In 2012, we recommended buying CTRP:

At first sight, Chinese online travel agency Ctrip.com International, Ltd. (NASDAQ:CTRP) should be a no-brainer. Internet and tourism are sectors with enormous potential in China. There is little doubt about that. What's more? The company has established a large, perhaps dominant position with a market share of over 40%. Internet bookings comprise just 10% of travel industry sales, but that percentage is likely to rise significantly, as it has done in richer economies. On that move alone Ctrip should see significant and continued revenue growth, although Ctrip is by no means exclusively an online travel agency. Online bookings account for 45% of total bookings, but that is growing.

Ctrip.com Attractively Priced, Despite Margin Pressure - Ctrip.com International, Ltd. (NASDAQ:CTRP) | Seeking Alpha

Then in 2013, after the shares had nearly tripled, we added some caution:

We believe that Ctrip is very well placed to benefit from all four of these trends and indeed, the shares jumped on another strong quarter and outlook at the end of July, beating both top-line and bottom-line by a considerable margin. However, as indicated in our first article, competition, and hence margin pressure, remains a concern, so let's start there.

Ctrip Shares Tripled, Can They Travel Higher? - Ctrip.com International, Ltd. (NASDAQ:CTRP) | Seeking Alpha

We can see both arguments playing out even today. Revenue growth is still very strong, but margins have come under even bigger stress because of heavy investing (mostly in mobile platforms for smartphones and tablets), discounting and marketing.

Here is the spending part:

"Success is increasingly a function of the ability to spend on marketing and invest in technology, whether that be in mobile or simply ongoing site optimization," he wrote. Adding to mobile users' desirability is the sense that they are "stickier," say analysts, meaning they are likelier to spend more time on an app they like and come back to it time and again.

Ctrip May Tighten Grip On China Boom After Taking Stake In Rival Site eLong - Yahoo Finance

And all the spending is having results:

The results of Ctrip's and Qunar's efforts are apparent. Ctrip's mobile app downloads in Q1 soared more than 550% from a year earlier to hit 800 million, and about 70% of all of the company's online transactions in Q1 were mobile. "Ctrip has definitely created the biggest footprint in the (mobile) space," Piper Jaffray analyst Mike Olson told IBD. "Given that mobile will be the majority of online travel transactions in China going forward, it's going to be a huge advantage.

Ctrip May Tighten Grip On China Boom After Taking Stake In Rival Site eLong - Yahoo Finance

However, margins have been severely compressed as a result:

Ctrip's operating margin, which was 45% in 2010, plunged to -14% in Q4 2014. Olson said margins have been hit hard due to heavy discounting, but also because of mobile development. Whether Ctrip can return to an operating margin north of 20% in the next 3-4 years is difficult to say, he added. Operating expenses grew almost 69% in Q1. At least on the mobile front, the company is probably dialing it down, said Olson, noting that its operating margin bounced back to -1% in Q1.

Ctrip May Tighten Grip On China Boom After Taking Stake In Rival Site eLong - Yahoo Finance

The long thesis is that the most of the spending will be behind us and that Ctrip's acquisition of a large stake in a competitor will improve pricing power

Ctrip.com International Ltd. surged to a record after it purchased a 38 percent stake in Elong Inc., improving the outlook for pricing and profits in China’s increasingly competitive online travel-booking industry.

Ctrip Rallies as Elong Purchase Cools Chinese Travel Competition - Bloomberg Business

However, there is a new competitive threat looming:

Alitrip, essentially the combination of Alibaba's (BABA) Taobao and Tmall travel sections, debuted last October. It allows consumers to book travel, reserve taxis and even apply for travel visas. The brand is "more bark than bite" for now, said Olson, and hasn't made much of a dent in Ctrip's lead. But, he warned, "You need to be cautious when such a large and well-resourced competitor is getting into the space. Alibaba's travel arm has a smaller market share in terms of bookings, but it has a trusted online payment platform and a wide consumer reach, Rauch also cautioned. "It signals a more serious entrance of an Internet giant in China," she said. "The potential is huge."

Ctrip May Tighten Grip On China Boom After Taking Stake In Rival Site eLong - Yahoo Finance

And it isn't the only competition looming:

China-based gaming company and Web portal NetEase (NASDAQ:NTES) announced on Friday that it will enter the online travel business when its Lede Technology subsidiary forms an Internet travel firm through a joint venture with China's HNA Group. HNA Group manages airports and is involved in financial services, logistics, aviation, hotel management and other areas.

NetEase Vaults Into Online Travel, Takes On Ctrip, Qunar NTES - Investors.com

Revenue and the main cost drivers:

For the first quarter of 2015, Ctrip’s reported revenue of RMB 2.4 billion or $394 million, representing a 46% increase from the same period in 2014.

Ctrip.com International's (CTRP) CEO James Jianzhang Liang on Q1 2015 Results - Earnings Call Transcript | Seeking Alpha

Excluding share-based compensation charges product development expenses accounts for 32% of the net revenues, increased from 25% in the same period in 2014, and decreased by 39% in the previous quarter.

Ctrip.com International's (CTRP) CEO James Jianzhang Liang on Q1 2015 Results - Earnings Call Transcript | Seeking Alpha

Excluding share-based compensation charges sales and marketing expenses accounted for 30% of the net revenues, increased from 26% in the same period in 2014 and decreased from 36% in the previous quarter.

Ctrip.com International's (CTRP) CEO James Jianzhang Liang on Q1 2015 Results - Earnings Call Transcript | Seeking Alpha

Excluding share-based compensation charges general and administrative expenses account for 8% of the net revenue remain consistent with the same period in 2014 and decreased from 9% in the previous quarter.

Ctrip.com International's (CTRP) CEO James Jianzhang Liang on Q1 2015 Results - Earnings Call Transcript | Seeking Alpha

Excluding share-based compensation charges, operating margin was negative 1%, compared to 12% in the same period in 2014 and negative 14% in the previous quarter.

Ctrip.com International's (CTRP) CEO James Jianzhang Liang on Q1 2015 Results - Earnings Call Transcript | Seeking Alpha

Heavy investment in product development and marketing drove margins negative in Q4, whilst improving somewhat in Q1

In the next decade, the amount of globe-trotting done by Russian tourists will more than double, although it will still be Chinese tourists that spend the most- $255.4 billion a year by 2025- according to a study by payment processing company Visa. This is all due to a new "traveling class" that is being created thanks to increasing global incomes, said Visa, in the study released Thursday. Among those households most likely to travel internationally, Visa's study estimates that spending will reach an average of $5,305 per household, per year, by 2025, which includes average spending such as food and hotel, but not the airline ticket.

Money spent by Chinese tourist will hit record high in 2025: Study

In October, Ctrip and Qunar agreed to combine products and services. Chinese internet leader Baidu (BIDU) owns 25% of Qunar stock, and Ctrip has a 45% voting interest in Qunar. Qunar initially rejected a buyout offer from Ctrip in early 2015.

Chinese Giant Ctrip Q1 Sales To Accelerate On Baidu-Qunar Deal | Stock News & Stock Market Analysis - IBD

CTRP followed its peers like Priceline Group (NASDAQCLN) and Expedia Inc. (NASDAQ:EXPE) and started consolidating the market. In 2015, CTRP has made an acquisition or an investment in most of its rivals, practically creating an impression of one big family in the region. The investments include buying stake in eLong, Inc. (ADR) (LONG) from EXPE, multiple investments by PCLN in CTRP to the tune of $1.9 billion since 2014, share swap with Qunar (NASDAQ:QUNR) giving CTRP 45% voting rights in QUNR in exchange for 25% of CTRP (Baidu Inc. (NASDAQ:BIDU) is a majority investor in Qunar), and other smaller players like Uzai.com, Tuniu (NASDAQ:TOUR), Tongcheng and more. It even went a step further in January 2016 and made an investment of $180 million in MakeMyTrip Limited (NASDAQ:MMYT), India's largest OTA with 40% market share.

Ctrip Stock Ready To Sizzle, But Only One Obstacle Remains - Ctrip.com International, Ltd. (NASDAQ:CTRP) | Seeking Alpha

These investments makes one wonder about the contours of the OTA market in China in the next two or three years. Ctrip has not only been investing in these companies, but has also ramped up its mobile platform to a great deal. It currently boasts of cumulative downloads of mobile apps in excess of the 1 billion mark. Qunar-Ctrip partnership will lead to a single platform cornering close to 70%-80% of the total market. If other investments in rivals are also accounted, then the market share would be even higher. The obvious result of this consolidation is that the firm need not spend similar amounts on discounts to get customers. It also gives the firm a much stronger hand while negotiating with hotels and other firms.

Ctrip Stock Ready To Sizzle, But Only One Obstacle Remains - Ctrip.com International, Ltd. (NASDAQ:CTRP) | Seeking Alpha

"Global travel continues to be an attractive investment area," Sandra Horbach, cohead of Carlyle Group's US buyout team, told Business Insider. "Consumers are increasingly shifting their spending from things to experiences. Travel will also benefit from rising discretionary incomes in many emerging markets."

Private-equity firms are piling into tourism investment - Business Insider

Asia’s aviation industry, meantime, is expanding at a breakneck pace with 100 million new passengers taking to the skies every year, according to Boeing. In the next two decades, the world’s fleet of 22,000 aircraft is set to double.

Missing Malaysia Jet MH370 Weeks Away From Keeping Secrets Forever - Bloomberg Business

From The Council of Foreign Relations:

Sum it all up though, and the number of tourists travelling abroad in 2014 looks to have increased by about 10 percent (from 100 to 110 million or so) in line with past growth. Look at this Goldman Report.* With an increase in nominal spending per tourist it is possible to imagine tourism growth of say 20 percent. Not 80 percent. 2015 seems similar. Visits to Hong Kong and Macau fell.

So what is going on in the balance of payments (BoP) data? No doubt many things. China seems to have revised its methodology for “counting” tourism in the balance of payments in some way, leading to a jump in both imports and exports in 2014. Tourism imports rose by a giant $100 billion in 2014 (with a slowing economy) after growing by $40 billion in 2013. Tourism exports were adjusted up too, but not by nearly as much.

The result is a data series that doesn’t quite map to other indicators of tourism, as well as an important break in the data. And of course it is also the case that expectations about the course of China’s currency against the dollar started to change in 2014, strengthening incentives for disguised outflows.