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One-Time Significant Events Constrict Tourism Growth

China special - insight from eLong's CEO Guangfu Cui

eTN  Aug 29, 2008

In the run-up to the Olympic Games in Beijing, the travel industry, including online travel players, had projected a rosy picture for the industry.

But, in the last couple of months, several stakeholders including travel suppliers and intermediaries, have acknowledged that the Olympics and other events in 2008 have served to constrict the growth in tourism flows to and from China.

Assessing the situation from an online travel sector's perspective, Guangfu Cui, chief executive officer, eLong told's Ritesh Gupta, "Yes, it has been a tough year for the travel industry due to many one-time but significant events - the snowstorm, the Sichuan earthquake, the shortened May holiday, Olympic Games… Without these one-time but significant events, the market would have been better."

Cui, who is scheduled to speak during EyeforTravel's Travel Distribution and Sales China 2008 conference, scheduled to take place in Beijing on September 24-25, added, "There might also be some other factors which impact the travel industry in the short term, i.e., the difficulties that the small and medium enterprises face right now. Despite these short-term challenges, we are very optimistic about the long-term prospect of the travel market in China. One of the key drivers is the ever-increased consumption power of Chinese consumers."

From an operations' perspective, eLong's total gross revenues has increased 10 percent year-on-year to RMB86.0 million and net revenues increased nine percent year-on-year to RMB80.8 million in the second quarter.

However, operating loss increased year-on-year by RMB5.7 million to RMB7.9 million, driven primarily by increased revenue offset by greater service development and sales and marketing expenses, according to the company. Its net loss from continuing operations increased year-on-year by RMB18.4 million to RMB20.3 million, driven primarily by a RMB 9.6 million increase in sales and marketing expenses, a RMB4.5 million increase in foreign currency exchange losses and a RMB7.3 million decrease in interest income compared to the prior year quarter, due to the appreciation of the Renminbi and lower US interest rates.

According to Cui, eLong has made significant improvements to its products and services and considers the ongoing phase as an ideal one to invest in brand awareness and to aggressively promote its product offerings.

"We are doing the right things and believe that our hard work will pay off as we develop our brand and the market rebounds," said Cui.

On major achievements this year, Cui said, "We have made several breakthroughs this year, both call center and website. We have really turned around our call center service as the two survey results showed."

He explained further by saying:

1. Our research in June 2008 indicates that 99 percent of our customers are satisfied or very satisfied with the eLong call center service, of which 88 percent are very satisfied. Customers are asked to give immediate evaluation of our service at the end of their calls to our call center. The service quality is classified as Very Satisfied, Satisfied, Average, and Not Satisfied. In June 2008, approximately 30 percent of our customers gave their evaluation. We got the above-mentioned excellent result.

2. In addition to our internal research, in March/April, we employed an external market research company and conducted the first Mystery Shopper Research by asking a panel of shoppers to shop and then rate the call center service of both eLong and our key competitor. Customers rated the eLong call center overall slightly better than our key competitor.

"Another key achievement was related to our website. We upgraded our website by implementing quite a few new applications. is now the leading website for online booking in China. We saw our online bookings grow faster than offline bookings since our upgrade," shared Cui.

eLong expects net revenues, net of business tax and surcharges, for the third quarter of 2008 to be relatively flat, within the range of RMB75 million to RMB83 million, or –5 percent to 5 percent compared to the third quarter of 2007.

EyeforTravel's Travel Distribution and Sales China 2008 Conference

Guangfu Cui, chief executive officer, eLong is scheduled to speak during EyeforTravel's Travel Distribution and Sales China 2008 Conference in Beijing on eptember 24-25. For information, click here:

Or Contact: Reece Gladstone at , Phone: +44 207 375 7158

China special - insight from eLong's CEO Guangfu Cui

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