Release Date: May 23, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tongcheng Travel Holdings Ltd (FRA:TEM, Financial) reported a net revenue of RMB4.4 billion for Q1 2025, marking a 13.2% year-over-year increase.
- The company's adjusted net profit grew by 41.1% year-over-year, reaching RMB788 million, with an adjusted net margin of 18%.
- The transportation ticketing revenue increased by 15.2% year-over-year, driven by strong demand for outbound travel.
- The accommodation reservation business saw a 23.3% increase in revenue, supported by cross-selling strategies and international business growth.
- The company is optimistic about the long-term prospects of China's travel industry, supported by government policies and changing consumer preferences towards experiential consumption.
Negative Points
- The macroeconomic uncertainties, including tariff tensions and economic recovery, could impact the sustainability of travel demand in the second half of the year.
- The company faces challenges in maintaining high user acquisition costs for its standalone app, which has a longer payback period compared to other platforms.
- There is a need for continuous investment in marketing and operational efficiency to maintain profitability in the outbound travel segment.
- The integration of AI-driven tools like DeTrip is still in its early stages, requiring time for users to adapt and integrate into their travel planning habits.
- The acquisition of Wanda Hotel Management Company, while strategic, involves significant investment and integration challenges to realize synergies with Tongcheng's core OTA platform.
Q & A Highlights
Q: How does management view the growth pattern of the core OTA business in the upcoming quarters, and what are the expected drivers? Additionally, will margins continue to expand?
A: The Chinese travel market has shown resilience, with positive growth in tourism revenue and passenger throughput. Management remains optimistic about the travel industry's prospects, supported by government policies and changing consumer preferences. The focus will be on enhancing growth by increasing user purchase frequency and optimizing sales and marketing investments. Margin improvements are expected through efficient resource allocation and operational efficiency, with a continuous decrease in sales and marketing expenses as a percentage of revenue. (Respondent: CFO, Mr. Julian Fang)
Q: What is the outlook for the outbound travel business, and how does it contribute to overall revenue?
A: The outbound travel segment has shown remarkable growth, with international room nights and air ticket volumes increasing significantly. Revenue from outbound air ticketing accounts for over 45% of total transportation ticketing revenue. The focus is on competitive pricing strategies and cross-selling opportunities to drive growth. The segment is expected to become a key growth driver with higher margins compared to domestic business in the long term. (Respondent: Chief Capital Officer, Ms. Joyce Lee)
Q: How has the standalone app contributed to the company's performance, and what are the future plans for user engagement and transaction frequency?
A: The standalone app has been a strategic focus, attracting new users with higher purchase frequency and spending. Collaborations with handset vendors and app store promotions have increased user acquisition. The app's DAU grew by over 60% year over year. Future plans include enhancing user engagement through tailored promotions, cross-selling, and leveraging new technologies to boost user transactions and value. (Respondent: CFO, Mr. Julian Fang)
Q: How do macroeconomic uncertainties impact travel demand, and what is the rationale behind the acquisition of Wanda Hotel Management?
A: Despite macroeconomic uncertainties, the travel industry shows strong growth potential due to a shift in consumer behavior towards experiential consumption. The acquisition of Wanda Hotel Management aims to enhance the company's hotel management capabilities, leveraging its extensive network and brand value. This move is expected to strengthen market presence and profitability in the luxury and high-end hotel market. (Respondent: CEO, Mr. Hop Ma and Chief Capital Officer, Ms. Joyce Lee)
Q: What has been the impact of the AI agent DeTrip on user engagement, and what are the future plans for AI integration?
A: DeTrip, an AI-driven travel planning tool, is in the early stages of adoption. It offers personalized travel solutions and has introduced social features to enhance user engagement. The focus is on integrating DeTrip into broader business environments and refining its features for increased adoption. The company plans to stay at the forefront of AI advancements to enhance user experience and engagement. (Respondent: Chief Capital Officer, Ms. Joyce Lee)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
