When most people think of Chinese-related travel, they think of Ctrip. Ctrip has the look and feel of any large U.S. travel site, like Expedia (EXPD -commentary - Trade Now). It spends an enormous amount on marketing its brand in China. We saw it in virtually every airport we traveled to during a recent two-week trip. Ctrip's market cap is $5 billion, with a lofty P/E ratio of 54. It makes the majority of its revenue from broker fees on hotel reservations (45%) and air-ticketing services (41%).
Many investors look at Universal as a smaller, undervalued version of Ctrip. If Universal had only half the valuation of Ctrip, this type of thinking goes, there would be an immediate tripling in the stock price. However, this is not a proper way to think about Universal's business or its potential as a stock.
When we met with Universal's managers, they didn't deny that they try to piggyback on Ctrip's well-known brand with U.S. investors. Universal points to its Web site as a means to do travel bookings, with additional call-center support. The company points out its valuation relative to Ctrip. Yet what Western investors need to understand is that Universal, at its core, is a packaged-tour company, not a smaller version of Ctrip.