Comments on: Online travel powerhouses — Priceline, Expedia … and Ctrip?

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Mon, 05 Apr 2010 20:21:13 +0000

[...] Online travel powerhouses — Priceline, Expedia … and Ctrip? | Tnooz [...]

By: Jonathan Alford

Jonathan Alford — Fri, 02 Apr 2010 16:15:06 +0000

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.

By: Dennis Schaal

Dennis Schaal — Fri, 02 Apr 2010 16:03:38 +0000

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.

By: ram

ram — Fri, 02 Apr 2010 09:19:09 +0000

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

By: saurabh

saurabh — Fri, 02 Apr 2010 05:38:17 +0000

do you think there 80% business is offline?

By: Elliott Ng

Elliott Ng — Fri, 02 Apr 2010 01:33:28 +0000

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.

By: Jonathan Alford

Jonathan Alford — Thu, 01 Apr 2010 15:42:52 +0000

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