Part 2 of How to Invest in 2008 Beijing Olympics Series.
In my first post, we talked about Home Inns & Hotels Management Inc. (HMIN), and expounded upon HMIN’s hotel expansion projections and profit potential from increased traffic during the 2008 Olympics in Beijing.
HMIN provides lodging for Beijing tourists, but they have to book their trips, don’t they?
#2: Ctrip.com International, Ltd (CTRP)
Based in Shanghai, China, Ctrip.com is a booking and hotel accommodations provider for much of China’s tourist demographic.
Ctrip.com Company Report
Ctrip.com International, Ltd. (Ctrip) is a consolidator of hotel accommodations and air tickets in China. The Company aggregates information on hotels and flights, and enables its customers to make hotel and flight bookings. Ctrip also sells packaged-tours that include transportation and accommodations. The Company targets its services primarily at business and leisure travelers in China. Ctrip acts as agent in all of its transactions and does not take any inventory risks with respect to the hotel rooms and air tickets booked through the Company. Ctrip derives its hotel reservation, air-ticketing and packaged-tour revenues through commissions from hotels (primarily based on the transaction value of the rooms), air tickets and packaged-tour products, respectively, booked through its services. In March 2006, the Company formed a wholly owned subsidiary, C-Travel International Limited.
In a nutshell, Ctrip International, Ltd. operates a similar business model to that of Expedia.com or Travelocity, two well-known US travel booking websites. The Chinese ticket and airlines booking agent generates revenue from commissions, and owns zero inventory or liabilities.
Backed by a healthy balance sheet of $0 long-term debt and $100 million in cash, Ctrip can profit from 3 red hot trends in the China tourist market for the upcoming 2008 olympics in Beijing:
- 2008 Beijing Olympic Spending Will Reach $4.5 Billion - Increasingly high traffic & exposure surrounding the 2008 Olympics in Beijing provides plenty of monetization opportunities for Ctrip. The company will pocket a chunk of this revenue by arranging hotel & air bookings, packaged tour events, and advertisements sold on their websites and travel guidebooks. Additional working capital may lead to future acquisitions, allowing Ctrip to expand their businesses much faster.
- 9 out of 10 people visiting for Beijing 2008 Olympics will visit other Chinese cities - This is music to Ctrip’s ears! Chinese tourists will seek packaged tour deals to explore other destinations within China.
Ctrip can keenly bundle invoices and correspondence with advertisements for their packaged tour business, and squeeze more revenue per customer from tourists who booked travel arrangements under the accommodations business.
- Overseas Visitors have grown 7% YOY since 2001 Beijing Olympic Announcement - Best of all, the Beijing Olympics has created a lot of “curiousity” and “wonder” about China and its society. Tourism is up since Beijing won the right to host the 2008 Olympics back in 2001, and has accounted for most of Ctrip’s recent growth.
If the 2008 Olympics is a huge success, China will compete with the US & France as the most visited countries in the world. Right now, France is the most visited country in the world, and receives over 75 million visitors per year.
Increased tourism & annual visiting leads to long-term profitability for Ctrip, a leader in China’s tourist industry. Who knows what Ctrip’s stock will trade at 2 years from now.
To Ctrip, the 2008 Olympics in Beijing is a blessing from God. Ctrip can improve the distribution of their company’s revenue model, enjoy a hefty surge in revenue and earnings for the entire tourist season, and better strengthen Ctrip’s global brand.
Bio: Tarik is the CEO/Marketing Manager of InvestorTrip.com. He follows a simple diversified value investment strategy that seeks long term equity appreciation. He studies economics at Dartmouth College, and plans to pursue his MBA at Morgan State University this fall. Tarik enjoys reading, playing soccer, and living life to the fullest.
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I believe Ctrip is not exactly the same as Expedia. As you may know in China before Ctrip there is no national travel agency which has a 1 800 number and customer service center. A few years ago when I booked ticket through Ctrip (domestic trip inside China), I visited their call center. It’s big! They have thousands of customer reps and delivery guys (people deliver the tickets by bicycle and motorcycle). At that time I believe about 20% of customer book onine (80% by phone). This may have changed since then because now we have more usuage of Internet and e-tickets.
CTRP is one of my best performing stocks. My Chinese friend uses them all the time.
I think I heard Jim Cramer recommending this on his show !
Eric Bolling was hot on CTRP on 6/4/2007 on CNBC’s “Fast Money” — FWIW.
Ctrip’s largest shareholder, a Japanese mall operator is selling the shares. If you own Ctrip, you may want to sell at te best price. If you don;r own Ctrip, buy a small amount of share at the dip and quickly turn around to sell for a profit. Never keep it for more than a week.
It seems Ctrip has inflated its revenue/profit by parking all the false revenue in Accounts Receivable or short-term investment. So, they are going to write them off.
Just stay and watch.
Ctrp is overvalued. Elong is the number 2 travel website in China. Expedia owns a majority ownership in elong, it is trading at less than $8/share but has over $6/share in cash! Elong will clearly profit from 2008 Beijing Olympic games.
Its really a nice blog…I enjoyed it.
Hmm..That will surely a big blow…Becuase Beijing is a much beautiful city and it will be more pleasent with the Olampic Games 2008.