Ctrip to spend US$500m in China's online travel price war
The injection of US$ 500 million for business promotion by travel agency Ctrip.com has taken the fierce battle between China's online travel service operators to a higher level.
Ctrip, which specializes in discount hotel reservations, cheap airline tickets and package tours, announced on July 5 a massive promotion plan with campaign funds equivalent to 3.2 billion yuan that will last for a period of one full year starting from this month. This is the biggest ever sales campaign in the company's 12-year history and the spending budget is 10 times the annual promotion fund in past years.
The move has been seen by industry observers as a powerful response to the price slashes by old online competitors like eLong, Qunar and MangoCity. Ctrip has found it hard to continue to sit tight as newcomers like 360buy, Taobao, and Hotelvp have been slashing hotel room rates by as much as 80% in certain group-buying packages.
Some airlines and hotel chains have also established their own online marketing operations to join the fray. Yet Ctrip, traded on the Nasdaq, seems to be highly confident of its competitive edge, according to Shanghai's Oriental Morning Post.
Tang Lan, vice president in charge of marketing at Ctrip, predicted that there will be outcomes resulting from the latest round of the ongoing price war in six months or one year at the latest. He believes that there will be "super market order" after devastating market chaos and the bar will be raised much higher for newcomers pl! anning t o enter the online travel business.
But Tang also acknowledged that reckless investment by small firms aiming to join the sector and the group procurements offered by e-commerce rivals have had some impact on his company's business in the past two years.
For the month of December 2011, eLong announced its group booking business soared to more than 100,000 hotel rooms per night, four times the bookings of Ctrip's group purchasing sector.
Ctrip subsequently offered discounts or rebates alternatively until June this year in order to retain market share. The company also launched online group purchasing with deep discounts to take on eLong at its own game. The head-on clash prompted senior executives from the two companies to openly trade barbs in media and microblogs.
MangoCity recently joined the battle with a promotion budget of US$ 80 million to offer cash subsidies to customers.
Competition in the travel service market escalated after China's internet giants expanded into the sector last year. Tencent, China's largest internet company by revenue, injected US$ 84.4 million into eLong to become its second biggest shareholder in May last year. It soon moved also into 17u.com with US$ 10 million and plans to help the company get listed on the stock market.
Search engine giant Baidu invested in Qunar and immediately lifted traffic at the website. In addition, e-commerce operators like 360buy, Suning and Taobao also extended their business to online travel services.
Ctrip dismissed the notion that the company is waging the online battle alone with no support from internet giants. Tang said the company has long cooperated with various websites for business cooperation and it will adopt an open-door policy to increase its online partners.
The number of operators working at the company's call center in Suqian in the eastern province of Jiangsu has increased to more than 20,000. Sources revealed that tickets booked via its online service have now account! ed for c lose to 55% of Ctrip's total ticket sales.
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