In its short history, Skift has talked about the balance of power in travel heading East, whether it is the influence of Chinese travelers, the rise of Ctrip and Alibaba, or the emergence of the Gulf carriers with their luxury long-haul flights. Ctrip's acquisition of Skyscanner is one of those moments that mattered in 2016 and Ctrip's global ambitions are a manifestation of what we have been talking about.
It’s been a busy week for Ctrip CEO Jane Jie Sun.
Just a week after Ctrip appointed Sun as its new CEO, the first woman to head a publicly traded online travel agency, Ctrip announced an agreement to acquire UK-based flight-metasearch engine Skyscanner for $1.74 billion.
Skift spoke with Sun via phone a day after the Skyscanner announcement and she discussed how Ctrip got the opportunity to get involved in the talks and why it sees such synergies between the giant Chinese online travel agency and the evolving flight-search and booking site.
We published some of the highlights of the interview as it pertains to Skyscanner a few days ago, but there is more below about Ctrip’s thinking about the acquisition.
In addition, Sun discusses how Ctrip plans on focusing on China and Asia for the time being but has plans to become a force in English-speaking countries, as well.
One of the more interesting perspectives Sun offers is about Ctrip’s relationship with the Priceline Group, which has about a 9 percent stake in Ctrip. While some Internet companies — she didn’t name Expedia, but we will — got involved in China by burning money and taking part in price wars, the Priceline Group invested in China in a peaceful way and was smart about it, Sun says.
“So, in a way, they [the Priceline Group] didn’t waste any money fighting price wars or as the other Internet company in China, but on the other hand they are one of the largest shareholders of the number one, number two, number three OTAs [online travel agecies] in China. So, that tells a lot about how practical and how forward-looking Darren [former Priceline Group CEO Darren Huston] and his team were. So, we have lots of respect for them.”
Priceline’s only direct stake is in Ctrip, which controls or is among the largest shareholders in online travel agencies Qunar and eLong, respectively.
Read more about Sun’s views about Ctrip, Skyscanner, and the online travel space below. The interview has been slightly edited.
Skift: You’re the new CEO. You made history and right away you don’t catch a break because now you’ve got a big job in having to integrate Skyscanner.
Jane Jie Sun: Correct. That’s correct.
Skift: There’s no rest for you. No time to get acclimated.
Sun: No time for rest. That’s right, but I enjoy it. The company grows fast because we are moving very rapidly towards that level …
Skift: Right. Can you tell me a little of the back story about how the Skyscanner acquisition came together? For example when did you first meet with them to talk about it and why you picked Skyscanner.
Sun: Yeah, sure. Skyscanner is very strong in technology. They’re good at the front end search and applied comparison. It’s very technology-driven, and what Ctrip does is the fulfillment cycle. So when the customer actually compare the price, when they find the ticket they need to book through Skyscanner right now do not have the capability to do that.
We have the industry know-how and the system bookability. It would be increasing their earnings ability and enhancing the user experience as well. So we feel it’s a win-win partnership so that’s why we made a pitch.
Skift: Can we expect because you have all this fulfillment capability that Skyscanner will now get much more into actually doing flight bookings instead of just search?
Sun: Correct. Gradually they were moving to it. With the partnership we established among the two teams that will help them to speed up the process.
Skift: To become a booking site?
Skift: I’m wondering, we’ve seen when the Priceline Group acquired Kayak, they decided to expand Kayak internationally but only on a profitable basis. It wasn’t, invest whatever they can so they can grow them fast. What do you think your strategy is going to be? Are you going to seek to grow Skyscanner very quickly even though it’s at a loss? Or, will you be more prudent?
Sun: Skyscanner, every since they were established, it’s always profitable company. So they are very careful in terms of balancing of growth and also delivering earnings. So that’s why we feel the company is very solid. Now, in order to have the fulfillment capability they need to also build a solid team. We can pass along our industry knowledge to them and help them to build a service team. It might take some time. But, I think you have a little bit cost ahead of you, but once the service team is built they would be able to earn more to cover these costs.
So, in the long run the net profit should be increased.
Skift: Got it. And will they also get into hotel booking?
Sun: Skyscanner is strong in air. So, air definitely is the important piece for their business. So we will be focusing on building global coverage of air ticketing first. And then add other services to it. For example, if you look at our inventory, we also have train product, we also have rental car, we also have local attraction tickets. Ctrip offers comprehensive products. In all of these, we will be able to open all these products to them.
Skift: To Skyscanner?
Skift: Why Skyscanner? Did you look at other companies? Did you look at companies like, Hipmunk or CheapOair or Momondo? Why Skyscanner and when did you start meeting with them to talk about it?
Sun: I think the companies we look need to have very strong entrepreneurship and also their technology needs to be quite advanced. So there are not so many. If it is too local or too small it doesn’t really help us too much. Because every year we book about 100 million to 150 million tickets. The counterparts we work with need to be able to handle a similar size or more for a meaningful partnership.
Also, some companies are available, and some are not. When we heard about Skyscanner we met with their team. We just felt this company and how driven they are, how customer-oriented they are, that we share a lot of common philosophy in terms of putting customer first, investing heavily in technology. So, there are lots of things we can do together. We feel very much that it’s an excellent partnership.
Skift: Did Skyscanner put themselves up for sale? Was it a competitive process with other companies bidding?
Sun: Yeah, there were … Some of the investors … the term of their fund was already up so they needed to liquidate some of their assets. It’s an opportunity for Ctrip to move in.
Skift: OK. And were there other companies involved?
Sun: We do not know who the other companies were that were involved. But, we feel that based on our knowledge of the air industry and their knowledge of the air industry, it’s very complementary. And the synergy will be great … So, we’re very much looking forward to it.
Skift: So, were there other companies involved? Or, you just don’t know who they were?
Sun: Yeah, we don’t know. We didn’t talk about, you know … they signed a non-disclosure agreement so we couldn’t ask the confidential information. We were just focusing on our own piece.
Skift: And, how long ago was the non-disclosure agreement signed? Was it a long process?
Sun: We moved very quickly. So, we normally are very prudent. We worked with the Skyscanner team on the Asian air ticket side and we can see their growth is tremendous. It’s small but it’s very steep. So, we know they have a very solid business model, very solid customer-orientated philosophy. That’s why when the opportunity came we moved very fast. Because, if t’s a good company then you just make a move and see if it works out.
Jane Sun Becomes Ctrip CEO
Skift: Excellent. So, now you’re CEO. First of all, was this sort or a surprise? Or was this part of long-term planning? Why did you become CEO at this time?
Sun: Well, we plan everything very methodically. I joined the company as the CFO 11 years ago. And then not only was I taking care of the CFO position, I also went out of my way to help other operations. So, after few years I was promoted to be the COO of the company. And then, I was also leading all the negotiations internationally and domestically for the company’s major deals. So, the board promoted me to be the co-president of the company.
And, about one year ago [then-CEO and current executive chairman] James Jianzhang Liang also wanted to grow the new leadership and leave some rooms for the young … to grow into. So, we talked about an action plan. It took me about almost one year when James talked to me about the plan. So, I took on more and responsibility this year and we finally made the switch. And, James will still be very involved. He will be the executive chairman and will look at the big picture, particularly our internationalization, our innovation, IT, and our strategic investment.
Skift: Who is the senior executive? At Expedia, Barry Diller is the chairman and senior executive while Dara Khosrowshahi is the CEO. Is it similar at Ctrip or are you the senior executive?
Sun: James founded the company. So he is the chairman. I will report to the board. So, obviously he is my boss. But, he and I have been working together for more than 11 years. And, I have the highest of respect for James. And, I learned a lot from him. So, moving forward I will still report to him and I will work side-by-side with him …
Skift: And, you said that you were handling a lot of the domestic and international negotiations. Did you handle the Skyscanner negotiation?
Sun: For Skyscanner, James and I, our CFO, and the CEO of our air-ticketing business were all very involved.
Ctrip’s Global Strategy
Skift: When you guys recently had a ceremony in New York City after acquiring three U.S. tour operators, I spoke to Ctrip’s Tao Yang and he said that your ambitions are global, and that you were actively working on a plan to start a U.S. point of sale business, selling tickets from the U.S. to China and to Southeast Asia. So, can you tell me little bit more about what your U.S. strategy is and where it stands?
Sun: Yeah. First of all, we need to move very methodically. So the first priority obviously is domestic China because that’s where we grew up. The second one will be the Greater China area. So, we already made the investment in ezTravel, which is number one in Taiwan. And, then we also made move to invest in the largest player in Hong Kong [Wing On Travel] so we’re very well-positioned there. A further step will be the greater Asia area. So, that is also very close to China. And, we need to have a very strong footprint there. And, then the next step probably is English-speaking countries. So, that’s our first step.
And, we also look at where our native Chinese customers are going. And, we need to support them from the local perspective. So, we see that visa restrictions to the USA are being lifted. So, that’s why we need to make sure the volume growth in the United States is very well-supported by the local resources. And that is why we made an investment in the three companies in the United States located in the most popular travel destinations, which are favored by Chinese tourists.
Skift: You invested in India’s MakeMyTrip, now you’ve acquired Skyscanner, which is strongest in Europe. So a big investment in the U.S. is not really not on the immediate agenda?
Sun: Correct. No, no. I think with the Skyscanner investment there are a lot of things we need to fulfill so we will be very focused on this and methodically make sure our investment will generate a great yield for us. For the time being.
Ctrip’s Relationship With the Priceline Group
Skift: When Darren Huston was CEO of the Priceline Group he had a quarterly call and said that Ctrip and Priceline were like first-cousins because of things like the culture and the speed of doing things and stuff. So, now Priceline I think has about a 9 percent investment in Ctrip and …
Skift: Priceline owns Kayak, and you have Skyscanner, a competitor of Kayak’s. So how does the Ctrip-Priceline Group relationship evolve?
Sun: We have very good relationship with the Priceline Group. We have the highest of respect for them. I was looking at the different Internet companies in China. Most of the international Internet companies do not do very well in China. So, for example, Google withdrew from China; eBay was shut down by Alibaba. So, the only one that did very well is Priceline and they didn’t burn lots of money like Uber did in China. Instead, we took a very peaceful way. We had a very friendly partnership with each other and we give them allowance to invest up to 15 percent of the total.
So, in a way, they didn’t waste any money fighting price wars or as the other Internet company in China, but on the other hand they are one of the largest shareholders of the number one, number two, number three OTAs [online travel agecies] in China. So, that tells a lot about how practical and how forward-looking Darren and his team were. So, we have lots of respect for them. So we cooperate quite a lot. In the global space, we use our inventory as well as Booking’s inventory. For domestic China, Booking uses their own inventory as well as Ctrip’s inventory.
But, we help each other a lot. And, also with the Priceline Group’s other brands, they have Rentalcars.com and Agoda etc. We all team up with them to an extent. Because Ctrip has everything you need when you travel. So, we start with air tickets and we have hotel, rental cars, chauffeur business, train, bus, vacation, TripAdvisor reviews and cruise etc. We have tons of products. Whatever you need for travel, our goal is Ctrip will help you to get there.
Skift: Ctrip seems to be doing a hybrid, online travel agency/tour operator model. The way you want to take care of customers while they’re traveling in the destination seems like almost a hybrid model.
Sun: Yeah, Ctrip probably is the only company that offers such a comprehensive product offering. Because if you look at Booking, they focus on hotel only. If you look at Expedia they offer hotel and tickets, and maybe some combination of both. They don’t do vacation, they don’t do the other elements. But Ctrip does almost everything.
Skift: So, you just took over as CEO, what do you plan on doing differently then has been done before? Do you plan on changing anything?
Sun: My background is I was born in Shanghai and went to Peking University Law School, and then I went to business school in the USA and worked in the Silicon Valley for more than 15 years. So, with this background I know the international business side very well and I also know Chinese culture very well. And because of my background from my CFO days we’re also very strong in raising funds, if it’s necessary. And taking a company from a domestic one to a domestic company abroad. With all these things combined, I think, we will move very fast to be able to serve our customers well when they move from China to the rest of the world.
Skift: So because of your international background you’re very well-positioned for the next growth phase of Ctrip?
Sun: Yes, very much so. So, for international, In order to grow the business you need international talents to do that. so my background will be very helpful for the next phase.
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Photo credit: Ctrip CEO Jane Sun says the company's priority is domestic China but her international experience, including in Silicon Valley, will be put to use as it expands in Asia, Europe and English-speaking countries. Ctrip