A Rise in Chinese Tourism

Robert Hsu, October 06, 2009

In this Issue:

China's National Day Holiday Boosts Tourism
China's Growing Domestic Tourists
The Expedia of China
Asia's Vastly Different Tourism Industries

The Expedia of China

As I discussed earlier, Chinese are now enjoying their newfound wealth and spending like never before, which is directly correlating with a rise in Chinese domestic tourism. And on my trips to the Greater China Region this year, I've observed first-hand the new Chinese spending.

And, on my most-recent trip to China -- I just returned to California on Monday -- the picture hadn't changed much. Both of the fine hotels that we stayed at, the Beijing Intercontinental and Shanghai Grand Hyatt, were near 100% occupancy. And local Chuppies and millionaires have overtaken international visitors and expatriates as the big spenders in both cities.

This increase in Chinese spending and subsequent boost in tourism is right in line with the Chinese government's intent to boost domestic demand and consumption. With the global economic slowdown deterring foreigners from visiting the Greater China Region, the Chinese government is striving to boost domestic tourism.

One way that policymakers are helping to boost domestic tourism is a robust development of China's transportation system. China now has more than 1,100 domestic and international air routes. And bus tours run to scenic spots all around the country, providing even more convenience for Chinese consumers to experience vacation spots that would have been difficult, if not impossible, to travel to just a few years ago.

And while travel agencies around China are benefiting from this pop in tourism -- I've recommended the cream of the crop to my China Strategy readers.

Established in 1999, Ctrip.com International (NASDAQ: CTRP) is the leading online booker of hotel rooms and airline tickets in China. Basically, it's the Expedia of China and our play on three key trends: an increase in tourism; growth of the Internet and travel information databases; and popularity of independent travel. In fact, Ctrip is one of China's best-known travel brands -- generating more than 4% of the entire country's hotel room reservations (and in a country as big as China, that's a lot of rooms).

What's great, though, is that China's tourism industry is just starting to heat up and online travel is just beginning to take off in China. There are currently 338 million Internet users in China -- that's more than the total population of the United States! Furthermore, the number of Internet users in China is growing by over 20% a year. The colossal size of the rapidly growing Chinese Internet market presents tremendous opportunities for online companies in China.

And Ctrip is already grabbing the lion's share of the online travel booking market. In fact, the company currently has a firm grasp on about 60% of China's travel market. Its main competitor is Expedia. But although Expedia's China spin-off, eLong, has poured $167 million into China during the past two years in a catch-up attempt, it still only has about a 10% market share.

Looking forward, I think Ctrip is a great way to profit from China's booming travel industry, as well as the rise in domestic consumption. I expect the company to continue to profit from the increase in China's domestic tourism and consumption for some time. Ctrip truly is a great long-term bet on China's growing travel and tourism industry.

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