Q1 2020 Earnings Call
[music].
Thank you for standing by and welcome to the trip Dot Com, Great Limited Q1, Twentytwenty and things conference call. All participants are in listen only mode. They won't be a presentation, followed by a question and I could see Chen.
He wants to ask a question you want me to places stockade, followed by the number one on your telephone keypad.
I would now like to had the conference Oh that to Ms., Michelle cheap head of Investor Relations. Please go ahead.
Thank you actually thank you everyone for joining on the call today, good morning, and will come to people still come groups Twentytwenty Q1 earnings Conference call. Joining me today on the call are Mr., Jim Slim Chief Executive Chairman of the Board Nice Jensen, Chief Executive Officer, and then.
These sending WAM Chief financial Officer.
During this call we will discuss our future although can performance, which are forward looking statements made under the safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.
Forward looking statements involve inherent risks and uncertainties.
As such our results may be materially different from the views expressed today.
A number of potential risks and uncertainties are outlined interest don't come groups public filings with the Securities and Exchange Commission.
Sure they'll come group does not undertake I think any obligation to update any forward looking statement, except as required under applicable law.
Jim Jane and Cindy will share no strategy and business updates operating highlights and financial performance for the first quarter of Twentytwenty as well as outlook for the second quarter of Twentytwenty.
After the prepared remarks, we will have an acute and recession.
With that I would turn the call over to Jim.
Genspace [noise].
[noise] close today.
2020, thus far has been challenging for us.
Thank you made its way across the world [laughter] global economy of social workers.
The travel industry, especially harsh.
China, we're glad to see.
And use it recovery domestic travel in the past two months.
International demand from as its that's more wont country adopted home Corenergy at a border control policies and a passport Oh of course holiday. It was to provide maximum protection for our customers.
Between January in April the company extended coverage and the scope of.
Cancellation provisions multiple times in response to the global development of calling over [noise].
So a great extent possible crane refunds for travelers.
Direct expenses related to the customer response topped 1.2 billion R&D first quarter at the same time, we extended the membership status for effective custom less worldwide. In addition, chip Dot com launched totaling 90 international travelers guide to help customers navigate the travel restrictions and access.
The latest to respond to the cancellation policies and the results Oh.
I am can't score reached a new high in Q1.
It's trading customer satisfaction, I can't say all service quality.
But he uses accumulated a kind of like the well translates into long term loyalty, increasing a lifetime value.
By now cancellation rates has stabilized and most of all markets. Yeah, we don't see increasing new orders in many areas.
With that level certain chase outside of China will focus on attention on China domestic system and then you had a child. So far we have seen recovery coming back fastest in the short haul segments.
Lower tier cities due to travel restrictions same kind of key customer account for this.
It's just a quick question that late.
Affects the top tier cities.
That's helpful recently.
It's a vicious football hall travel bookings have almost wholly with coverage compared to last year.
It's more and more regions.
Lets travel restrictions well hope assistance to travel demands.
Gradually increasing as well.
Hi. This is my team have been working closely with industry partners launched products, which caters to meet customer needs during the cold in Nanjing and no matter.
For example in the past two miles I mean spanning one already every week a live streaming platforms to promote our presale products.
Oh, yeah attractive discounts and a flexible cancellations. In addition to bookings that we have gained new customers reactivating existing ones and increasing exposure or high end products to the live streaming channels. It is worth noting that more than half the peak sales in the past most also have been concentrated.
Yeah, Hi Star Hotel products.
Meanwhile, International because it's a two under pressure from Cowen 19, giving any even approaches.
Up to five different regions.
It may take longer for international travel to come back in full despite the challenges we're glad to see in recent weeks OCO travel I started to show signs of recovery and certainly international markets.
Oh operation will continue to be flexible and they're ready to adapt to that and then make it to you.
As dependent make continues to develop across the world.
The team will also take advantage of this downtime to focus on internally improvement.
Such as enhancing our technology infrastructure.
Yeah I.
I'd like to say, thank you try and her team again for their tireless efforts in working together.
Getting through this difficult time period with the company.
Good day, everyone, it's hard to sweat.
Well not being able to achieve new goes reach new milestones despite the challenging externally around much.
To reiterate my sincere appreciation so global partners.
Well I've worked with us along the way to protect customer interest and now promote industry recovery.
We firmly believe that's probably 19 will eventually Pat.
And travel demand will persist.
In the meantime, well continue to focus on improving our product competitiveness and service quality you.
In order to best position also.
For the upcoming recovery.
Hello, everyone.
I would like to I think here I wish the previous quarter.
First quarter I'll put to compete with us.
Hi.
Quick hit hard by Qubic 19.
Net revenue in Q1 decreased by 42 cents year over year, reflecting Qubic 19 pack on China related to cobble from late January and overseas activity from the second quarter.
The company took immediate actions to ensure that we protect our customers.
Support industry partners and make appropriate internal I guess.
In response to dependable.
In the first quarter, we achieved breakeven operating income excluding <unk>.
Related to customer refunds.
Although Q2 may present, and even for the decline was four quarter impact from corporate banking.
Lastly, our international business.
We have already been improving they sell across the board in recent weeks.
First of all let me walk you through the domestic cobble, we have seen the recovery is well.
As James mentioned.
Trying or domestic cobble has being on the cost of consistent to recovery thing shipping I know im sorry.
During the me Labor day holiday tourist remembering trainer doubled compared to the previous teaming basketball.
<unk>.
Recently, you reservation for domestic hotel and air have rebounded.
I'm good to more than 70 cents.
Oh premium level.
All of the I encouraging.
We believe will continue in the coming month.
Sure for cobble activity.
Are the first to recover in train.
To date reservations for food or travel products, such as hotel, we've seen same krave and see the tea.
Attraction tickets.
And car rental services.
Approaching four recovery.
No what isn't in Indonesia activity on backing due to certain beat you know travel restrictions and customers come soon.
However, we have seen a combination of China's it's active containment measures local governments mid teen cobbled restrictions and our teams efforts and developing new product to enhance our customers' confidence in trouble.
As a result.
Long cold Cabo activity has also begun to catch up after labor day holiday may amazed.
Second.
For the international travel.
Activity are you at a lower level due to global Brad Qubits 19.
Early signs of recovery.
Certain market.
The album trouble activity has been at a low level things delayed generally due to pipe international travel restrictions across country and the two restriction.
We believe proud about China's l. Baum cargo demand welcome brick too high and domestic travel activity.
Yes, so situation continues.
Oh, well overseas business has also been under pressure since March for the same reason.
However on the positive note, we did start to see certain small but positive signs of recovery in market.
Where the virus.
Well contained.
For example in the past two weeks.
The Korean market.
Also Korea market.
Domestic hotel booking has been positive year over year gross.
We are focusing on improving the products and services.
Anthony our partnership and increasing operation efficiency.
As a pandemic continues to your ball, we will make sure our team remain Richard.
Vigilant and quick to adjust to the stipulation.
So out to the crisis, we're extremely proud of our employees for their exceptional hard work to protect our customers <unk>.
At the beginning of the outbreak in China.
So that product and technology team.
Oh poured in Denver and worked overnight to responded promptly to customers cancellation and the refund.
[noise], which came in more than 10 times a regular volume.
In addition, we too quickly loans internationally cobbled kite, providing easy access to the most updated information to our international travelers.
In the past man.
Our team came up with new products.
Catering to specific consumer.
HM.
Arising from the pandemic.
For example, together with our hotel partners, we launched pills Scotty alone.
Safety standards.
In order to lose to consumers troubled comfortable.
We also work with partners to put together attractive deals.
To creative marketing towards success like scene, we are able to reach out to.
To a white audience and enhance our customers' interest for long haul and for high end trouble packages.
It's the rigs out in the recent week, our high end hotel.
Recover meaningfully and outpaced other second.
[noise] our outlook.
Our collaboration a with the industry partners has further strengthened oh.
Since the huh.
Let me.
Since our announcement, Oh tourism revival the plane Mark.
<unk> spending for victory, we have received hot participation from T cells and hotel operators.
Five acquainted airline and hundreds of attraction.
As of today, we have but then they they take more then seven T cells into loan through our financing platform offering more than 10 billion RMB HM two hours.
To cope with economic hardship relative by the Qubits 19.
Just two weeks ago into Continental Hotel group also launched the inaugural flagship stores a platform.
As this collaboration the two companies agreed to a membership American pool.
To recognize each other membership of benefits, which will be providing.
Our customers with the best interest as well as I said collaboration for our partners.
Yeah addition to show a support to our global company, we have so to me to more than 3 million surgical masks to more than 25 countries around the world.
Due to the uncertainty in international markets, we were will prepare for all possibilities, including a potential prolong crisis overseas.
As of March 31st our company had 9.6 billion U.S. the on hand in capital Reserve.
I'm sure maximize maximum financial flexibility, we further announced a revolving credit facility of up to 1.5 billion, you'll see in early April.
The company also taken measures such as reducing discretional spending and the voluntary management pick.
To ensure our organization on lean and efficient in response to the pandemic.
The combined exports will provide ample liquidity for the company to be able to emerge as a stronger player for the future.
During this challenging time, we will work hard with our employees customers.
Business partners, and all stakeholders to streamline our organization and increase our efficiency.
We want to thank everyone for their hard work and the contribution.
With that.
I will now turn the call over to Cindy.
Oh, Thank you Jay Thanks, everyone. The company's without for the first quarter of Twentytwenty happens significantly and negatively impacted due to cold at 19.
And then it drove a significant decline in travel demand, resulting in customer cancellation and refused to new orders.
The impact also included the increase in bad debt provisions and impairments of long term investment.
Because the Corbett Nike is still evolving we may also need to continuously assess the amount of impairments and bad debt provision in the following periods.
For the first quarter of Twentytwenty tripped up call group reported net revenue of RMB 4.7 billion representing.
42% decrease from the same period in 29 team and a 43% decrease so on the previous quarter.
Accommodation reservation revenues for the first quarter of Twentytwenty was RMB 1.2 billion, representing a 62% decrease from the same period in 29 team and 61% decrease from the previous quarter.
Hotel bookings maintained double digit growth in the first 20 date of January demand start to fall at the outbreak spread in China hitting bottom in the following week.
Thanks, Dan we have seen domestic bookings gradually recover month over month.
While international demand remain at low level.
Transportation ticketing revenue for the first quarter of Twentytwenty was RMB 2.4 billion.
Opinium, representing a 29% decrease from the same period in 2019, and a 31% decrease previous quarter.
Compared to other travel segment.
Total transportation ticketing revenue was less impacted by the cold at 19 during the first quarter of 29 team.
Mainly due to a higher revenue mix from international business.
International Transportation sustained solid growth in the first half of the quarter and benefited from an increase in ticket implies.
[noise] packaged tour revenues for the first quarter of Twentytwenty was RMB 523 million, representing a 50% decrease from the same period in 29 team and a 35% decrease from the previous quarter.
Group and dynamic package products delivered strong results for travel activities made before Chinese new year.
Crossed rigid and album packaged.
Tour business have been a restricted list since late January Wow travel activities, such as attraction ticket gradually resumed in the second hall of the quarter.
Hopefully travel revenue for the first quarter of Twentytwenty was RMB 126 million.
Representing a 47% decrease from the same period in 29 team and 66% decrease from the previous quarter.
Revenues from other business sustained rose by 4% Yale year for the first quarter of Twentytwenty.
I know in each of them size strong performance of travel financial services.
Gross margin was 74% for the first quarter of Twentytwenty, which decreased from 79% for the same period in 2019 and the previous quarter.
Product development expenses for the first quarter of Twentytwenty decreased by 33% to RMB 1.7 billion from the same period in 2019 and decreased by 37% from the previous quarter.
Cost saving in product development in the first quarter was mainly driven by a decrease of performance based bonus due to the pandemic.
Headcount in product and development was stable all a year over year basis.
Sales and marketing expenses for the first quarter of Twentytwenty decreased by 38% to RMB 1.4 billion. So on the same period in 2019.
And decreased by 44% Sun the previous quarter.
Cost saving cells and marketing expenses in the first quarter was mainly driven by a decrease of variable and discretional spending across marketing channels.
[noise] GL they expenses for the first quarter of Twentytwenty decreased a increased by 136% to RMB 1.9 billion Sun. The same period in 2019 increased by 130%.
From the previous quarter.
Yeah. They expenses in the first quarter of Twentytwenty include it included that that provision of RMB 1.2 billion for the increase the receivables mainly due to the response for reservation cancellations, we paid on behalf.
As I travel suppliers and the increased the credit risk as a result of the cold at 19 pandemic.
Excluding the bad that provisions.
Gen DNA expenses for the first quarter of Twentytwenty decreased by 9% from the same period in 2019, and a 3% from the previous quarter.
Excluding share based compensation charges non-GAAP loss from operations was RMB 1.2 billion.
Adjusting for expenses related to customer refunds, all non-GAAP operating income reached breakeven level.
Other expenses for the first quarter of Twentytwenty was RMB 3.8 billion.
Mainly related to fair value changes of equity security investments and impairment of certain long term investments due to the public 19.
Diluted losses per ATM were RMB 8.98, our U.S. dollar 1.27 for the first quarter of Twentytwenty.
Excluding share based compensation charges and fair value change of equity security investment.
Non-GAAP diluted loss per ATM were RMB 3.73, or U.S. dollar 53 cents for the first quarter of Twentytwenty.
As of March 31st to Twentytwenty, the balance of cash and cash equivalence.
Restricted cash short term investment.
Held to maturity time deposit and financial products was RMB 68.2 billion or U.S. dollar 9.6 billion.
To ensure a maximum financial flexibility.
In April the company entered into a facility agreement with certain financial institutions for up to U.S. dollar 1 billion transferable to them and revolving loan facility with an incremental facility of up to U.S. dollar 500 mini.
And.
In which you S. dollar 1 billion happy successfully Jones down in May Twentytwenty was effective interest rate between 1.15% to 1.25%.
In addition, I today, we have repaid.
You asked all at 250 million of convertible notes.
And plan to settle additional convertible notes.
Worth 700 million U.S. dollar maturing ingenue in July.
And you S. dollar 400 million was put four date in July should investors choose to exercise such right.
Which altogether potentially reduce fully diluted ordinary share count.
<unk> up to 3.15 million.
The outbreak of coal benign team has negatively impacted our cash flow during the first quarter of Twentytwenty.
Which could continue into subsequent periods, depending on the speed of recovery.
Both domestically.
And internationally.
We frequently assess our liquidity position and the company is confident to come crude tapped the combination of our existing cash reserves cash profile operations and financing sources are sufficient to meet our anticipated cash.
Cash needs, including working capital capital expenditures and repayment all financial obligations for the foreseeable future.
Now turning to the second quarter of Twentytwenty.
We expect a full quarter impact of Colgate 19.
Despite sequential improvement across the board in recent weeks.
For the second quarter of Twentytwenty. The company currently expect natural revenue to decrease by 67% to 77% year over year.
Excluding share based compensation the company expects non-GAAP operating net loss.
Well be in the range of RMB 1.1 billion to RMB 1.3 billion.
This forecast reflects tripped up call groups current and preliminary view.
Which is subject to change.
The increase the uncertainty due to the per run the virus outbreak further further restricted our visibility.
We will continue to monitor the market.
And provide more color to investors in time.
With that we will open up for killing me operator please.
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Your first question comes from Gregory Zhao with Barclays. Please go ahead.
Hi, James James, Indiana, Michel SEC Smoky can my question.
Just wanted to understand how do we think about our Jacoby 19 will reshape for long term travel are you guys tricky Montabert you heard behavior.
Are we see from off the de snakes, driven trouble or travel demand, perhaps being replaced by some virtu technologies front during the past our depends on mix a purely or how should we think about the long term, but not make about again. Thank you.
Hey research or mid term, we believe business travel demand is generally with Phillips and a strong correlation with economic prosperity. For example, according to the recent survey for corporate travel Clive.
80% to corporate clients believe their travel budgets will recover and grow once the pandemic it's over.
In the long run I.
Oh, what technology reshaped the business travel demand it seems to be watch.
Hi, thank each business travel activity I've enjoyed continued growth.
Right the fast evolving telecom technology as.
The leisure travel demand.
She is my their time.
The only evergreen and handling the streets are the ones that fulfill people's spiritually rather than materialistic need.
In many parts of the wells, including China horizontally as well as the most but didn't answer industry.
We believe the disruption caused by the pandemic well eventually disappear.
And the travel demand there will come back stronger after that they tend to anyway.
Your next question comes from Thomas Chong with Jefferies. Please go ahead.
Hi, I brands money coming off what became my question I have a question about the Q2 revenue guidance as I said second half.
Okay remember why some guidance about how the performance of war.
That means accommodation.
Corporate travel and others trending include you asked about second half. Thank you.
Oh sure it's almost.
We except.
Ah So Q2 reflected a full quarter due to the Colby 19, a especially for the international travel activities, which accounted for about 35% to 40% off our books total revenue.
In the into second quarter last year.
Therefore, we expect total revenue to decrease 67% to 77% he all year.
Four different segment, we expect revenue for the accommodation reservation, two decreased 67% to 77% young yet.
Within the accommodation reservation business, our domestic travel activities continued to recovered in the past to three to four month to date the news reservations for the domestic a hotel reach to over four.
At least over 17% compared with last year, a wild applies steel is heavily discounted.
The new reservation for international travel activities, it's back to.
To close to almost zero for the full quarter due to the strip to international travel restrictions, especially for the China album business. However, in some countries and markets. We noticed the early signs of recovery in their domestic travel segment.
Oh, just for your information Oh International Hotel revenue accounted for 20% to 25% off the total accommodation reservation and the second quarter last year.
Oh, the with regard to the transportation reservation revenues, we expect to it will decrease 70% to 80% year over year. The domestic travel activities continued to recover a in the past three to four months.
To date, the reservations for our domestic air.
Also recovered over 70% compare with last year.
But the new reservations for our international activities ice back to close to zero.
Due to stripped international travel restrictions for both China, all bond as well ask international travel.
And for your information International Transportation accounted for close to half of our total transportation revenue.
In the second half in the second quarter last year.
Which may include Oh, all bond air ticket as well as our air revenues from our international brands.
We expect to revenue for packaged tour business to decrease 80% to 90% young here.
And although the across regions and international travel package I still owned a restriction list.
We are happy to see reservations for our short haul activities in China suggests attraction ticket have been fully recovered and either recorded the.
ER positive growth in the recent recent weeks.
With regard to all corporate travel business. We we are forecast to it will decrease about 65% to 75% year over year. Many large corporations are live resume travel activities in recent months.
We expect to our revenue from other business to decrease about 15% to 25% year over year.
Thank you.
Your next question comes from Benny Wong with HSBC. Please go ahead.
Hi, Good morning, James Jane and Cindy and Shout I think is fair understandable in terms of different than nature to the travel business and our here. So that I just wanted to understand that the falling on a change comment in terms of the opening remark, saying that there will be improvement in the technology shot improvement in that.
He said she sees and then she looks like Duncanville, Greg <unk> improvement at the end they should be able to help us to piece or.
The potential it like a stable only be flattish earnings growth.
Despite a hit to the top line maybe tours on the said like apart. Your and then also can you also comment on Oh, because free two upcoming third quarter would be the seasonally the strongest quarter I'm. So I guess with the focus shifting more in the domestic business or how you see trip.
The shouldn't they differently to doing that the market share in the domestic markets. Thank you so much.
Thanks, any oh, yeah, I think it during the crisis is a lot of technology team and product team hopping strengthened a lot of projects was a accelerated to handle the 10 x. volumes are due to the crisis offer cancellation of orders et cetera.
So we took this opportunity to preserve and strengthen our technology and a product team I in debuted a stronger scalability. So that we can handle the extension of the business going forward.
In Q3, we are looking forward to to the summer months are based on a couple of observation first before I think the government has been a very good job controlling the operate all of the viruses. So we have seen consumer confidence has been increasing.
Secondly, during the recent quarter. Our recent weeks, we also have see the faster recovery, particularly on the high end of the product has been getting its momentum. After me first labor day weekend and so we are hoping I just can't work.
Continuous into the Q3.
Some a week and certainly we expect a certain outbound demand will be converted into the high end up the product and long hole products into from a month. So our team is working very hard to develop products that can satisfy the high end.
Customers need because this year, they will not be able to go abroad as they do every year on so we would like to capitalize a decent named income rooted in domestic demand for high end product in a long quoting a product on so I mean.
Technology, Brent as well as a product to Reno leash innovation a friend we are full force to be in <unk> I see in a way to best possible and our chairman James even lead at the airports and he is going through all the problems in a with the promotion to encourage the <unk> consumer and.
Oh confidence so far the recent has been very positive. Thank you.
Your next question comes from Jed Kelly with Oppenheimer. Please go ahead.
Oh, great. Thanks for taking my question.
Can you just think talk talk about how have you been begin to gradually recover into the second half of this year and into next year.
How you're thinking sort of positioning your overall cost structure.
You know over the next 12 to 18 months.
Sure.
We have a large portion.
Our caused to structures for simple cost of service and so the cost of service as well as the marketing expenses.
They are variable cost.
All purely discretional caused to such outsized performance based the marketing expenses and these two items accounted for more than half of our total cost and no non-GAAP operating expenses.
So for personnel related expense a significant portion is variables such as performance based bonus.
We are also executing on ways to conserve resources and adapt to the changing market demand for.
For example.
Our <unk> management top management team have taken voluntary pay cut.
Ah things the first quarter.
And in response to the pandemic, a we have swiftly adopted the cost control measures to reflect a significant slowdown.
In consumer demand, our total pause to end the operating expenses actually decreased to about 31% year over year in the first Oh quarter.
And in the second quarter, we expect to our total cost to saving oh, well be around 40% to 50% compare with last year.
Thank you.
Your next question comes from a James Lee What's missing hard. Please go ahead.
Yeah. Thanks for taking my questions a two questions here once the policy related off what changed here anything coming at a national Congress, specifically on the policy perspective that could be positive for travel.
Four Oh for wondering what's the status of summer vacation for students that could impact the travel.
During the summer season, as well and of course, Cindy here or how should we think about the expense level for second quarter.
Giving the revenue challenges that you provided no guidance here. Thanks.
Thanks, James Oh, I think the government has protein a very decisive policies for us to content outbreak corporate virus. So the whole country right now is very safe and consumers confidence in the control all the pandemic has.
Being a very positively enhancing secondly on economic front are there going and also proteins stimulus package to improve the employment level to increase their recovery of the economy, which is very positive for.
Our travel industry, and we're hoping that to city to city state to state travel will also be more open and more enhanced going forward, a we have already seen positive recovery.
[noise] starting from May 1st Labor day holiday, particularly on the high end, though the product.
So we are confident that took going forward that we will.
I see a recovery and particularly on some of the demand from overseas well be converted into domestic demand and so our product team is working very hard to call to make sure we capitalized on the demand.
Thank you see.
Yeah I'm of course, a control side in the second quarter, we expect our total cost of saving will be about 40% to 50% decrease compared with last year and for the first quarter actually we already increment allowed us up cost control measures, which was.
[noise] out to death in Ah Ah instead to significant decrease on the cost side, a and excluding onetime bad debt provisions that Oh, we made in the first quarter in relation.
With.
And Oh, what a refund policy.
Actually we achieved a breakeven level on the non-GAAP operating level. Thank you.
Your next question comes from T. unharmed Web T.H. capital. Please go ahead.
Yeah. Thank you thanks much money.
So as I've two questions one is.
Regarding skyscanner a osiris she starts to go back to work. We told you that this is operation I Wonder how skyscanner is recovering and just so what's the what commencement do there in terms of best guess goodness business and the old so.
In terms of Oh, Hey penetration in China I can mention after the occurred in the virus a lot to the agencies offline agencies, a a heart to survive, but so is that since two statements that OTI a penetration.
Post the of the virus is going to be much higher than before so that's the two question. Thank you.
Thank you.
Now for our global team outside of China, a we it there also revealing a their business and make an adjustment to for the cost structure, a very carefully a including our teams in Europe E America everywhere else outside of China. Some.
Sure the cost structure, well also reflect their business a recovery progresses as were monitoring the situation very carefully second Oh cig, Yes every time there is Uh huh.
Crisis, it's always a good time for us to Reexam, Iraq technology team as well as product team and make sure we extend our leadership in a travel industry. Thank you.
Your next question comes from Ronald Kim with Goldman Sachs. Please go ahead.
Thank you James James Indian Michelle.
So my question is on the shift back to domestic has we should more focused it domestic travel in the near term do we have different strategies for our ski trip between our brands and even your affiliate <unk> you know.
Between the higher and lower tier markets I'm thinking about I also we are tracking your original outbound travelers to a domestic so what are they kind of strategies with this in a different brands like you.
Sure.
We have different brands to cover a different segments and penetrate into different tiers of the cities and that province is see Cooper brand is known for high quality core business travelers and high end of the products on so with the limitation.
Oh, the outbound business. Our this brenda will be a poorly innovative odd to make sure we capitalize on the recovery of the business travelers as well as stuff international demand, which is being converted into the high end up the products into China. So.
Hi terminal is leading the effort for every province to open up more trouble resources.
To to be able to satisfy the high end outstanding.
And there are lot tougher high end of the hotels and resorts are being discovered through this efforts and we have seen after the may holiday the recovery on the high end hotels has outpaced.
The other segments, a which is very positive and secondarily we also.
Think about in the summer normally our outbound travel will hit a new high during the summer UBS break a with families and the children's going abroad. This time because of the Corbett 19, these didn't and well be converted into that the mask.
Neat. So I was a team also have there been very innovative and creative in order to convert these demand into the long hole travel as well as the luxury.
Other within China, a we hope to capitalize on these conviction.
Yeah, just the she has some color on the recent developments Oh each segment on different segment, we noticed Oh shuffle travel activity Oh activities almost to fully recovered in recent weeks for example, our hotel reservations within the problems.
And our car rental business, Oh, almost a approach and fully recovered and our reservations for the local attraction tickets resume to grow gross.
Recently.
Thank you.
Your next question comes from Alex Paris, with Morgan Stanley. Please go ahead.
Hi, James James you need to show Thanks for taking my questions I have two questions first is regarding your retail business.
How long should we think about the balancing of [noise].
Hi, bargaining power between Otcs hotels offline suppliers.
It looks like a dynamic is going to help OTI more because.
You have to most tropic.
And so going forward, if I think about the next six.
Next year is which there'd be any changes to the take rates.
If it ties in revenue coming from these hotels, hoping your overall domestic margins and because it domestic business or my second question is it's much more controllable and is recovering.
And we're assuming next year or can we expect the operating margin to go back to 20%. Thank you very much.
HM.
[noise].
The pandemic a hit the global travel industry and no country and no industry has ever had the opportunity to be hers for this kind of hit. So therefore, it's very important for us to team up with all our partners in the global cases to make sure.
We bring that means to our hotel partners and support them as much as possible. So we'll reach out to our partners in the global spaces.
To make sure we understand there.
Ben and their potential for their recovery or what we have thing is launched ally a revival V plan I mean, they travel industry, where hotels and attraction has idle and perishable inventory were able to beat them up.
With the increased demand.
Okay from our consumers so I could vary a diminishing our incremental costs were able to bring demand too which is tremendous for them to gradual they reach the breakeven point. So wherever we're working very hard to make sure we.
To spend our ecosystem and I stimulate demand from our consumer site and bring them to our partners, which have idle perishable inventory on so we'll work very hard to try to be very innovative to support our pump partners in a global please.
Your next question comes from nationally we will see I say say please go ahead.
Hi, Good morning, Thanks for taking my question a couple of questions here, especially have you noticed any typically change during the outbreak given the trouble looking into issues you just mentioned.
Oh sure or how should we see the competition landscape if solution, especially in lower tier cities.
Due to the uptake and lastly, I'm, calling and lives Genie.
Does that come to do to like GMB users and find matches up would be great. If management can ship Oh more caught up on that thank you.
HM.
40 create I think it's very much a dynamic accretion. So we allow all kinds of hotels to be ally platform and depending on how much inventory they have how much demand they need it's a dynamic balance.
So we enable them to use or any kind of a method for example, certain hotel well say a we use a step up that model. The more revenue you bring the more a commission you look at some other hotels, where say okay. We give you a fix the rake arms so estimate.
I'll give me increases the portal among the revenue increases as well we are very open minded and work who we sell the hotel partners in any kind of Oh mechanism that they feel comfortable to support them.
And in terms of the penetration into the local market as we discussed the we have seem to show to school up packages and hotels in a business recover fully already going forward. After me first holiday, we feel with that to state to state.
City to city trouble will enhance and we already see yeah across the line, including transportation high in hotels et cetera have seen positive recovery after the holiday.
Thank you that is older quick since we have time for today I'll now hand back to mix cheap for closing remarks.
Thank you. Thank you everyone for joining US today, you can find the transcript and webcast of today's call mustard, though to they'll come well look forward to speaking with you I don't know second quarter 2020 earnings call. Thank you and have a good day. Thank you.
Thank you.
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