Expedia Boosts China Ties, Watch Out Ctrip Expedia增持艺龙股份携程要小心了

By newsdoug on November 22, 2011

Expedia boosts China travel ties There’s been some interesting movement in the lucrative online travel space, where US online giant Expedia (Nasdaq: EXPE) has just boosted its ownership eLong (Nasdaq: LONG) for a hefty premium, boosting its stake in China’s number-two online travel agent to more than 60 percent. (company announcement; Chinese article) Not surprisingly, eLong shares jumped 10 percent after the purchase, though at $15.41 per share were still well below Expedia’s purchase price of $23. That indicates the market realizes that Expedia, which has owned more than 50 percent of eLong for a while now, was more interested in boosting its stake than in getting a good price. From my perspective, the more interesting element here is that this purchase may indicate that Expedia, after years of taking a mostly hands-off approach to eLong’s operations, may finally be feeling confident enough to try and bring some of its background and expertise to the Chinese company, including integrating it more with Expedia’s own very successful global network. If it indeed makes such a move, that could spell more headaches for China’s industry leader Ctrip (Nasdaq: CTRP), whose own recent third-quarter results showed slowing growth, sparking a 25 percent decline in its shares over the last week. (previous post) If Expedia does indeed take a more hands-on approach to eLong, it would mirror a more recent trend that has seen foreign Internet giants coming back to China for a new attempt to be more active in the world’s biggest Internet market by users, after their previous attempts mostly failed. Amazon (Nasdaq: AMZN) appeared to be leading the charge on the China market with the recent launch of a massive new warehouse near Shanghai for Joyo.com, the online merchant it bought several years ago. Amazon had also taken a low-key approach to Joyo for the first few years of its ownership, though that looks set to change. (previous post) The next few months will be interesting to see what, if anything, changes at eLong following Expedia’s latest move, with Ctrip no doubt watching the situation very closely.

Bottom line: Expedia’s increase of its share in eLong could presage a more active partnership between the 2 companies, posing a major challenge to industry leader Ctrip.

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