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Ctrip's Chinese Internet Travel Profit Slows In Q4 2008

Last year was supposed to be fantastic for Chinese travel websites as they planned on the Beijing 2008 Olympics to push them to higher revenues, but Ctrip.com's unaudited financial results for the fourth quarter and year ended December 31, 2008, show that the travel industry is starting to crack under pressure in China from the global financial crisis.

While Ctrip.com reported today that its net revenues were CNY396 million for the fourth quarter of 2008, up 11% year-on-year, and gross margin was 77% for the fourth quarter of 2008, compared to 81% in the same period in 2007, the company's income from operations was CNY117 million, down 8% year-on-year. Operating margin was 30% in the fourth quarter of 2008, compared to 36% during the same period in 2007. Net income dropped to CNY121 million in the fourth quarter of 2008, down 10% year-on-year.

"Despite the challenges in the travel industry in China, our team delivered a solid result in 2008. We strengthened our market leadership, enhanced our vendor relationship, elevated our customer service level, improved our operation efficiency, and achieved a steady revenue and earnings growth," said Min Fan, CEO of Ctrip. "In the near term, we remain cautious about the global economy. We will prudently manage our business and capitalize the opportunities ahead of us."

Though the last quarter of 2008 showed a worrisome trend, the year overall did have positive results, though perhaps not as high as investors had hoped. For the full year 2008, net revenues were CNY1.5 billion in 2008, up 24% from 2007. Gross margin was 78% in 2008, compared to 80% in 2007, and net income was CNY444 million in 2008, up 11% from 2007. For the first quarter of 2009, Ctrip.com expects to continue the year-on-year net revenue growth at a rate of approximately 5-10%.

Hotel reservation revenues amounted to CNY211 million for the fourth quarter of 2008, representing a 7% increase from the same period in 2007, driven by a 11% increase in hotel room reservation volume, which was partially offset by a decrease in commission per room. Hotel reservation revenues represented a 13% increase from the previous quarter, primarily due to increased hotel booking volume. For the full year ended December 31, 2008, hotel reservation revenues were CNY764 million, a 13% increase from 2007. The hotel reservation revenues accounted for 48% of the total revenues in 2008, compared to 53% in 2007.

Air ticket booking revenues for the fourth quarter of 2008 were CNY166 million, representing a 7% increase from the same period in 2007, driven by a 41% increase in air-ticketing sales volume, which was partially offset by a decrease in commission per ticket. Air-ticketing revenue for the fourth quarter of 2008 remained relatively the same as the previous quarter. For the full year ended December 31, 2008, air ticket booking revenues were CNY659 million, a 31% increase from 2007. The air ticket booking revenues accounted for 42% of the total revenues in 2008, compared to 39% in 2007.

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