Q1 2024 Earnings Summary
- Trip.com anticipates strong growth in outbound travel, with the industry expected to recover to 80% of pre-pandemic levels by year-end 2024, and Trip.com outperforming the market by 20% to 30%. This rebound is driven by factors such as increased flight capacity and easier visa applications.
- There are significant opportunities in China's inbound travel market and senior population segment, which represent a multitrillion RMB and RMB 1 trillion market opportunity respectively. Trip.com is actively pursuing these markets with tailored products and services, such as the Old Friends Club initiative targeting the senior demographic.
- Rapid growth in Trip.com's international business, particularly in Asia where over 70% of revenue is generated. The international business has recently turned profitable on contribution margins and is expected to achieve healthy margins as scale increases. The company leverages competitive advantages like a smooth mobile app experience, one-stop shopping platform, and 24/7 customer service to expand its market share.
- Declining Average Daily Rates (ADR) and air ticket prices could pressure revenue growth: The company observed a decline in domestic ADR in recent months, influenced by a shift in travel preference towards outbound destinations and increased availability of hotels and flights. Increased supply has put pressure on short-term prices across the board, particularly when compared to the high benchmark established during last year's peak season.
- Intensifying competition in international markets may challenge market share expansion: Management acknowledges that there are many existing players in both the international market and the Asia market. Competing with established companies could challenge Trip.com's ability to gain significant market share, potentially affecting growth and margins in its global expansion.
- Dependency on external factors could hinder outbound travel recovery: The recovery of outbound travel is dependent on factors such as visa application processes and flight capacity, which are still lagging in certain countries. Delays in visa processing and insufficient flight capacity may slow down the rebound in outbound travel, impacting the company's growth projections in this segment.
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Margin Outlook
Q: What's the margin trend and outlook?
A: Management reported healthy margins for the domestic business due to large scale and scalability. Outbound travel has slightly higher margins, thanks to higher average selling prices, while costs remain similar to domestic. The Trip.com business has recently achieved breakeven in contribution margin and is expected to become profitable as it scales. Overall, margins are expected to align with typical seasonal patterns, reflecting strong growth and disciplined cost management. Future margin expansion will primarily come from operational scalability and improved sales and marketing efficiencies, though international expansion may partially offset this. -
Growth Drivers
Q: What are the key growth drivers and new initiatives?
A: The company plans to expand its user base in China's second- and third-tier cities and improve user acquisition and cross-selling ratios. Management expects to benefit from the growth of outbound travel in the coming years. Internationally, Trip.com will focus on Asia to become a regional and global leader. New initiatives include pursuing opportunities in China's inbound travel market, which is a multitrillion RMB opportunity. They are introducing tailor-made products for the "silver generation," representing a RMB 1 trillion market. Additionally, they are combining entertainment activities with travel to meet the evolving demands of younger consumers. Investments in content strategy and AI development aim to enhance user engagement and operational efficiency. -
Business Performance and Outlook
Q: How is recent performance and what's the outlook?
A: Domestic and outbound travel bookings reached new record highs during the Labor Day holiday, with outbound air and hotel bookings surpassing 12% of 2019 levels. Quarter-to-date, domestic travel bookings achieved double-digit growth, led by hotels, and outbound hotel and air bookings have fully rebounded to pre-pandemic levels. Despite year-over-year decreases in hotel ADR and average air ticket prices, Trip.com maintained robust growth in the mid- to high double-digit percentage range. Management remains confident about travel momentum into the summer and beyond, expecting significant growth in outbound travel driven by flight capacity recovery and visa backlog resolution. -
Outbound Travel Recovery
Q: What factors affect outbound travel recovery?
A: Management estimates that by year-end, the outbound travel industry should recover to 80% of pre-pandemic levels, with the company outpacing the market by 20–30%. Key factors include visa applications and flight capacity. Many countries offering free visas, such as Singapore, Malaysia, Thailand, and GCC countries, have seen strong pickup. Recovery in flight capacity to these regions boosts outbound travel. Some countries lag in flight capacity recovery, and management is working to process visa applications and increase flights before the summer holidays. -
Trip.com Business Details
Q: Can you elaborate on Trip.com's business breakdown and advantages?
A: The inbound contribution to Trip.com's business increased from the teens to over 20% of revenues in Q1 2024. Trip.com's revenue contributed around 10% to the total group, with about 70% coming from Asian markets. Hotel bookings now contribute over 35% of Trip.com's revenues. Take rates for hotel and air reservations are similar to the outbound business. Trip.com's advantages include a smooth mobile app experience, a comprehensive one-stop model, 24/7 customer service, competitive offerings leveraging group strengths, and opportunities from China's inbound travel surge. -
Market Size and Competition
Q: What's Trip.com's addressable market and competitive landscape?
A: The Asian market outside China is significant, equivalent to 1.5 times China's market. Trip.com offers a one-stop shopping platform, excellent mobile user experience with over 90% mobile usage in China, outstanding customer service, and strong outbound business enabling competitive deals for global customers. Management is committed to providing excellent products and services to global customers. -
Hotel ADR and Pricing Trends
Q: Have you seen a decrease in hotel ADR and price trends?
A: Management observed a decline in domestic ADR, influenced by a shift towards outbound destinations and lower-tier cities, and increased hotel and flight availability. Outbound travel has attracted mid- to high-end travelers away from domestic options. Lower-tier cities offer excellent value due to improved infrastructure. Increased hotel and air supply has pressured short-term prices compared to high benchmarks set during last year's peak season. Outbound air ticket prices are normalizing as flight capacity recovers, currently around 15% above 2019 levels compared to over 130% the previous year. Average outbound hotel prices have remained stable compared to last year. -
China Inbound Travel Opportunity
Q: How is Trip.com capturing China's inbound travel market?
A: Management sees inbound travel as a significant opportunity, with China offering rich history and unique provinces. Free visas have been extended to many countries, encouraging visitors. Trip.com provides a one-stop platform with excellent inventory, including flight tickets, high-speed rail tickets, and tour packages. They offer free one-day tours for customers transiting in Shanghai. Their app and customer service support over 30 languages, offering 24/7 assistance within 30 seconds. The inbound contribution to Trip.com's business improved from the teens to over 20% of overall revenues in Q1 2024.