adminNew York. – Priceline Group is taking a $500 million stake in Ctrip, the Shanghai-based travel booking website, increasing the biggest US online travel agent’s footprint in China’s fast growing tourism market.
The Connecticut-based company will invest $500 million via a convertible bond. It will also gain the right to acquire Ctrip shares on the open market over the next year to build a stake which, combined with the shares convertible under the bond, could be worth up to 10 percent.
Ctrip, which listed on Nasdaq in 2003, has a market capitalisation of $8,2 billion.
The two companies are also expanding a commercial agreement first struck in 2012 to offer more hotel room inventory to each other’s customers, give Ctrip users access to Priceline’s rental cars and restaurant booking offerings and give Priceline access to Ctrip’s airline and attraction ticket services.
A flood of middle class Chinese tourists armed with higher disposable incomes is spreading across the world and reshaping the global travel market.
“So many Chinese tourists are making their way to Europe. They are the most noticeable change in global travel,” said Darren Huston, Priceline chief executive. “In five to 10 years they could become the world’s largest travelling population.”
CLSA estimates that by the end of this decade, 200 million Chinese tourists will travel outside the country each year and spending on tourism will double.
While in most western countries, 40 to 50 percent of travel bookings are made online, only 10 to 15 percent are done so in China, Mr Huston said, offering providers like Priceline a big opportunity.
The US group preferred to partner with Ctrip – a well-known brand with an established business – rather than tackle the market alone, he said.
The deal will allow Priceline to offer travellers outside of China access to Ctrip’s inventory of 100 000 accommodations in the country.
“It rounds out the key premise of our success: the broadest selection of booking options,” Mr Huston said.
Ctrip’s revenues jumped 38 percent to 1,8 billion renminbi ($292 million) in the second quarter. Priceline started in 1997 as a “name your own price” service for hotel, airline, car rental and vacation bookings and became known for quirky television ads featuring Star Trek’s William Shatner.
It overtook rival Expedia in gross bookings in 2013 and has staked out a dominant position in the US by snapping up companies like Open Table, the restaurant reservation company it bought for $2,6 billion in June, and Kayak, the travel search engine it acquired for $1,8 billion in 2012.
Priceline’s stock is up nearly 12 percent this year. Ctrip has gained more than 24 percent since January. – Financial Times.
Online Reporter