Still-Spirited Trip.com Makes Content Push In China As Covid Limits International Travel

Travel stocks such Booking Holdings and Expedia have been mixed in the past month amid a resurgence of Covid-19 cases in much of the world. Trip.com, China’s largest online booking agency, tumbled to a 13-month low in U.S. trading on Friday even though the country remains relatively isolated from the pandemic. (Shares weren’t helped by Typhoon In-Fa, which is wreaking havoc on travel in eastern China this weekend.)  The spread of the Delta variant elsewhere, however, doesn’t appear to be having much of an impact on a big Trip.com push to boost business at home from a relatively new target: online content.

Trip.com, then known as Ctrip, was founded back in 1999 as a private-sector disruptor in China’s travel services industry, entering at a time when the field was dominated by offline state-owned companies. Beginning with hotel rooms, it began an Expedia-like online expansion into airline tickets, corporate travel services and even railway tickets. From its $250,000 in start-up capital, Trip.com’s market capitalization at the Nasdaq was $17 billion on Friday.

After a successful series of colorful “Boss Live” livestreaming events by its chairman James Liang last year to help pandemic-hit hotels in China drum up business, still-spirited Trip.com aims by 2025 to generate more than $1 billion in annual advertising revenue tied to content. That figure doesn’t include new business from the booking of tickets by users that place orders after they view Trip.com’s videos, CEO Jane Sun said in an interview at the company’s Shanghai headquarters earlier this month.

“We looked at the advertising market in the tourism industry (in China),” Sun said. “It’s worth about 90 billion yuan to 140 billion (or about $21.6 billion) yuan. In five years, it will reach 140 billion yuan. So if we continue to develop (our content strategy), in 3-5 years, we believe we can take 3-5% of the market. This is substantial because it is a high-margin business.”

“The reason we can do it is that our customers have very strong buying power,” Sun said. “Our own website can host content and booking together, and the conversion rate will be very high.”

Brokerage Jefferies sees the content drive as part of an effort to connect with users in new ways.  “Trip.com is transforming itself from a solely purchasing platform to a hub of inspiration” that will allow its partners such as hotels and theme parks to expand customer engagement; Trip.com has also launched blind-box products, the July 12 report noted.  Jefferies has a “buy” on the stock and a price target of $47, well above Friday’s close of $27.23.

New business from online ads would be helpful because Trip.com’s international bookings are still being hurt by the pandemic. Revenue fell by nearly half last year to the equivalent of $2.8 billion, and declined 13% in the first quarter from a year earlier to $628 million amid continuing restrictions on visas and global travel. Trip.com managed to raise $1.1 billion from a secondary listing in Hong Kong in April, in a sign of confidence in its eventual recovery.  

Chinese online customers used to the country’s fast-changing e-commerce and entertainment worlds are likely to be open new ideas at Trip.com’s site. “Globally, very few companies can keep up with us on innovation – China’s Internet moves very fast,” Sun said.  Trip.com has 300 million registered users – one third abroad – and about 10 million people use its site daily. Of that, about one million click on Trip.com’s content daily, Sun said.   

Liang’s “Boss Live” series in 2020 highlighted the chairman in colorful garb; he attracted 200 million views over the year and more than 5 billion yuan worth of bookings, she said.    Last year, Trip.com already booked $296 million in from a revenue category called “other” that included ads and financial services (the company declined to say how much of that sum actually came from ads). A new “Star Hub” content and marketing promotion was formally launched in April with 100 partners that included hotels such as InterContinental and Marriott International.

The push is working out so far in part because “the virus has been controlled very well” in China, Sun said. The government this month said the country’s GDP rose by 7.9% in the second quarter from a year earlier, giving a boost to spending. “So far so good,”  Sun said of summer travel bookings. Her own last trip was to western China’s Qinghai area during the long May 1 holiday.

Sun, who joined the company in 2002 as the chief operating officer, became CFO in 2006, and was promoted to CEO in 2016. She is joined on Trip.com’s board by the company’s four co-founders, two of whom have over the years become billionaires: Ji Qi chairs U.S.-listed, Shanghai-based hotel chain Huazhu and has a fortune worth $3.7 billion, while Neil Shen leads Sequoia Capital China and has a fortune worth $4.4 billion. Among the other two, James Liang is chairman and Fan Min is vice chairman. Robin Li, the billionaire CEO of Baidu, isn’t a founder but Baidu owns 11% of

Trip.com and he sits on its board.  Other investors include funds associated with Morgan Stanley and Pzena Investment Management.

One opportunity outside of China for the right investor, Sun said, is hotel chains whose value has been depressed by tourism declines during Covid. Trip.com has investments in at least six hotel and travel businesses in China: BTG Group, Tuniu, Atour, Elong,  HomeInns and Huazhu.  Atour, a hotel operator, launched a U.S. IPO in May prior to the DiDi’s listing fiasco but hasn’t started trading.  

Trip.com isn’t inclined to invest in overseas hotels itself for now because it prioritizes targets it can bring the most customers to through its platforms – and for now, that’s mostly in China, Sun said.  In a world still facing pandemic uncertainties, there’s plenty to keep Sun busy at home, not least its growing media business.

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