Eliza Wong
Chinese online travel giant Ctrip Group (携程集团) finds itself at a critical regulatory crossroads as provincial market regulators challenge the company’s controversial pricing practices despite its soaring stock performance and record-breaking financial results. The Zhengzhou Municipal Market Supervision Administration’s recent intervention signals growing regulatory discomfort with platform dominance in China’s digital economy, particularly as it affects small and medium-sized businesses.
Key Developments and Market Implications
Regulatory Intervention in Zhengzhou
The Zhengzhou Municipal Market Supervision Administration (郑州市市场监管局) issued an official administrative warning to Ctrip on September 17, following investigations into the company’s alleged manipulation of hotel pricing through its controversial “Price Adjustment Assistant” (调价助手) tool. This marks the second regulatory intervention Ctrip has faced within months, after Guizhou province authorities included the company in a broader platform regulation discussion in August.
Financial Performance Contrast
Despite regulatory challenges, Ctrip continues to demonstrate remarkable financial strength. The company reported 2024 revenue of 53.3 billion yuan with net profits of 17.2 billion yuan, representing significant growth from 2023 figures. Second quarter 2025 results showed continued momentum with 14.84 billion yuan in revenue (up 16% year-over-year) and 4.85 billion yuan in net profit (up 26%).
The Price Adjustment Assistant Controversy
How the Tool Functions
Ctrip’s Price Adjustment Assistant automatically scans competing platforms for identical hotel listings and adjusts prices on Ctrip’s platform to maintain price competitiveness. The system operates without requiring hotel verification or consent, automatically lowering prices or enrolling properties in promotional activities when competitors offer better rates.
Hotel Industry Backlash
Multiple hotel operators in Zhengzhou jointly filed complaints in June 2024, alleging that Ctrip forcibly enabled the price adjustment tool without consent and repeatedly reactivated it after merchants attempted to opt out. The controversy represents a growing tension between platform operators and service providers in China’s digital ecosystem.
- Hotels report complete loss of pricing autonomy
- Revenue impacts from unauthorized price changes
- Lack of notification or verification requirements
- Inability to permanently disable the tool
Regulatory Response and Legal Framework
Corrective Measures Demanded
The Zhengzhou regulatory authority issued a Rectification Notice (责令改正通知书) on September 4, demanding that Ctrip respect merchant autonomy and cease using technological means to manipulate prices or restrict transactions. Authorities specifically required revisions to service agreements, optimization of pricing tools, and establishment of compliance mechanisms.
Broader Regulatory Context
China’s market regulators have increasingly focused on platform economy practices that potentially violate antitrust principles or unfairly disadvantage smaller market participants. The Ctrip case follows pattern of increased scrutiny on technology platforms’ business practices across various sectors.
Market Dominance and Competitive Landscape
Ctrip’s Market Position
According to Bank of Communications International research data, Ctrip commands 56% market share by GMV in China’s online travel agency market, cementing its dominant position. This market power provides significant leverage over hotel partners who depend on the platform for customer acquisition.
Financial Impact on Hotel Industry
While Ctrip thrives financially, the hotel sector faces mounting challenges. Major hotel chains including Jinjiang Hotels (锦江酒店), Green Tree (格林酒店), and BTG Homeinns (首旅如家) have reported declining revenues and profits through 2024, with key performance metrics showing deterioration:
- Jinjiang Hotels: 6.53 billion yuan revenue (-5.31% YoY), 371 million yuan net profit (-56.27%)
- Industry-wide RevPAR (Revenue Per Available Room) declines across major chains
- ADR (Average Daily Rate) compression throughout sector
- Supply growth of 11.8% exceeding demand increases
Strategic Responses and Industry Evolution
Hotel Industry Countermeasures
Major hotel chains have begun implementing strategies to reduce dependency on OTAs. Huazhu Group (华住集团), founded by Ctrip co-founder Ji Qi (季琦), has instructed properties to limit OTA bookings to under 30% of total revenue. This movement toward direct booking channels represents a significant strategic shift in the industry.
Competitive Landscape Shifts
JD.com (京东集团) has entered the hospitality sector with a zero-commission hotel membership program, potentially disrupting the traditional OTA business model. This competitive pressure may force Ctrip to reconsider its pricing strategies and partner relationships.
Ctrip’s “Anti-Internal Competition” Initiative
In response to growing industry pressure, Ctrip has launched an “anti-internal competition” (反内卷) campaign aimed at reducing price-based competition among hotel partners. The initiative includes:
- Restructuring hotel review system to decouple ratings from traffic allocation
- Optimizing recommendation algorithms to avoid “low-price, low-quality” traps
- Implementing AI tools to help hotels develop incremental market opportunities
Investment Implications and Market Outlook
Stock Performance Analysis
Ctrip’s shares reached record highs in September 2024, surpassing a $50 billion market capitalization that exceeded both JD.com and Baidu. However, recent insider selling by executives including co-founder James Liang (梁建章) warrants monitoring for potential signaling effects.
Regulatory Risk Assessment
Investors must weigh Ctrip’s strong financial performance against increasing regulatory scrutiny. The company’s pricing practices face challenges not only from market regulators but also from competitors offering alternative models with lower merchant fees.
Forward-Looking Perspectives
The tension between Ctrip and its hotel partners reflects broader challenges in China’s platform economy, where dominant digital intermediaries balance market power with regulatory compliance. As authorities increasingly focus on fair competition and merchant protection, platform business models may require significant adaptation.
For investors, the key considerations include monitoring Ctrip’s compliance with regulatory directives, assessing the financial impact of potential business model changes, and evaluating competitive threats from emerging platforms with alternative approaches to hotel distribution. The resolution of these issues will significantly influence China’s online travel landscape and platform regulation approaches more broadly.
Market participants should closely monitor Ctrip’s response to regulatory requirements, particularly regarding modifications to its Price Adjustment Assistant tool and changes to merchant agreements. Additionally, tracking hotel industry initiatives to reduce OTA dependency will provide valuable insights into market evolution and potential disruption opportunities.
