctrip is able to offer tailor-made offerings to individual travelers rather than providing a single "standard package," she said.A student is likely to see a vastly different selection of travel offerings compared to a high-end customer, who might be offered Ctrip's $200,000 around-the-world trip lasting 88 days. While the company was initially doubtful over whether there would be a market for that product, it took just 17 seconds for Ctrip to sell the package, Sun said. The trip was bought by 22 people.In 2016, Ctrip posted its first ever annual loss since listing on the Nasdaq, but Sun said recent quarters have seen improved margins.In its quarterly earnings report last week, the company said its third-quarter operating margin came in at 17 percent, compared to the 10 percent seen in the second quarter and the 7 percent seen the quarter before that. China's travel market is hugely lucrative and growing, and travel giant Ctrip (NASDAQ: CTRP) is poised to benefit grandly. But the company isn't resting on its laurels: It's focusing on capturing a larger segment of the mainland travel market, its CEO said. "We have two fields that we're working on. Outbound, definitely, is very important for us, so we made lots of investment in outbound business. And also, [the] domestic market is huge too," Ctrip CEO Jane Sun told CNBC's "Managing Asia." The Chinese travel market has grown as disposable incomes have risen on the mainland. "People, after they buy a house, buy a car, the rest of the money, they would like to use to explore the world. Secondly, with the income level that's increasing, visa restrictions by many countries are being lifted so we're free to go [to] many countries," Sun explained. Outbound trips from China grew 18 percent in 2016, according to the annual World Travel Monitor survey from consultancy IPK International. That growth doesn't show signs of letting up in the near future: Chinese outbound travel will grow at an average of 8 percent annually between 2016 and 2021, Mastercard projected in a report published in January. Domestic travel has also picked up, with most of the more than 700 million people in the country traveling during the October Golden Week holiday visiting domestic destinations. Given those upbeat numbers, Ctrip's expansion remains focused on the Chinese travel market, its CEO said. "I think our brand works very well in China and maybe we can test [it] out in greater China and also the rest of Asia. But I think we focus mainly on our customers, what they need. So as they are growing more global, we will offer more and more globalized products," said Sun. Chinese travelers represent the majority of Ctrip's customers, she explained. The company currently has around a 50 percent market share in the sale of business and first class flights, but its share of the overall market is "way below" 30 percent, Sun said. "There is still great room for us to expand," she added. To do that, Ctrip has been spending big on technology in an effort to improve efficiency at the company. "We spend lots of effort investing in ABC. 'A' stands for artificial intelligence, 'B' is big data, 'C' is cloud computing," Sun said. With data on its customers' buying power, hobbies and travel preferences, Ctrip is able to offer tailor-made offerings to individual travelers rather than providing a single "standard package," she said. A student is likely to see a vastly different selection of travel offerings compared to a high-end customer, who might be offered Ctrip's $200,000 around-the-world trip lasting 88 days. While the company was initially doubtful over whether there would be a market for that product, it took just 17 seconds for Ctrip to sell the package, Sun said. The trip was bought by 22 people. In 2016, Ctrip posted its first ever annual loss since listing on the Nasdaq, but Sun said recent quarters have seen improved margins. In its quarterly earnings report last week, the company said its third-quarter operating margin came in at 17 percent, compared to the 10 percent seen in the second quarter and the 7 percent seen the quarter before that.
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