Ctrip Travels Overseas With Priceline 携程网与外国公司价格线合作
Ctrip (Nasdaq: CTRP) has just announced a new tie-up with US travel services giant Priceline (Nasdaq: PCLN), marking the latest partnership with an overseas partner by Chinese firms looking to tap growing demand from increasingly wealthy Chinese travelers. These tie-ups are also being driven by intense competition that has recently emerged in the travel space, as up-and-coming younger firms with names like Qunar and TravelSky and new sites opened by big Internet names like Jingdong Mall look to steal market share from older established players like Ctrip and eLong (Nasdaq: LONG).
Let’s look at this latest deal, which will see Ctrip, China’s oldest and largest online travel site, partner with Booking.com, the hotel booking unit of US discount travel services giant Priceline. (company announcement) The tie-up will give users of Ctrip’s China site access to Booking.com’s network of more than 200,000 hotels globally, complementing Ctrip’s own extensive network of around 50,000 hotels, mostly in China.
Investors seemed to welcome the news, bidding up Ctrip shares by more than 5 percent in after-hours trading after the deal was announced. With the deal, Ctrip becomes the last of China’s major online travel operators to tie up with a major partner to assist in its global expansion. Its oldest rival eLong already counts Expedia (Nasdaq: EXPE), a leading US travel site, as its majority shareholder; and TravelSky in June announced its own new tie-up with Sabre Holdings, another major US player. (previous post) Qunar is also well positioned after receiving a $300 million investment from Baidu (Nasdaq: BIDU), China’s leading search engine and one of its most profitable Internet companies.
As a long-time China Internet watcher, this latest tie-up is of particular interest to me because it represents a reversal of Ctrip’s previous indifference to partnerships with outside firms. Some may recall that leading Japanese e-commerce firm Rakuten (Osaka: 4755) became Ctrip’s biggest shareholder when it purchased 20 percent of the company in 2004, but then sold the stake just a year later when it became clear that Ctrip wasn’t interested in forming any strategic alliances.
Much has changed in the last 7 years, and in the past 2 years especially, as many well-funded firms have entered the travel services space, breaking the longtime dominance of the the market by Ctrip and eLong. At the same time, fast-rising incomes have led to growing demand from Chinese consumers for international services. All of these factors are driving companies like Ctrip to look for any advantage they can find, especially in the international services market.
If this newest partnership goes well, I wouldn’t be surprised to see Priceline eventually take an equity stake in Ctrip, and perhaps for the pair to even form a joint venture to offer a version of Priceline’s popular discount travel services site for the mainland Chinese market.
Bottom line: Ctrip’s new tie-up with Priceline marks the latest partnership between Chinese and foreign travel services firms, and could result in an eventual equity tie-up between the pair.
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