Eliza Wong
The Regulatory Storm Hits China’s Travel Giant
Just as China’s National Day holiday approaches, bringing what should be peak season for online travel agencies, regulatory authorities have delivered an unexpected blow to industry leader Ctrip (携程). The Zhengzhou Municipal Market Supervision Administration’s September 17 announcement of administrative talks with Ctrip has sent shockwaves through China’s travel sector, raising questions about the sustainability of platform business models that have generated spectacular profits while partners struggle.
The regulatory scrutiny focuses on Ctrip’s alleged use of service agreements, transaction rules, and technical means to impose unreasonable restrictions on merchants’ trading and pricing autonomy. This development comes despite Ctrip reporting phenomenal financial results, with nearly 9.2 billion yuan ($1.26 billion) in net profit for the first half of 2025—equivalent to earning over 50 million yuan ($6.85 million) daily.
Timeline of Regulatory Actions
The current regulatory action didn’t emerge from vacuum. On August 5, 2025, Guizhou Provincial Market Supervision Administration had already convened collective talks with Ctrip and four other travel platform enterprises. Those talks addressed potential issues including enforcing “pick one of two” exclusive arrangements, using technical means to interfere with merchant pricing, order cancellations or price increases after confirmation, price fraud, and price gouging.
According to official disclosures, regulators had already issued a “Order to Correct Notice” to Ctrip on September 4, 2025, indicating the investigation had been ongoing for some time. The current regulatory scrutiny represents an escalation of concerns that have been building within the industry.
Behind Ctrip’s Business Empire: Growth and Controversy
Founded in 1999 during China’s internet dawn by four founders with complementary backgrounds—technical expert James Liang (梁建章), industry veteran Qi Ji (季琦), capital specialist Neil Shen (沈南鹏), and management professional Fan Min (范敏)—Ctrip has grown from a 2 million yuan startup to a global travel behemoth. After listing on NASDAQ in 2003 and returning to Hong Kong markets in 2021, Ctrip has built an empire through investments, mergers, and strategic alliances.
The company’s portfolio now includes Ctrip, Trip.com, Qunar (去哪儿), and Skyscanner, creating a global travel service network spanning hotel bookings, air tickets, business travel, and vacation packages. This expansion has positioned Ctrip as the dominant player in China’s online travel market, but recent regulatory challenges suggest this dominance may have come at a cost to partners and consumers.
The Profit Machine: How Ctrip Makes Money
Ctrip’s business model rests on four core revenue streams: accommodation reservations, transportation ticketing, packaged tours, and corporate travel management. The company generates income through commissions, agency fees, value-added services, and financial operations. Accommodation booking represents the primary revenue source, with Ctrip collecting commissions from partner hotels for providing online reservation services.
– Accommodation预订: Commission rates typically range between 10-20%, with some hotels paying over 30% when participating in promotional activities
– Transportation ticketing: Revenue share arrangements with airlines and railway services
– Package tours: Markup on bundled travel products
– Corporate services: Subscription and transaction fees from business clients
According to calculations by BOCOM International, Ctrip commanded a staggering 56% market share of gross merchandise value (GMV) in China’s hotel and travel market by 2024. This dominant position has enabled the company to maintain high gross margins through what industry observers describe as a “low cost, high commission” strategy.
The Complaint Landscape: Mounting Merchant Dissatisfaction
The regulatory action follows numerous complaints from hotel merchants who reported that Ctrip was modifying room prices on their behalf without permission. According to Southern Metropolitan Daily reports from July 2025, multiple hotel operators in Zhengzhou complained that Ctrip私自修改 (privately modified) their room prices listed on the platform.
Hotel managers reported that when price discrepancies were detected, Ctrip’s “Price Adjustment Assistant” would automatically lower their room rates on the platform without notification or authorization. The system also allegedly modified merchants’ promotional discounts without consent, fundamentally undermining hoteliers’ pricing autonomy.
Black Cat Complaint Platform, a consumer rights website, shows over 140,000 complaints when searching for “Ctrip.” These include allegations of unauthorized deductions, unreasonable charges, excessive service fees, and discrepancies between Ctrip’s hotel prices and actual hotel rates. The volume and consistency of these complaints likely contributed to regulatory attention.
Industry Perspectives on Platform Practices
An internet industry insider familiar with the situation told Phoenix Network Finance’s Company Research Institute that the regulatory action primarily aims to combat internet platform misconduct, protect the real economy, and prevent platforms from bullying merchants and disrupting market order.
A tourism industry veteran with over 20 years of experience provided even blunter assessment: “Most hotels on Ctrip are automatically forced to adjust prices. The platform has commission support and can attract traffic—it’s a guaranteed profit for them. But hotel revenues suffer significantly, reducing them to mere ‘workers’ for the platform.”
This power imbalance between the massively profitable platform and its struggling merchant partners lies at the heart of the current regulatory scrutiny.
The Profit Paradox: Ctrip’s Success Versus Industry Struggles
Ctrip’s spectacular financial performance creates a striking contrast with the difficulties facing its industry partners. While Ctrip reported 28.7 billion yuan in revenue and nearly 9.2 billion yuan in net profit for the first half of 2025, major airlines that supply its ticket inventory reported substantial losses.
– Air China (中国国际航空): 1.81 billion yuan loss
– China Eastern Airlines (中国东方航空): 1.431 billion yuan loss
– China Southern Airlines (中国南方航空): 1.533 billion yuan loss
According to 21st Century Business Herald statistics, 15 other tourism enterprises also found themselves mired in losses. The hotel industry faced even more severe challenges, with Ministry of Culture and Tourism data indicating approximately 30,000 hotel closures over two years, 95% of which were independent properties. The national average room rate declined by 6% in 2024.
Technology Investment and Customer Experience Gaps
To maintain its high-profit model, Ctrip has made significant investments in technology. The company began developing large language models in 2013 and launched the first travel-specific LLM product in the industry. First-quarter 2025 data showed that applications like intelligent customer service and driver-guide service monitoring had reduced human costs by 20%.
However, this technological efficiency appears to have created customer experience issues. Gartner research indicates over 60% of users expressed dissatisfaction with AI customer service, citing problems with semantic understanding, rigid processes, and difficulty accessing human support. These issues potentially undermine user loyalty in an industry where experience quality is paramount.
Market Response and Competitive Threats
As regulatory pressure mounts, Ctrip faces challenges from multiple fronts. Airlines have begun fighting back against what they perceive as excessive platform power. Air China, China Southern, and China Eastern have collectively established a prominent presence on TravelSky (航旅纵横), promising “transparent pricing, no bundling, no price discrimination” in an effort to reclaim pricing autonomy and direct customer relationships.
For airlines, OTA platforms have transformed from channel partners to what they view as profit-diluting intermediaries. Years of channel dependency left carriers feeling like they were “working for the platforms,” surrendering critical pricing power and customer data in the process.
Meanwhile, the lucrative travel business has attracted intensified competition from other internet giants. Meituan (美团), Alibaba’s Fliggy (飞猪), Douyin (抖音), and Xiaohongshu (小红书) have all entered the space, threatening Ctrip’s dominance with alternative platform models and substantial user bases.
Leadership Actions Raise Questions
Adding to uncertainty, Ctrip’s leadership has recently engaged in significant stock sales. Following the company’s strong earnings report, co-founder James Liang (梁建章), president Fan Min (范敏), and COO Xiong Xing (熊星) all reduced their holdings and cashed out. While such moves might represent routine portfolio management, they inevitably raise questions about insiders’ confidence in Ctrip’s future prospects amid growing regulatory and competitive challenges.
Regulatory Scrutiny and Future Outlook
The current regulatory scrutiny represents more than a temporary inconvenience for Ctrip. Zhengzhou Municipal Market Supervision Administration used unusually strong language, demanding the platform “adhere to integrity, thoroughly correct unreasonable restrictions, and respect merchant autonomy.” The directive specifically targeted industry pain points like “forced activation” and “inability to exit” platform tools and programs.
This regulatory scrutiny aligns with broader Chinese government efforts to rein in platform economy excesses and protect smaller businesses from dominant digital platforms. The emphasis on “establishing and improving long-term compliance mechanisms” suggests authorities seek fundamental business model adjustments rather than superficial fixes.
Industry analyst Huang Yuanpu (黄渊普), partner at EqualOcean, had previously publicly questioned Ctrip’s practice of “price discrimination” (杀熟) and lack of price advantages, bringing industry conflicts into the open. These criticisms now appear validated by regulatory action.
Investment Implications and Market Outlook
For investors, the regulatory scrutiny presents both risks and opportunities. Near-term earnings might face pressure if Ctrip must reduce commission rates or change business practices. However, successful adaptation to a more balanced platform model could ensure long-term sustainability.
The company’s international growth provides a potential offset to domestic challenges. Second-quarter 2025 data showed international OTA platform flight bookings growing over 60% year-over-year, while inbound travel bookings increased more than 100%. This international diversification could help cushion any domestic slowdown.
Ultimately, Ctrip’s future trajectory will depend on navigating the complex interplay between regulatory requirements, merchant relationships, competitive pressures, and technological innovation. The company that once staged a spectacular comeback during COVID through CEO James Liang’s creative livestreaming sales campaigns now faces a different kind of challenge—adapting its business model to a new regulatory reality while maintaining its market leadership.
Investors should monitor several key indicators: resolution of the regulatory investigation, changes to commission structures, merchant satisfaction trends, competitive market share shifts, and international expansion progress. These factors will collectively determine whether Ctrip’s remarkable profit generation can continue amid evolving market conditions.
For sophisticated market participants focused on Chinese equities, the Ctrip situation offers valuable insights into the broader platform economy regulation trend. Similar dynamics may emerge across other digital platform sectors, making this case study relevant beyond the travel industry. As always in Chinese markets, regulatory understanding proves as important as financial analysis when assessing investment opportunities and risks.
