Expanding Ctrip continues to see falling profits

Accommodation reservation revenues accounted for 45% of total revenues in Q3 2014
Accommodation reservations accounted for 45% of Ctrip’s operating revenues in Q3 2014

Chinese travel giant Ctrip has continued to experience falling profits, as rising costs relating to the company’s expansion offset higher revenues.

The Shanghai-based company generated operating profits of CNY88 million (US$14m) for the third quarter of 2014, down 71% year-on-year. Revenues actually jumped 38% to CNY2.1 billion, exceeding Ctrip’s forecast, but the company’s costs also soared, leading to the sharp drop in profits.

Nevertheless, Ctrip’s chairman & CEO, James Liang, said he was “pleased” with his company’s “solid performance”.

“Accommodation reservation and transportation ticketing services maintained robust growth,” Liang said. “We will continue to invest in our open platform strategy and in technology and services to create more value for both our customers and partners.”

Accommodation reservation revenues accounted for 45% of total revenues, or CNY950m, up 56% year-on-year, while transportation ticketing generated CNY800m, up 32%. Package tour revenues increased 12% to CNY358m and corporate travel business rose 45% to CNY104m.

And the company recently entered the cruise market; a joint venture with Royal Caribbean will see Ctrip launch a new cruise line, SkySea Cruises, which will be tailored to the Chinese market.

But the company’s costs continued to rise sharply in Q3, with product & development, sales & marketing and administrative expenses rising 83%, 69% and 40% respectively. Ctrip also announced plans to spend approximately US$500m on a vast new headquarters in Shanghai.

For the fourth quarter of 2014, the company said it expects revenues to grow at a rate of approximately 30%, although it made no forecast for Q4 profits.

 

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