Is Priceline entering China's travel market? (PCLN LONG CTRP)

Check out the competition section from eLong's (ticker: LONG) latest 20-F filed on June 30th:

Competition

The travel service industry in China is extremely large, highly fragmented and intensely competitive. We compete with Ctrip.com International, Ltd., traditional travel agencies such as CTS, CITS and CYTS, and hotel suppliers that sell their room inventory directly to consumers. The major markets in which we currently compete include the relatively affluent coastal areas of China. As China’s market continues to grow, we may face further competition from other new domestic hotel room consolidators or international players such as priceline.com that may seek to expand into China. We may also face increasing competition from hotels and airlines should they further expand into the direct selling market or engage in alliances with other travel service providers besides us. We compete on the basis of brand recognition, selection, price, ease of use, accessibility of information, breadth of services offered, convenience, and customer service and satisfaction.

Comment: Priceline and Hong Kong's Hutchison Whampoa already jointly operate a site for travelers leaving from Hong Kong and Singapore. An excerpt from a recent article in the China Daily (June 22, 2005):

....Since its launch in 2002, Priceline, a unit of the Hutchison Whampoa Group, has, in a short period of time, emerged as the leader in online ticketing and travel bookings in Hong Kong. Along the way, it has garnered accolades from Internet icons and customers alike, including best overall travel site by Yahoo's Internet Life magazine and best online travel deals, in a survey by global market researcher Millward Brown.

....When looking to the future and its mainland prospects, Ma (Tony Ma, CEO of Hutchison-Priceline Travel Limited) says any foray there depends on the resolution of a critical issue. "The mainland offers huge potential, but does not have a credit card payment system in place. This is why we cannot enter the market yet. At the moment there is no way to verify or accept real-time transactions and this is something we need for our business."....However, "we expect that this will happen in the next few years. Certainly before 2010," he says. Indeed. Recent reports suggest that a full-scale credit card service might be in place ahead of the 2008 Olympic Games in Beijing, as evidence of the mainland's maturing economy and to capitalize on the expected influx of foreign visitors to the city. In the meantime, "we will keep an eye on the market," says Ma. "If the situation changes, we will make a move."

Priceline (ticker: PCLN) President and CEO Jeff Boyd from PCLN's Q3 2004 earnings results conference call (November 2, 2004)

....As I think many of you know, we have got a venture in Hong Kong with our partner and shareholder, Hutchison Whampoa. Hutch owns 85 percent of that venture at this point in time, and it is operating in Hong Kong, Singapore and eventually Taiwan. I think that the market there is still very much in its infancy, and while there has been a lot of capital markets interest in travel businesses in China in particular, many of those businesses are off-line businesses that are really just in the process of trying to develop a strong online product distribution and ultimately business flows.

Our business in the Asian market will be through the Hutchison Priceline venture. They have license to our business model and to our intellectual property and so forth. I think the business is very, very small right now, but it is positioned to engage in that market as the market conditions improve.

(Quotes are from the CCBN StreetEvents transcript.)

Comment: Is Priceline planning to enter the mainland China travel market? eLong did single them out as a possible competitor. While Ctrip's (ticker: CTRP) recent 20-F made no mention of possible competition from Priceline, a move into the mainland's fragmented travel market is a logical step -- especially since neither Ctrip nor eLong has exclusive supplier relationships, fixed costs are low and barriers to entry are minimal. Priceline also enjoys the support of mammoth conglomerate Hutchison Whampoa.

PCLN chart.

Traveling to Beijing, China? Read the Radical Travel Guide to Beijing, China here.