Ctrip Transforms towards Mobile Internet, Has to

Ctrip has been sitting on the overlord position of online travel industry for almost a decade before year 2012. However, a string of small travel startups equipped with disruptive innovation in travel business challenged the largest Chinese OTA from many aspects, flight booking, hotel booking, travelogue, you name it.

Competition from its long-time rivals including eLong and so on was also mounting that Ctrip had to put up a fight with them via a series of price war, which incurred a dent on the company’s latest financial results, in 2012 its operating profit declined 39% on a yoy basis to about US$ 105 million.

The major problems lie in the approach and thinking method of senior management team, who are too conservative and failed at swift response to the ever-changing market situation, especially the mobile internet trend rapidly. The team is under the leadership of CEO Fan Min, who has extensive experience in traditional hotel industry but doesn’t really have Internet-thinking mindset. In 2012, Ctrip is subjected to the fierce competition from eLong, Qunar and other mobile internet product, however, Fan Min’s experience and thinking method is not helpful for Ctrip in the mobile internet oriented market situation.

A transform is vital for Ctrip at this moment, and new leadership is required as well. James Liang, one of the founding team of Ctrip, is about to come back to play the important role. James Liang is not only the co-founder of Ctrip, but also the person who brings Ctrip to great success. In 2003, James helped Ctrip to list in Nasdaq market successfully. In 2006, the market value of Ctrip was over $1 billion, exceeding Sina and Shanda. After that, James chose to move back and receive further education for a Ph.D. in demographic economics in U.S.

James pinned his hopes on changes from the following three aspects:

Firstly, Ctrip is bringing sales from offline to online. Ctrip sales network covers airports, subway and hotels around China, which used to play a significant role for the growth and development of Ctrip in the wired connection era. However, the advantage in the past now turned into a high cost which can be easily substituted by mobile devices and service. Ctrip will be downsizing offline sales team and move towards online sales to cope with the change.

Secondly, Ctrip will keep the price war ongoing, and expand low-priced products line to obtain higher sales volume and bigger market share.

Thirdly and more vitally, Ctrip will place great importance on mobile internet business. In 2012, Ctrip released five apps in cooperation with AutoNavi. In January 2013, 10% of the total income came from mobile end in the field of hotel reservation. Ctrip plans to focus on mobile business in the future.

Bearing past glory and being challenged by current issues, Ctrip has to go beyond the original business model and thinking method, and reshape the company from business structure to human resource structure, in order to adjust itself to the trend of mobile internet.