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China's second-largest online travel service provider, eLong Inc, is focusing on its Internet sales and marketing in order to compete with market leader Ctrip.com International Ltd, executives at the firm told China Daily.

 

The NASDAQ-listed Chinese firm said it is working closely with US-based giant Expedia, which holds more than half of eLong's shares, to boost the number of transactions made on its website. This, eLong said, will help it reduce the costs of running its 800-person call center.

 

In the United States, 30 percent of users of online services book hotels and rooms on the Web, but in China, only 5 percent do so. Both eLong and Ctrip need to employ hundreds of operators at call centers to handle orders or answer inquiries, which pushes up costs.

 

"Internationalization should be the one thing that differentiates us from anyone else in this market," said Richard Xu, chief marketing officer of eLong.

 

ELong, unlike its rival Ctrip, allows English-language users to book international flights online, rather than having to call.

 

While Ctrip focuses on high profit margin services such as package tours and business travellers, eLong hopes to take advantage of the Internet to serve a large volume of customers at a small cost, the firm said.

 

The Beijing-based firm just made it into the black for the first time in seven years in the second quarter, but its profitability was still small.

 

In the third quarter, its operating income was just 1.7 million yuan (US$215,000) on revenues of 74.60 million yuan (US$9.4 million). Its rival, Shanghai-based Ctrip, had operating income of 64 million yuan (US$8 million) in the same period on revenues of 208 million yuan (US$26 million).

 

At the end of November, the company revamped its website to make services easier to access for users, along with allowing them to ask questions on the website so they do not have to call.

 

It also decided to give online customers reward points worth 200 yuan (US$26) to 300 yuan (US$38) per order to encourage travellers to use the Internet rather than the phone.

 

In May, both eLong and Ctrip launched 360-degree room view services in China, where users are able to see hotel rooms before making bookings.

 

Besides utilizing the Internet platform, eLong's other goal is to expand its customer base through marketing.

 

In the third quarter, Ctrip sold 1.82 million hotel rooms and 1.72 million air tickets, but eLong sold just 893,000 and 273,000 respectively. Bigger scale is key to more profitability, the firm said.

 

Marketing officer Xu said eLong planned to boost its presence in the country with an aggressive marketing campaign. In the past quarter, sales and marketing accounted for almost half of eLong's operating expenses at 25.33 million yuan (US$3.17 million).

 

Xu expects the growth of marketing expenses will be faster than the company's annual growth, which is about 40 percent. In the past quarter, its sales and marketing expenses grew by less than 10 percent year-on-year.

 

ELong has marketing people at some 50 airports, but that number will grow by 20 percent next year to promote its services among frequent business travellers, Xu said.

 

(China Daily December 12, 2006)