While companies like Expedia Inc. are growing by combining various services and offering cost-effective solutions to its investors, Ctrip.com International Ltd. became the victim of its own discounting spree.
LONDON – Online travel companies are looking to thrive in the improving economic scenario. However, the sector is still dominated by intense pricing strategies. While companies like Expedia Inc. are growing by combining various services and offering cost-effective solutions to its investors, Ctrip.com International Ltd. became the victim of its own discounting spree. The stock is getting pummeled as concerns about its long-term viability grow. The sector is also seeing growing M&A activities. StockCall has initiated comprehensive technical research on Expedia and Ctrip.com.
Expedia on Upward Trajectory
Expedia has been hitting new 52 weeks high and is set to report its fourth quarter and full year results today. However, its growth is somewhat dwarfed by one of its biggest competitor, Priceline. The stock is currently trading at P/E ratio of 25.55, which is more or less in-line with Priceline’s P/E ratio Priceline. Expedia is going ahead with its strategy of forming enduring relationship with airlines and hotels to offer synergistic benefits to the consumers. It is also going to help the company to establish itself as one-stop destination for meeting multiple travel needs.
Expedia is also expanding internationally which will make its services portfolio more immune to economic hiccups in a particular geographic area. However, it also needs to diversify its client-base as the company mainly relies upon leisure travel. Corporate travel forms a small part of its portfolio and has much hidden potential. Expedia also recently invested in upcoming hotel search engine Room 77. Hotel booking segment makes about three-quarter of Expedia’s total revenue and its collaboration with Room 77 will help it in driving up the volume. With margin of more than 20 percent, hotel booking is also the most profitable segment for Expedia. The company also acquired a majority stake in Germany-based hotel search engine Trivago. The online travel company is likely to keep performing well in the near future.
Ctrip.com Overdoes Discount Pricing Strategy
Ctrip.com is a Chinese travel site and despite its good start, has been lagging behind lately. The company collaborates with Priceline and both the companies mutually share their services. Ctrip.com stock has been clobbered down lately, but in the long-run, the company stands to benefit from growing economic clout of China and its prosperous middle-class. However, the company faces stiff competition from eLong and 17u. Currently, Ctrip.com has lion’s share of China’s travel market with about 45 percent of the pie under its belt, but Expedia backed eLong is also making steady progress.
Ctrip.com, in order to remain viable, needs to protect its margin. The company grew its market share through aggressive pricing. The company’s emphasis on rebate coupons is considered to be the biggest cause behind the steep fall experience by its shares in the recent past. Ctrip.com reported its fourth quarter financial numbers on January 31st beating both top- and bottom-lines.
Vicky is the co-founder of TravelDailyNews Media Network where she is the Editor-in Chief. She is also responsible for the daily operation and the financial policy. She holds a Bachelor's degree in Tourism Business Administration from the Technical University of Athens and a Master in Business Administration (MBA) from the University of Wales.
She has many years of both academic and industrial experience within the travel industry. She has written/edited numerous articles in various tourism magazines.
