(Yicai Global) Dec. 27 -- China International Travel Service Corp. is abandoning its travel agency business to focus on duty-free retail after intense competition hacked away at its profit margins in the sector.

The Beijing-based firm plans to sell its wholly owned unit China International Travel Service Co. to its own controlling shareholder, CITS Group, for CNY1.8 billion (USD261 million) in a private deal, CITS Corp. said in a statement on Dec. 24.

Competition in the offline travel market has become increasingly fierce as online services change the way people organize their trips. CITS Corp.'s earnings growth has continued to slow in recent years due to the lowered margins, and even declined last year. The unit contributes little to the overall profitability of its parent, the statement added.

CITS Group also plans to send CITS Corp. a 51 percent share of Hainan Provincial Duty Free to give the unit a leg up the tax-free sector, where it already owns 51 percent stakes in Sunrise Duty Free China and Sunrise Duty Free Shanghai. Those units run stores at major Chinese airports likes Beijing Capital, Shanghai Pudong and Shanghai Hongqiao.

By handing over the subsidiary CITS Corp. and its parent will also eliminate competition between themselves, the statement said.

Editor: James Boynton