Below is the transcript of a CNBC interview with Jane Sun, CEO, CTrip and CNBC's Geoff Cutmore. The interview took place at CNBC's inaugural tech conference, East Tech West, in Nansha, Guangzhou.
GC: Thanks, last but not least, as they always say, thank you so much, Mandy, for that, and Jane, terrific to have the opportunity-,
JS: Thank you.
GC: To talk with you again. We've had some really interesting conversations up here, both with people at the very early stage of the road that your company has travelled, and some a little bit further down the road. What's becoming clear, it seems, is that the investing environment has become a little bit more difficult-,
GC: At the VC, private equity level. I wonder if you could just offer us some reflections on some of the challenges, as you see it, for perhaps other companies in your space, at the moment, trying to get a foothold? I mean, maybe that's a good news story, for CTrip, in a way-,
JS: Yes, yes.
GC: But just explain how you see the travel and leisure sector.
JS: Yes. For travelers, I think the segment we are targeted at is relatively resilient, so we are targeting at people who are making $10,000 USD per person, and that segment, relatively, is more resilient than the people making less money. So, what we have seen is safety is very important for these travelers. Secondly, the direct flight routes is very important. Whenever the airlines open a direct flight, we can see the increase to these countries or cities. Thirdly, the people who want to go to Europe, or Australia and New Zealand, or Asia, I think they all want to feel-, to be welcomed, and that feeling is also very important. So, whenever I travel around the world, when I see these cities, meeting with the state governors, I always try to make sure, if they have the will to receive more tourists, they have these three things in mind. And we also designed a program called Welcome China program, so Chinese customers, on the first couple of days, they are very daring to try different food, but after a couple of days, they will miss their food, they like to have hot teas, you know, little things will be very important. The road signs, if they have a little Chinese on it, so they feel, 'Oh!' very comfortable, that's all very comf- very, very well.
GC: So, all of those things are about tailoring the specific-,
GC: Experience to the Chinese traveler-,
GC: But just circling back to my first question, there is a sense that the Chinese economy is slowing, at the moment, and the middle class traveler, who is just emerging, in many senses, has less disposable income-,
GC: To spend on your experiences. Are you seeing any of that, in all the data you collect, and what does that mean, in terms of maybe profitability and margin for you?
JS: Yes. So, for us, I think, if we look at our Diamond users, no impact at all. If we look at the new, upcoming, young people, instead of travelling for example, abroad, now they are travelling domestic. And for certain countries, if the currency trades against RMB negatively, then these regions will be impacted. But if the Chinese dollar is holding against certain currencies at a steady level, it's not impacted.
GC: One of the reasons it's so good to have you here is you are a big user of data-,
GC: And you've invested heavily in systems that allow you to mine, and use that data to react very quickly to trends.
GC: Can you give us a sense of just how quickly you're able to change the pricing of what you're offering, a hotel package, perhaps, or a flight plus a hotel, based on the feedback you're receiving? How quickly does that process happen?
JS: Oh, that's instant. So, we connect with all the hotels, every day we host about-, we have about 300 million registered users. Based on where the customers are, we try to reach out to the suppliers, and find the best rate for our customers. And we also innovate a lot of new products. So, for example, China right now has two thirds of the high-speed railway, and the speed is 50% faster than the rest of the world, yet the price is one half of the price we have in Europe. So that gives a huge potential. So, CTrip innovated this product called High-speed Railway Package, so along the way, when you travel, for example, we went to the Hollywood of China, where all these movies were filmed, it used to take 4.5 hours, now we can get there by 1.5 hours. So we, you know, were able to negotiate a very good deal with the hotels, and bundle it together, we negotiated very good deals with the attraction tickets, bundle it together. So, that is something that, based on what data, we saw our customer has the need, we reached out to the vendors, and were able, using our huge volume, to negotiate a very good deal for our customers.
GC: Now, you've made investments overseas, and international expansion, I think, is one of your key objectives for next year. How frustrated are you that you don't have the access to the same kind of data, or that actually, the infrastructure or the setup reacts very differently to how you expect it to behave, based on your experience here?
JS: Mm. Yes, we made a very good investment-, two very good investments, in UK companies. One is Skyscanner, they have about 200 million users, MAU, so their data is very important for us, and the brand is very strong, their strength is in Europe and the rest of the world, so we collaborate very closely. Before CTrip made the investment, Skyscanner is a price comparison engine, where it compares all the prices, but when you select one vendor, it will take you to the other website. Now, in the PC world, that model works, but in the app world, the user's experience is not the best. So, what we do is we insert our direct booking facility on their website. If you select Trip.com, which is our brand outside of China, you will be able to fulfil everything within their sites, to the conversion rate increases, and we are able to cross-sell hotels, etc. So it has been a very successful initiative on our side, and so we will leverage their knowledge. Another investment we made is called Travelfusion, it's a B2B small company, but they are a traffic hub for low-cost carriers. Again, before CTrip made the investment, the growth probably was somewhere around 10 to 20%. But after we made the investment, every year, they enjoy 50% growth, because the volume CTrip brings them is just tremendous, the margin is very high. So that's the type of synergy we would like to see, one plus four equals to five.
GC: There's a very big focus, at the moment, on privacy, and data usage, and some companies in the west are under a lot of pressure, like Google, and Facebook, and so forth. Since you're a Chinese company in the technology space that's already been able to make the leap, and access data in the UK, could you share, perhaps, some of the challenges, and some of the frustrations, and how you've had to modify your approach-,
GC: To fit in with different data privacy regulations?
JS: Yes. We are quite young, in terms of our globalization, so in a way, it's good, because we are very small, in portion, so we try very hard to stay in compliance with all the rules and the regulations. But I think, again, the big players in our portfolio are the companies we've invested in already, in Europe, in North America, etc. And these companies, they have the experience, how to work with the regulators, and make sure they stay in compliance.
GC: Which is a very interesting example, because people in the western business field have complained that they feel they need to partner, to come in to the Chinese market. What you're saying is actually you were pleased to partner, going in to the western markets-,
JS: Yes, yes.
GC: Because it got you up to speed very quickly.
GC: As you look at 2019, I've talked about your international strategy, but what else are your key deliverables? What are you planning for next year?
JS: Mm. Yes. I think we have two fields, two tremendous growth ahead of us. First of all, within China-, although CTrip is a very dominant player in China, we still only account for maybe 7 to 8% of the overall travel market, and that market is, you know, if we are talking about GDP growth rate at 6%, the industry is worth double that, to grow at about 10%, and CTrip normally can double that number. So we are looking at a very fast growth still, within China, so to further penetrate in to the area where the GDP growth per capita is growing will be very important for our domestic team. The second thing is, also, because China is so huge, we have 1.3 targeted audience ahead of us, so we've hired 8,000 engineers to develop a network originally designed to be utilized by Chinese customers, but if Chinese customers can use it, why can people in Korea not use it? Why can people in Singapore not use it? Right? So, that network is very scalable, so our task is making sure the great assets we've built is not only limited by utilizing by Chinese customers, but also we are able to let in customers outside of China to use that network.
GC: Something that I know you've been talking about, and looking at, is smart hotels.
GC: What innovations, including smart hotels, are the traveling public going to see, in the next few years, that maybe they don't know about yet?
JS: Yes. I think smart hotel, it has many different stages, different phases. So, for example, we have worked on facial recognition, so if facial recognition is done, you can automatically check in. And on the phone, we have a smart key, so on the key, you can turn on your air conditioning, and you can get in very easily. And a lot of people also say, 'Oh, if the robotic technology takes over, maybe we can use robots to carry out luggage to our home, and I think this will happen, because the labor cost inevitably will increase. Using machines to do something that is logic, that is programmable, is a very feasible way to make sure the customer is satisfied, and efficiency is improved.
GC: Do you find that the Chinese market is more willing to accept this technology than other markets you operate in? Give us a sense of where you find the take-up easier.
JS: Yes. I think, for CTrip, we have 50% of our customers younger than 35 years old-, oh, 70% is younger than. So that number is very big. And Chinese people are very innovative. They like to try. I think an ideal hotel room, in our young people's mind, will be a Star Wars hotel, or something, you know, you have little-, you know, a futuristic theme designed in it. I think that will all happen. I think wherever you see a desire, there will be a need, there will be an opportunity.
GC: Tell us something that people don't know about CTrip. I think your company is well recognized in this marketplace, and you're very well known, as a pioneer in this area. But perhaps share with our audience something they won't have heard anywhere else, either about you, or about the business, that isn't commonly known.
JS: Mm. CTrip is not only an online company. I always tell our young employees, with an average age of 25 to 26 years old, that their mission is not only to issue a ticket, or booking a hotel room. Rather, when they do that, they are linking the world together. So, in Chinese, it's always better to travel 10,000 miles than to read 10,000 books. While we are sending people to the world, bringing people to China, we hope we can promote global peace, promote international peace, and I think, at this moment, it becomes very critical, for the benefits for the global people. The second thing we feel very proud of is, since I am the only (female) CEO in the high-tech industry in China, I feel tremendous responsibility to bring up the female leaders in the company, so we have adopted many policies that are very encouraging and inspiring. For example, when we still were under the one-child policy, our employees, when they had the second child, they would pay a fine, so I would authorize a no-interest loan, for employees to pay off the fine. And now we have a two-child policy, but we still think we should do more. So what we do is, for a lady who is pregnant, we give them taxis for free. When the baby is born, we give them 800 as a welcome gift, 3,000 as education fee. When a female comes back to work, we offer flexible hours. And now we start to hire lots of people who have degrees in both countries, and they are a little bit-, they spend more time in college. So instead of having the female workers to struggle, 'Should I start a family first, or should I work first?' if they decide to have their eggs frozen, CTrip will pay for that, and that is very progressive, and our female employees really enjoy the policies, I think, that give them good options, so they don't have to fight when they make their choice. So, I hope, with all these progressive policies, we will – with the government, and with the enterprise, with the individual families – we will solve the population issue, by contributing our part to China.
GC: Jane, thank you so much for being with us. It's been-,
JS: Thank you.
GC: A real pleasure, listening to how you're going to model the company, going forward. Thank you.
JS: Thank you so much for having me. Thank you.
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