Social media’s ability to mobilise consumers is a global phenomenon. Revenue growth at China’s leading online travel agency Ctrip has slowed following public disapprobation. Jane Sun, the group’s chief executive, referred to new “consumer-centric principles” in a call to analysts. Nevertheless, investors should continue to bet on the group.
An abuse scandal at a pre-school centre for children of parents working at Ctrip has dragged on performance. So has regulatory critique of booking practices. New government rules ban cross-sales of high-margin items pre-selected during ticket sales. Revenue rose 11 per cent year on year to Rmb6.7bn ($1.1bn) in the first quarter but the growth rate is roughly a quarter of that from a year ago. The group’s preferred version of operating margin is down slightly from last year.
Yet Ctrip’s ambitions are laudable. Sales and marketing expenses have grown from a quarter to nearly a third as a share of revenue since 2013 and the group is opening physical stores in lower-tier cities. It has sacrificed profits to grow market share in low-end hotel bookings.