Skift Take

Profitability isn't a concern right now as Expedia's eLong invests in expanding its hotel business, and it is in the game for the long haul.

Expedia’s eLong isn’t focused on profitability and won’t be distracted by making investments in tours and activities as it seeks to be the leading lodging player in China, but it has a long way to go if it intends to catch up to the leading online travel agency, Ctrip.

eLong CEO Guangfu Cui said during the company’s second quarter earnings call August 8 that he wouldn’t provide any guidance on profitability in upcoming quarters because the online travel agency, which is majority-controlled by Expedia Inc., needs to aggressively invest in technology, mobile, and sales and marketing in a quest to be the number one lodging company in China.

He said eLong may incur losses in upcoming quarters.

“We are not about spending for other lines of business,” Guangfu said in explaining why eLong won’t invest in tours and activities despite the fact that rivals Ctrip and Qunar are doing so.

During the second quarter, eLong increased its room nights stayed 44% to 8.3 million while hotel commission revenue climbed 28% to $32.4 million.

That makes eLong the second largest online travel agency in China in the highly competitive hotel business. The vast majority of eLong’s hotel business is for domestic stays; Guangfu said eLong won’t disclose its outbound hotel business volumes because they are below 10% of its overall hotel business.

eLong has a long way to go to catch up with Ctrip’s hotel business, which has just been fortified with a $500 million investment by the Priceline Group.

Ctrip saw its accommodation reservation revenue jump 47% year-over-year in the second quarter to $121 million — compared with eLong’s drastically smaller $32.4 million. Ctrip didn’t detail its number of room nights sold, but said they increased 64% compared with the second quarter of 2013, and that growth was considerably faster than eLong’s 44% jump.

Asked about eLong’s competitive position versus another leading player, Qunar, Guangfu didn’t answer the question directly, but said eLong would remain a Qunar partner and competitor.

Qunar acts as a booking agent for domestic hotels in China, and sends leads to eLong for its fledgling international hotel business.

eLong and Ctrip have seen their hotel commission rates fall because there is aggressive discounting in the form of couponing taking place in China. Guangfu said eLong will remain competitive in couponing to grow its market share.

Mobile is playing a substantially larger role in China than it does in Europe and the U.S.

For the second quarter, eLong said 45% of its “eLong brand room nights” were made on mobile devices.

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Tags: china, ctrip, elong, expedia, qunar

Photo credit: eLong seeks to be the largest hotel player in China, but it would have to overtake Ctrip to do so. 125715

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