Path: Sino-US >> Sino-US News>> Biz >>
China's Ctrip says US trade war discouraging tourism

Ctrip chief executive Jane Sun said she expects revenue growth, which came in at 18 per cent last quarter, to remain strong even though profits are growing more slowly. Photo: Bloomberg

China's largest online travel agent has been caught out by the country’s trade war with the US, which has hit consumer spending on outbound trips and contributed to a $6bn fall in US-listed Ctrip’s valuation this year, according to its chief executive. 

“The trade war caught many companies in China by surprise; nobody was really prepared,” Jane Sun told the Financial Times. “The trade war affects confidence in both countries.”

Ctrip and 45 per cent-owned affiliate Qunar together account for more than half of China’s online travel market, a fast-growing sector but one that has slowed this year as consumer sentiment in the world’s second largest has weakened. “When the stock market is tanking people don’t have the confidence to spend,” Ms Sun said. 

Shares in Nasdaq-listed Ctrip, which has a stock market valuation of $15.8bn, fell 19 per cent last month in their biggest one-day drop for five years after the company forecast an operating profit margin of less than 1 per cent for this year — down from 11 per cent last year — because of macroeconomic weakness and higher spending on marketing. 

“In the face of slowing economic growth, we expect international trips to be curtailed somewhat, and for some of those trips to be replaced by travel within China,” said Maggie Rauch, an analyst at Phocuswright, a travel industry consultancy.

In the first six months of 2018, 80m border crossings were made by Chinese passport holders, up 16 per cent from the same period last year, according to the China Outbound Tourism Research Institute. But the institute projects that rate of growth to have slowed in the second half of this year.

Chinese consumers spending power overseas has been eroded by a weakening currency, with the renminbi this year hitting its lowest level against the US dollar for a decade.

“The depreciation of the renminbi weakened tourists’ purchasing power abroad. Visits by mainlanders to Hong Kong and Macau have also picked up as trips to foreign countries cool off,” according to a report by Gavekal Dragonomics, a consultancy.

Ms Sun said the impact was felt most keenly on trips to western destinations.

“[Consumers] might not travel to Europe but they will travel to Asia, or within China,” she said.

With close to half of Chinese travel ticket sales and nearly 40 per cent of hotel bookings now made online, internet travel agents are “past the sweet spot” of rapid user growth, according to analysts at UBS. 

Analysts at Daiwa Securities expect “macro headwinds” and the increasing cost of serving customers to weigh on Ctrip’s margins. 

However, Ms Sun said she expects revenue growth, which came in at 18 per cent last quarter, to remain strong even though profits are growing more slowly. She said Ctrip would not change its strategy, which includes investing in initiatives such as chatbots enabled by artificial intelligence to handle customer queries, and added that the company would keep headcount stable next year to control costs. 

Economists expect Beijing to introduce more stimulus measures in 2019, with additional fiscal spending on infrastructure intended to sustain growth above 6 per cent.

“If GDP is growing 5 to 6 per cent, travel will be 8 or 9 [per cent] and we will be double that,” Ms Sun said. “In the long run there is a lot of room for China to grow.”


Related Stories
Share this page
Touched Sympathetic Bored Angry Amused Sad Happy No comment

China's Ctrip says US trade war discouraging tourismChina's multibillion-dollar electric car companies are heading for a make-or-break momentMeng Wanzhou's twist of fate in Vancouver: Huawei 5G vs. Western 'Five eyes'Party-affiliated paper Global Times says Chinese netizens angered by Baidu, want Google backUS-China trade war could 'severely undermine' global merger activity in 2019, says Baker McKenzie reportBoeing delivers first 737 from China plant as trade war simmersJuvenile delinquency in spotlight after release of 12-year-old boy who killed motherMultinationals ramp up investment in China with prospects of further opening upSamsung to close smartphone factory in China's Tianjin amid sales slumpChina’s dilemma in trade war talks with US: making concessions without looking weak
< Prev Next >