on 01 April 2010When you think of the leading players in online travel globally, Priceline and Expedia might be near the top of your list. But, would you immediately place Ctrip, the Shanghai-based travel agency, in the upper echelons, as well?
The answer should be “yes,” given the recent market-cap gains made by China’s dominant online travel company.
Fueled by last week’s China Lodging Group IPO and Ctrip’s investment in the hotel company, Ctrip’s stock price has been rising and its market cap April 1 stood at $5.34 billion.
That’s not chump change, nor is it an April Fool’s joke.
Buffed up by the China Lodging Group IPO, recent acquistions and the overall growth of online travel in China, Ctrip’s market cap puts it in the Expedia conversation.
Expedia’s market cap on April 1 was $7.23 billion.
Of course, Priceline’s is out of this world at $11.62 billion, thanks in part to that little acquisition a few years back of Booking.com.
Forbes points out that Ctrip, based in Shanghai, may further benefit this year from the 70 million visitors expected to show up for Shanghai Expo in Ctrip’s backyard.
So who are the global leaders in online travel?
Well, you just need to do the math.
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Good article, Dennis. If you’re interested at all, I happened to research Ctrip’s valuation a bit in ‘08, and after testing about 40 financial metrics and external factors, the ONLY one correlated to CTRP’s crazy PE multiple for all of 2006 – 2007 (which was 60x – 90x at the time) was Chinese internet penetration.
Of course, CTRP was doing about 80% of its business offline. Go figure.
What I couldn’t figure out how to quantify and test was guanxi
do you think there 80% business is offline?
Actually, the question I’m thinking about is: who are the non-travel specific players that ultimately will become online travel powerhouses? Dennis, you’ve been doggedly tracking the Google story–I think that’s a clear potential player. Who else?
I’ll probably write a post about non-travel aspirants in China who will increasingly put pressure even on CTRP here in China.
i always hold stock market valuation as only a part reflection of company. These are driven by many parts including infusion of liquidity, hedging, macro story of China etc. Ctrip has been extremely effective in China really built on customer service, operational excellence and less about technology/ innovation. The innovation is how they have secured supply lines across the country and built a business that was initially built for cash. But things are changing in China with credit card adoption, growth of broadband video content for travel and meta players.
The thing about that model is that it fits China but not the world. So does the market cap reflect only the China market
Ram: Yes, market cap can be a fickle measure. I remember when Priceline’s market cap surpassed Expedia’s last year, Expedia claimed it wasn’t a measure they particularly monitored. But while that is difficult to believe, market cap isn’t the end all and be all.
But it does say something about the perception of a company and its clout.
It sounds like what you are saying is that new players will emerge in China and give Ctrip a run for its money — especially if Ctrip is slow to come up to speed on the technology front.
A huge portion of its business still is conducted offline.
That will probably need to change over the years.
Ram, well-said, and I look forward to Elliot’s thoughts on how the China market is shaping now as well.
My thought is that there has consistently been a large gap between CTRP’s actual valuation and what it merits.
The factors you mention certainly seem on target and warrant a strong valuation; however, that a single external factor was the only significantly-correlated variable for a fairly long period of time was interesting and perhaps telling of a large degree of irrationality above and beyond the strengths you mention.
Elliot’s comments seem interesting re this discussion as well.