|
Mangocity Fights Ctrip, China Mobile for Travel Industry Space
 JLM Pacific Epoch sat down with Mangocity.com, China's third biggest online travel service provider behind Ctrip (Nasdaq: CTRP) and eLong (Nasdaq: LONG), East China Sales and Marketing Director Grace Yao to feel out the online travel industry. Founded in March 2006, Mangocity.com covers about 10% of China's online travel market. Mangocity.com parent China Travel International Investment (308.HK) is a travel conglomerate with investment in hotels, theme parks and passenger transportation; the listed company has more than 500 offices nationwide.
JLMPE: How do you describe the travel industry for 2008?
Yao: 2008 has not been a smooth year. The Beijing Olympic Games had a huge negative impact on business travel because of entry restrictions, while the snowstorms in the south and the Sichuan earthquake in May hit leisure travel. Then the financial crisis came. In Q3, all of our domestic travel markets saw declines except Beijing because a lot of people wanted to visit the Bird's Nest and other Olympic venues.
JLMPE: Ctrip (Nasdaq: CTRP), eLong (Nasdaq: LONG) and Mangocity are currently the three biggest online travel service providers in China. Do you foresee any future changes in rankings or any new competitors emerging?
Yao: It's changing already. China Mobile's (NYSE: CHL, 941.HK) "12580" service hotline and China Telecom's (NYSE: CHA, 728.HK) "114" are developing very fast. Hotel booking volume of 12580 already reaches about one-third to half of eLong's. Hotel reservations on 114 are also developing very quickly. 114 was previously our distributor, relying on us to provide the database, but now they do it themselves. Both 12580 and 114 have huge call centers and their capital costs are much lower than ours. China Merchants Bank (600036.SH, 3968.HK) also provides travel service for its credit card users. Although it is only their value-added business, they are also one of our competitors.
JLMPE: What is the breakdown of Mangocity hotel reservations by star ranking?
Yao: High-star hotels contribute 60-70% of our hotel booking revenue because of their higher room rates. We usually get 15% commission if guests book through Mangocity.com.
JLMPE: What is the breakdown of your ticketing business in terms of cities?
Yao: First-tier cites Beijing, Shanghai, Guangzhou and Shenzhen contribute 90% of our air ticket revenue.
JLMPE: How do you cooperate with your partner hotels? How do they update their room rates if there are any changes?
Yao: Although Mangocity is an online company, we are still labor intensive. Hotels send us faxes to update their room rates and we call them twice a day, once during the day and once at night, to confirm our booking. We have a call center of 600 people in Shenzhen.
JLMPE: What is your current business focus?
Yao: Developing members. We are still in the initial stages. Sending membership cards is still a very cost-effective way to develop new members. The cost of each card is only RMB 0.4. Expedia (Nasdaq: EXPE) has also started using this method in the United States.
JLMPE: What do you think of travel search engines such as Qunar?
Yao: The challenge for Qunar is how to maintain its objective to be a credible third-party search engine while at the same time generating profits. It may become a direct sales platform for airlines and hotels in the future. China's airlines are not good at marketing, but Qunar may help them to sell tickets.
JLMPE: Will you cooperate with Qunar?
Yao: We are considering it, but since our ranks in their search results always lag behind others, why should we cooperate with them? Air tickets sold directly by airlines must be cheaper than ours. We will only work with Qunar if they can prove to us that the partnership will bring us new customers.
JLMPE: What is your outlook for 2009?
Yao: Business travel will probably continue to decrease in 2009. The financial and manufacturing industries were hit most by the economic crisis, and people in these industries tended to make a lot of business trips. China's State-owned Assets Supervision and Administration Commission has required all state-owned enterprises to cut budgets 10% year-on-year for 2009. State-owned enterprises won't lay off employees, so reducing business travel is an easy way to meet requirements. The RMB 4 trillion stimulus plan may help, but we don’t know the exact effect yet.
Leisure travel will be less affected, especially short tour travel. Unlike business travel where people sometimes travel several times a month, leisure travel usually only occurs once or twice a year so the economic slow down has little effect on it. Also, because of RMB currency appreciation, some overseas tour routes are even hotter. For example, the price of a trip to Australia has fallen 20%, however; self-guided tours only account for 5% of our revenue. Our core businesses are still hotel and air ticketing booking, just like Ctrip and eLong.
|
