Online travel service gets boost

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Last updated at: (Beijing Time) Thursday, December 11, 2003

Online travel service gets boost

Chinese travelers will see cheaper and better travel services as major online travel service operators strive to promote their business with huge capital in hand.

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Chinese travelers will see cheaper and better travel services as major online travel service operators strive to promote their business with huge capital in hand.

Ctrip.com, a Shanghai-based online hotel, air ticket and holiday service provider, said yesterday that it would use a significant sum of the proceeds - from its initial public offering (IPO) on the NASDAQ stock market in New York on Tuesday via the Cayman Island-registered Ctrip.com International - to greatly improve services.

The company issued 4.2 million American depository receipts (ADRs), which are about 8.4 million of its ordinary shares and 28 per cent of its total outstanding shares.

The stocks were priced at US$18 million and Ctrip got US$75.6 million from the offering.

On the first day of its IPO, Ctrip's ADRs rose to US$33.90 at the close of the after-hours trading, rising by 88.3 per cent, the highest debut on the NASDAQ in three years.

"We will use the proceeds for business expansion, elevation of our brand, technological updates and strategic mergers and acquisitions," said Alfred Fan, executive vice-president of Ctrip.

He revealed his company had achieved some progress in acquiring a travel agency in China.

At the same time, the online travel service firm will also spend more money on promotions, especially in offline business, which accounts for roughly 70 per cent of its orders.

Fan said the primary target of promotions will be frequent flyers and train travellers.

Ctrip has 6 million registered users, including 600,000 active ones, according to Fan.

Ctrip's arch-rival eLong.com also spelled out ambitious plans for next year.

"We have spent US$20-30 million to develop our online business in the past years and the amount will reach US$100 million by the end of next year," said Justin Tang, chairman of the Beijing-based Internet company, in a telephone interview.

The business, which got US$15 million investment from US venture capital firms Tiger Technology Fund and Blueridge Capital, will raise the expansion fund with either private placements or an IPO.

"I think it is not the best time for a listing for eLong, because I do not want to expose my company to pressures from investors too early, when it is still young," said Tang.

"But anyhow, you will see some big moves in the first half of next year," said Tang, who founded eLong.com with friends in 1999.

China's biggest Internet portal Sina Corp also announced yesterday that it would acquire a Shanghai-based online travel service provider.

The firm, named Fortunetrip.com, mainly operates in Beijing, Shanghai, Guangzhou and Zhejiang Province with 130 employees.

The deal is expected to be completed in the first quarter of 2004, Sina said, but details of the acquisition was not revealed.

"The acquisition will lay the foundation for our development in electronic commerce," said the company.

With huge capital in hand, the online travel service market will see a lot of changes, said Peter Lu, a Beijing-based Internet industry analyst.

"There are a lot of operators in the market, but their scale is very small, so the moves from Ctrip, eLong and Sina will be worth much attention," said Lu.

He pointed out that since the technological threshold for an online travel service provider is quite low, the competition will focus on network resources, such as the number of partner hotels and the discounts they can get.

He added that with the intensification of the turf war, it will likely be a win-win situation for consumers.

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