Ctrip: Brandished cut ground sales to channel revolution

China's largest online travel service provider Ctrip Travel Network (CTRP,NSDAQ) (hereinafter referred to as "Ctrip") began a major layoffs, plotting from the ground sales to online sales channels to change.

January 22, the central province of Ctrip more than sales staff to the reporter disclosed that Ctrip ground sales staff began a large area was cut, in addition to retaining Beijing, Shanghai, Guangzhou, Shenzhen, the 7 major airport channels, the other two or three-line city airport, high-speed rail, railway stations, bus stations and other ground sales staff will be abolished, is expected to lay off at least 500 people.

Ctrip was listed in the United States in 2003, the share price as high as 80 U.S. dollars, which in July 2012 was excluded from the Nasdaq-100 index, so far the share price hovering around 23 U.S. dollars. In the second half of 2012 since the promotion, Ctrip won the sales performance, profits but a sharp decline. Facing the rising of the tourism network business, adhere to the decade "cement + Mouse" business model of Ctrip, walked at the crossroads.

Ground sales layoffs

"I 11 for Ctrip blood Sweat dozen Jiangshan, but Ctrip don't we." "January 21, the Central province Ctrip branch of the airport Sales Director Sun Li (a pseudonym) to the newspaper reporter said.

Sun Li, college graduate, 2001 into Ctrip. In these more than 10 years, her work is almost unanimous, early in the morning to rush to the airport waiting area, each encounter a passenger, with a smiley face, to introduce passengers Ctrip hotel reservations, air tickets and other services.

Sun Li is just an ordinary member of the hundreds of ground sales of Ctrip. They have been active in the past more than 10 years in China's large and small airports, railway stations, bus stations, they brought a large number of customers Ctrip, Ctrip is the early development of the "hero."

Sun Li Introduction, internal sources said, as early as a few months ago, the company's top secret meeting, after some two or three-line city of high-speed railway station, bus station floor sales staff were cut, November 2012, December layoffs spread to all over the airport Ctrip sales staff.

"We are still making profits, why are we being cut?" Sun Li said that early entry of Ctrip employees, the first four or five years did not buy social security, in accordance with the commitment should be paid, but up to the eve of the separation has not been paid.

More than Ctrip internal staff revealed that since the second half of 2012, has left more than 500 ground sales staff. To Ctrip Wuhan branch, for example, the ground sales staff in Wuhan, Changsha Airport, a total of more than 30 people, but now only three or four people, the other two or three lines in the country similar to the city. These two or three-line City Ground sales staff, a small number of staff will be arranged for internal transfer, because of the cross-geographical and demotion, many people quit the transfer and leave. Most employees are forced to leave their jobs and work N years to eventually get a "n" monthly salary.

"The problem is how the options are handled, and Ctrip's unilateral termination hurts the old employees. "Ctrip inside a number of employees, according to Ctrip" Employee Handbook Fifth article 6th article, Ctrip for a certain level of management staff and the annual outstanding staff and more than 8 years of grass-roots staff to give stock options reward. Ctrip internal staff said, Ctrip Wuhan Branch two employees have been working for eight years but no options.

Several people who are on the verge of separation say they have received 2000-share options, which, if converted into equities, would be about 80,000 to 100,000 yuan. "But according to Ctrip English contract, if leave, these options will be free of charge back." We've worked for years for options. "said Ctrip employees, and Ctrip signed the contract is all English, no Chinese version, so many terms and details do not have a clear understanding."

For the "one-month wage recovery option" said, Ctrip responded to this newspaper to deny. For this layoff, Ctrip said: "Ctrip 2012 at the end of the original ground sales channel optimization, to the employees involved, Ctrip to give proper placement." Be willing to leave the staff to arrange the internal transfer, while actively in the industry related companies to create new jobs. For those who do not transfer due to geographical area, the Company shall give reasonable compensation according to the state regulations to ensure the employees ' rights. ”

"Monopoly" status shaken

Behind the layoffs, the external market environment quietly changed.

Ctrip since its inception in 1999, through 13 years to build a website, membership system and a huge call center based operating mode, in hotel reservations, air tickets booking, vacation and business travel services four to build up the core competitiveness of China OTA (online travel service provider) market leader. Ctrip has set up branch offices in 12 cities such as Beijing, Guangzhou, Shenzhen and Chengdu, and employs more than 10000 people. However, domestic hotels, airlines are increasing their own direct sales channel construction. With where to go nets, Taobao, such as the difference between the traditional OTA website rise, Ctrip is gradually eroded market.

2012, Ctrip in the third quarter total operating income of 198 million U.S. dollars, an increase of 20%. Among them, Ctrip four main business: Hotel reservation, air tickets booking, tourism vacation, travel management revenue is divided into 73 million U.S. dollars, 76 million U.S. dollars, 36 million U.S. dollars, 9 million dollars.

Hotel reservations and air tickets to book two major market share, encounter Taobao, where to go, art dragon, Cool news and the same network of hunting. In the airline booking business area, Ctrip profit also showed a significant downward trend. Domestic airlines do their own direct sales, commissions continue to decline. Ctrip CFO Wu Wenjie said, Ctrip Ticket Commission can only be maintained at 4% to 5%, while the first quarter of 2012 Ctrip ticket booking commission fell 22% Year-on-year. Cui, chief executive of the Art Dragon, shifted the focus to online hotels.

A number of Ctrip internal staff that, air tickets reservations, Taobao, where and other emerging sites to carry a great impact on Ctrip. These new Web sites, to achieve parity on the Internet, the different distributors of airline tickets for the maximum price difference of up to 20% or more, the new Web site revenue, including from the Distributor to get back.

The lucrative hotel reservation area, where to go net, Art Dragon is rapidly becoming its competitor. According to the network data, November 2012, online travel website Hotel Reservation Business user coverage number Top 5 are: Where to go to the net, Ctrip, cool News travel network, art Dragon Travel Network and Mango net. Where to go net ranking has surpassed Ctrip to the top.

Market share reduction at the same time, Ctrip high marketing costs. Ctrip 2012 third quarter sales and marketing costs of 48 million U.S. dollars, an increase of 74%, the main reason for the increase in marketing activities.

The hotel business is the most important bearer of Ctrip's call center, and Ctrip has long sustained investment. In the foreign industry, there is no call center, that is, not by telephone, but through the PC (computer network) to carry out hotel reservations. Ctrip Senior Vice president Mr. said in July 2012 that many people still think call centres are a better experience, and PCs may have a process.

Wu Sanmao, a U.S. stock analyst, says the volume of business brought by Ctrip's call center is still growing. In the past ten years, Ctrip mainly rely on the ground sales accumulated a large number of customer resources, now online sales method cost is lower, Ctrip has been from the ground sales to online sales gradually transformed.

Price "Bloody battle" lasts

When the market was eroded, Ctrip chose the price of a bloody battle. July 2012, Ctrip announced that it would invest 500 million U.S. dollars (about 3.2 billion yuan) for a one-year low price promotion.

Then mango nets, art dragon, Taobao Travel, where to go, cool network, passers-by and other cattle have joined the price war. Ctrip insiders revealed that Ctrip take out real gold and silver, this part of the main focus on hotel reservations and buy, at the expense of profits to rob market share.

November 2012, Ctrip COO Sun said, Ctrip's market strategy is to let Ctrip occupy more shares, not only through marketing activities, but also through the best pricing strategy to achieve. In addition, in the second half of 2012, Ctrip "new product" intensive came out: comments on the return function, "Hundred Outbound travel", on the line of the car rental platform, as well as based on the Android system hotel booking applications, with the Czech Republic Airlines and the capital aviation to facilitate customer reservations or buy.

This series of measures led to a sharp increase in the income of Ctrip, but the profit has shrunk sharply. In the first quarter of 2012, Ctrip's total income was 153 million U.S. dollars, an increase of 23.08%, net profit of 26.84 million U.S. dollars, down 25.17%; second quarter, Ctrip total income 162 million, year-on-year growth 18.33%; Net profit 18.84 million USD, down 53.83% While the third quarter, Ctrip total income of 198 million U.S. dollars, an increase of 21.81%, net profit of 30.84 million U.S. dollars, down 39.53%.

January 23, Ctrip replied this newspaper: "2013, Ctrip will be in the air tickets, hotels, tourism areas to further strengthen the" most abundant products, the best quality service, the most competitive price "this strategy. Especially in the price, will do whatever means to ensure market price advantage. ”

Ctrip has confidence in the price war. Ctrip COO Sun revealed that the company issued 180 million U.S. dollars convertible bonds, mainly for repurchase.

Facing the new market and competitor, Ctrip's development approach faces a choice: call center, PC and mobile internet. Today, the heavy assets of the call center is still the main service model Ctrip, while the light assets of the PC and mobile Internet, service market share is expanding rapidly. Ctrip CEO in November 2012 revealed that the company is plotting services to the mobile platform to expand, this is the strategic focus of Ctrip.

Telephone line with the Internet's operating system to help Ctrip quickly become a market leader, there are online travel industry Analysis: "Ctrip sales channel change, this means that Ctrip adhere to a decade of" Cement + mouse "mode or will gradually change, this may be a good thing for Ctrip. ”