Q4 2020 Trip.com Group Ltd Earnings Call

March 4, 2021

[music].

Thank you for standing by and welcome to the trip Dotcom Group 2020 Q4 earnings Conference call. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question you will need to press the star key followed by the number one on your <unk>.

Telephone keypad I would now like to hand, the conference over to Michelle Qi Senior Director. Please go ahead.

Thank you good morning, and welcome to Telecom Group 101, Q4 earnings Conference call. Joining me today on the call are Mr. Jin, Yeah exactly to the chairman of the board.

And Chief Executive Officer, and the MS, Cindy Wang Chief Financial Officer.

You are and this call, we will discuss our future outlook and per phone and we try forward looking statements made under the safe Harbor provision 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 offline and they'll come through public filings with the security and Exchange Commission.

And they'll come group does not undertake any obligation to update any forward looking statements.

As required under applicable law.

Jim John and Cindy will share and what strategy and business updates operating highlights and financial performance for the fourth quarter of 2020 as well as and also for the first quarter of 2021.

After the prepared remarks, we will have a Q&A session.

With that I will turn the call over to Jim Gypsy.

Thank you Michelle Thank you everyone for joining us on the call today.

Looking back at 2020 day.

A year filled with both challenges and opportunities.

Despite some negative impact and then we have continued to innovate our product and improve our service and.

The strength I mean.

Operation with our partners.

Such results demonstrated our strong as it is and it helps to make us stronger as a company.

And the result, we sit and gained market share across our bottom line.

Domestic China and maintain a strong recovery and momentum throughout the year.

We are fully prepared to take additional market share and upcoming global recovery.

Any forward that will continue.

And due to focused on the domestic market in terms of supply chain.

<unk> comprehensive capabilities and quality and technology.

And at same time, we are pushing it and global ambition and international travel recovery and seeking for opportunities and Malone.

Our focused assets and not only and old products.

And additional market share during the pandemic, but also laid solid foundation book.

These growth drivers.

And with Covid.

Yeah.

Today, I would like to shed some light on the leather.

First of all on our supply chain as our core competence, which have built over the decades.

Operation.

Therefore, we are best positioned to expand the breadth and depth of our offerings.

To capture users and Wally.

And then.

Such as the unique and two debt experiences as alternatives for outbound travel.

And sure and its dedication chips, which are incremental to the typical long haul pipe.

This is and near term growth.

And that's already started to bear fruit.

And we're glad to see reservations for football and travel and leisure destination activities achieved strong year over year growth despite industry fluctuation and the path.

Last winter.

Secondly, we are working hard to strengthen.

Our content is worth it.

It is highly synergistic.

With our core price business.

And can bring meaningful revenue sources and the years to come.

We expect to follow a three step strategy and developing our content roadmap. Firstly, we will continue to.

And rich content selection.

In terms of category and formats, we believe comprehensive content offering and will help attract new users and improved engagement and tends to frequency and time spent.

Next we will strengthen the integration of content generation and.

Effective with recommendation and product value and <unk>.

<unk> and improved conversion rates.

Especially for the short haul products.

And completely linked to some contents to transactions will form a virtuous cycle.

The benefits our sustained its growth.

And third.

The deep integration of content capabilities products and our quality.

The base and extensive marketing network enables us to serve as a tourism marketing hub group.

Branding promotion and other marketing activities, leading to incremental revenue opportunity and tourism and the paint industry advertising and marketing.

Last but not least we continue to upgrade our service quality and technology capability and all.

And to safeguard our smooth and effortless delivery of our products and users.

It remains our core competencies.

And we will continue to invest and further our leadership compared with peers and the travel space.

Finally <unk>.

Looking beyond Covid, we remain deeply excited by.

By the global travel opportunities, we believe steady international markets presents an attractive long term growth potential for a one stop travel platform.

One that could be multiple of China's domestic market, particularly for international travel partners chip.

<unk> group is uniquely positioned to reach a truly global audience.

Our brand portfolio.

From a marketing perspective.

With that I will turn the call over to Jane well operating highlights.

Thanks James.

And everyone.

I would like to start with a quick overview of Q4 and the full year of 2020.

And like the industry fluctuation and a week and a weaker seasonality and the winter in Q4, we are glad to see that trip Com group delivered solid performance and have consistently outgrow the industry average across the product lines.

Total net revenue so a further narrowed year over year decline in Q4 to 40%.

S domestic accommodation reservation.

Air ticketing business ground transportation and other domestic travel products recovered nicely in Q4.

In addition, we achieved positive non-GAAP profit margin of 10% in the fourth quarter.

And our full year basis, our core opiate blends and deliberate GMB of 395 billion RMB 461 billion USD.

Again, leading the industry worldwide.

For full year 2020.

And to our efficiency improvements and strong cost control.

We're able to achieve 2% non-GAAP operating profit margin.

Today, I would like to share some operating highlights in four areas.

First mid to high and trouble market second.

Second low tier city penetration.

But our new strength in higher frequency categories and force improvements of our content and capabilities.

First we continue to improve our product competitiveness and increase market share in the fourth quarter.

Actually in the middle to high end market.

Our middle to high end hotel bookings reached the double digit growth year over year far exceeding the industry average by 15% to 20%.

In addition high quality niche and and boutique could travel has become an important alternative for our previously outbound customers.

We saw an average spending on domestic package tours grew significantly year over year in the fourth quarter.

Especially for our mobile users.

Second we.

We gained further market share in the low tier markets.

In 2020 more than 40 per cent of our new customers came from third tier cities and below.

Transportation products has become important to channels to acquire new users with whom we can cross sell other product.

Third as James mentioned.

And we worked hard to unlock a nuisance in highly frequent categories, such as Shaw short haul and vacation.

We attracted more diverse and high quality partners to our platform to expand our product offerings and also broaden the scope of collaboration with existing partners.

And number of our in destination activity and supply increased by over 25% year over year by the end of last year.

And so rates out short haul and then local travel has become a key contributor to our recovery.

In the fourth quarter, our hotel chain and B for the same probably and space increased by over 20% year over year and.

And reservation for attraction and activities increased almost 100 per se.

Such strong performance for short haul and local travel and extend it into the past Chinese new year holiday.

Compared to the same period in 2019, our hotel G. M. B for the same probably space achieved 20% year over year growth and reservation for local attractions and activities more than tripled.

Over the past year, we focused on improving our content offering.

We achieved we believe the content will generate unique and long term long lasting value and user engagement as well as the new earnings power.

By the end of 'twenty 'twenty, our content channel contribution to the total.

App traffic more than doubled compared to the beginning of the year.

And the visit time of our information seats more than tripled during the year.

Our live stream and special deals channel has now become a place where people come to find attractive deals.

Which contributed approximately 5 billion G M b during the past year.

We are also glad to see the initial development in advertisement to revenue opportunity.

I want the best stick advertising and marketing revenue.

Increased significantly year over year in the fourth quarter and maintained and overall or how such a growth throughout the year.

In the future, we will continue to build our content ecosystem.

And concerted efforts.

The ecosystem will enable our users engagement and make our platform our comprehensive market place.

Turning to the year of 'twenty, 'twenty, one and the domestic travel demand.

Remain resilient despite industry headwinds due to the small outbreaks and tightened travel restrictions during the Chinese new year holiday.

And like domestic hotel and Air Reservation quickly rebounded post at the holiday and reached for recovery recently.

Compared to the same period in 2019.

We are fully confident that the domestic market will come back with the growth trajectory in the year of 2021.

Due to the effective pandemic control and wide distribution of vaccine.

Yeah.

I remember that the World Cross border travel is still under pressure.

However, the domestic travel and the trip Dotcom has started its recovery.

According to China, Tourism Academy and increased distribution of its active COVID-19 vaccine worldwide.

Global travel will resume its order.

In the new year.

We are optimistic and it will be fully prepared to take advantage of the upcoming recovery in the international travel.

Finally, I would like to thank our team again for their dedicated efforts and commitment.

Maintaining quality service during this challenging time.

As always we are committed to leading the best in the industry practice for all our stakeholders, including our customers business partners employees and shareholders and communities.

Lastly, we released our first ESG report, which cover our approaches and efforts in developing and inclusive work place promoting responsible travel and providing quality user experience.

Going forward, we will continue to improve our efforts in ESG to lead our sustainable growth in the long term.

With that I will now turn the call over to Cindy.

Thanks, Jane Thanks, everyone for the fourth quarter of 2020 trip Com Group reported net revenue of RMB 5 billion, representing a 40% decrease from the same period in 2019.

Further narrowed declines reflect a continued recovery of our China domestic market.

Especially for short haul and Staycations.

I'd like to first go through some business highlights that drives the recovery of our domestic revenues.

Accommodation reservations for China domestic market.

And positive growth in Q4.

Net too high and hotel reservations growing at the double digits and intra province Hotel GMB grew by more than 20 per cent.

Domestic air revenue maintained positive year over year growth in Q4, despite the higher base in the previous year with transportation bookings for early Chinese new year holiday.

Reservations for domestic in destination activities achieved strong growth during the quarter, mainly driven by short haul trips.

Recovery for domestic package product was slower due to industry fluctuations with small outbreaks of Covid cases, and this quarter.

International business is still under pressure.

However, similar to what we experienced in China, Our brand tripped I'll call also saw strong growth with domestic hotel reservations in many markets.

Gross margin was 82 per cent for the fourth quarter of 2020 increased from 17, 9% for the same period in 2019 and 81 per cent for the previous quarter.

The increase of gross margin was mainly helped by a favorable change in product mix and continued improvement in service efficiency.

In the mid to long term, we still expect the gross margin to be around 75 per cent to 80%.

Total non-GAAP operating expenses decreased by 36% from the same period in 2019 and increased by 14% from the previous quarter.

Thanks to our largely flexible cost and expenses structure and efficient operating management.

During the past year, we have further streamlined our operations across business lines. In addition to certain adjustments related to COVID-19.

In addition, our improvement our content and cross selling and have further lift the marketing efficiencies.

Yeah.

Product development expenses for the fourth quarter and decreased by 20 per cent to RMB. Two 2 billion from the same period in 2019 and increased by 8% from the previous quarter.

The sequential increase was mainly due to the normalization of our personnel arrangement.

Sales and marketing expenses for the fourth quarter decreased by 58% to RMB. One 2 billion from the same period in 2019 and increased by 9% from the previous quarter.

The sequential increase was mainly due to the increased marketing spending in response to continued travel demand recovery.

Excluding share based compensation charges non-GAAP operating margin was 10 per cent for the fourth quarter of 2020.

Compared to 12% in the same period in 2019.

Diluted earning per ads were RMB 165 are U S dollar 25.

For the fourth quarter of 2020.

Excluding share based compensation charges and fair value changes of equity security investments and exchangeable senior notes.

Non-GAAP diluted earning per ads were RMB, one seven and five are U S dollar 27.

For the fourth quarter of 2020.

As of December 31, 2020, the balance of cash and cash equivalents.

Restricted cash and short term investment held to maturity time deposits and financial products was RMB $59 6 billion or U S. Dollar 191 billion.

Now turning to the first quarter of 2021.

S. Jane shared early we saw significant but liability and our booking trends in the first two months of 2021.

Mostly due to COVID-19 related travel restrictions during the Chinese new year.

Our visibility for the full quarter. It is still very limited as of today due to the ongoing and volatility of the recovery pace and a short booking window.

And therefore, we will not provide a full quarter guidance at this time.

Instead, I'd like to share some color on our recent performance.

We have sustained better than industry performance across major business lines.

And in the first quarter of Q1 in the first half of Q1.

Recovery of our domestic hotel reservation, and let the industry average performance by around 15% against the same period of 2019.

And in particular.

Total reservations for intra province travel and in destination and activity reservations maintained solid growth.

After the holiday.

We've seen that travel demand quickly rebounded and.

And our hotel and air ticketing achieved a full recovery recently compared with the same period in 2019.

We remain fully confident on the general trend that the domestic market is getting back to the growth trajectory and.

And increasingly more positive on the potential reopening of international travel and.

Encouraged by the wide availability of vaccines and relaxation of travel restrictions.

We are fully prepared to continue gaining market share and capturing the opportunities during the recovery domestically and internationally.

With that operator, please open the line for questions.

Thank you if you wish to ask a question. Please press star one on your telephone and wait for your name to be announced if you wish to cancel your request. Please press star two and if you're on a speakerphone. Please pick up the handset to ask your questions. We ask that participants limit themselves to one question.

And should you wish to ask additional questions you need to register again and rejoin the queue you'll.

And your first question comes from Alex Yao from J P. Morgan. Please go ahead.

Thank you management for taking my question.

So I have a question on the content strategy Jonas you talked briefly.

Content strategy and the prepared remarks.

Can you elaborate a bit more on the strategy.

Particularly from a competition perspective, how do you plan to compete.

Got it.

The more <unk>.

And as to content platforms with exposure to travel such as they show them through and until you. Thank you.

Yeah.

First we are the largest travel and transaction platform and further so many of our users.

Oh, they used to writing authentic reviews and travel journey.

Our platform the more importantly.

Our strong bottoms and transaction consider day allows the content per transaction conversion easy and frictionless.

For example, our livestream channels and the world.

The highest conversion rate and travel industry last year.

Okay.

So for these reasons, we are confident to see.

But we will be one of the golden platforms, where users seek both travel and explorations and value.

Four.

Yeah.

Shaw and Mohawk travel demand.

Thank you and your next question comes from Thomas Chong from Jefferies. Please go ahead.

Hi, Good morning, Thanks management for taking my questions and congratulations on the recovery of.

After Chinese new year.

My question is more about.

The competitive landscape in lower tier cities are can.

And management talks about the.

And the poison trend in lower tier cities as well as Oh, and our strategy in lower tier cities. This year. Thank you.

Yes for the lower tier cities, we are putting lots of efforts fully utilizing the comprehensive comprehensiveness of our platform.

First of all our transportation products offered and leads for us to further penetrate into the lower tier cities and our cross sell capability enable us to cross sell all the products and our platform Secondly, Ah not only we have the online platform. We also have.

Thousands.

Thousands of the lower tier cities.

<unk> line of stores, which enable us also to sell our products in these oh cities, we will be able to input even more products, including a hotel.

Transportation products packaged tours local activities into these off line stores as well to enable us to further penetrate into these cities and thirdly because of the upcoming trend. We're also making sure our product is very competitive in terms of cash.

Average as well as the price to make sure the people in the cities get the best deal when they select products from different.

Product line and so our efforts for the lower tier cities.

And so going to be strengthened and also we have special teams to look at specific markets such as <unk>.

For people, who retired et cetera are these segments also presents a different opportunities for our new businesses.

Thank you.

Okay.

Thank you.

Next question comes from Ronald Keung from Goldman Sachs. Please go ahead.

Thank you. Thank you James James and B and Michelle.

Yes, my question and kind of follows on the competitive landscape.

The hotel.

Given the very good performance, you mentioned 15 percentage points above the industry.

The overall industry and how do we see that that amongst the online players.

With with more bookings online and I see so hot ways online penetration for hotel for the overall industry now.

And for online penetration and between say ourselves plus our associate control, how do we see ourselves doing amongst within the online trend and maybe your thoughts with other players, including and meet one another place and and all.

Within the online space. Thank you.

Or the hotel business the majority of the hotel bookings still its offline so with the concerted efforts by every player there are more volumes moving online and we're gaining lots of shares through this movement.

And as we discussed are from lower tier from mid to high and we are outpacing the industry growth growth by.

15% gaining market share in that segment and a lower tier cities. We're also putting concerted efforts to make sure. Our price is the best penetrating into the lower tier cities and thirdly, we also offer comprehensive one stop shopping platform too.

Everyone, who are interested in using our platform to travel. So all these efforts give us the advantage leading to industry growth.

Thank you.

Thanks.

Thank you and your next question comes from Binnie Wong from HSBC. Please go ahead.

Yeah.

Oh, Hi, good morning management and thank you for taking my questions I have two questions here and one or two short questions. One is there and also a falloff and on.

And the competitive landscape and the domestic market and we understand that some of your peers and stepping up specialties, right and especially even at the net to the hotel on the hotel side. So how do you see that would trend in terms of line on the subsidies wise do you have to step up on debt, especially Washington, T cells, and Mark and step up in the fourth quarter.

And then also.

I guess the book in terms of our.

Our cross selling them.

Efforts right in terms of like when you get like a retention and also the cross selling and any metrics that you can share with us wants to see and tons of our user retention.

Retention and also a cross sell and.

There will be very helpful to better understand our strategy.

Thank you.

Yeah with regard to the competition I think our strategy is to as Jane explained our strategy is quite consistent and also time schools and for the high end hotels.

Price and subsidy have been proved effective.

We keep focusing on strengthening our core competence.

And the AR and inventory service as well as the content, especially during the pandemic. We know all these strengths and our collaborations with our hotel partners by launch and a broader range of room and novel offerings at very attractive prices, but also developed a preorder off.

And which allow our users to locking.

And a competitive pricing, while enjoying great flexibility in determining the actual travel date.

We also launched the channels like a shock of holidays and fresh cell to help hotels.

And targeted marketing.

These off these kind of efforts to some extent further strengthening our strategic partnership.

With almost all the major and mid to high end hotels in the China market. Therefore, our market share increased significantly against peer players and we are very confident that we will continue to leading the ACH.

And for the low and hotel.

And.

In this segment.

We did notice that the customer.

Customers tend to be more price sensitive. Therefore, we will continue to lead the price competitiveness.

And the targeted market and acquire new users was competitive but lower end hotels and.

We also work very closely with our partners third party partners, especially in the.

Cheerful and share five cities to help our inventory flow market share against the peers in the segment.

And as our LOE and hotel business has.

A very limited contribution to our total revenue as well as the net profit and competition in this area have limited impact to our group level our financial performance.

And the long run our value proposition is much more sustainable for hotels, as we focus on bringing new customers and incremental demand.

From other places.

Instead of serving as just inserted paid channel to bring hotels existing local demand on line.

Okay.

Thank you and manager for a quick follow up and so on the margin side.

And we think about like the margin because free QC and very good margins and they can book you is because of seasonality and.

And also a high investment and Shopko positive drivers and you should expect and training for me one on the module side. Thank you.

Ah yes.

Our debt total non-GAAP costs, and operating expenses decreased to around 39% year over year in Q4.

Largely and thanks, largely to our largely flexible cost expenses structure and very efficient operating management.

During the past year, we have further streamlined our operation across business lines. In addition to certain adjustments related to Covid.

In addition, our improvement our content and cross selling her brother and less marketing efficiency.

Our non-GAAP sales and marketing expenses did increase debt.

And now are in the queue.

Q and looking forward in 2021, we expect a modest increase in our personnel expenses in 2021 and while we.

We did expect that the total head count will largely be stable, especially for our core businesses.

Sales and marketing expenses are largely discretional and be adjusted income.

Caught us with our business recovery and we will continue to adapt to and our <unk> strategy. We believe our improvement on content and cross selling will help improve our marketing efficiency.

At the same time, we will also reserved certain budgets in the short term to develop.

And our strategic long term strategic project for example, the content ecosystem and to prepare for the recovery and our potential growth and the international market.

Thank you. Thank you once again, if you wish to ask a question. Please press star one on your telephone and wait and see your name to be announced we ask that all questioners. Please restrict themselves to one question per person. If you do wish to ask additional questions you will need.

To rejoin the queue. Your next question comes from Jed Kelly from Oppenheimer. Please go ahead.

Good morning management and thank you.

And you for taking my question.

Just sort of looking like big picture.

And the global Otas and online travel there's a lot of investor enthusiasm that these companies are going to emerge from the pandemic and structurally higher margins.

And you see that's the case for you do you think you can come.

Come out and actually agree with.

And with higher margins. Thank you.

[laughter] and yeah.

And as I explained I think that the and in terms of the long term margin, we still think although and a very short term because of the volatility and.

On the top line, we especially for the Q1 as well as the 2020, while we profit.

Cannot provide at this moment a player guidance in terms of the margin, but in the long run we do think that the original 20% to 30% margin and.

It's very achievable for us and compare with the compare with international peers.

In terms of our sales and marketing efficiencies and a trip I'll call probably is the most efficient players in the and the market because we are and as always.

And we focus on gaining market share by growing our own customer, especially the mobile app our customers and we will continue to focus on this and in addition, and.

This year and because of the pandemic to we also noticed the.

The content product will help us significantly improve our conversion rate as well as the stickiness of our users. Therefore, we think we can have the same.

Some leverage, especially compared with the global peers and on the sales and marketing side. Thank you.

Right.

Thank you.

Next question comes from James Lee from Mizuho. Please go ahead.

Great. Thanks for taking my question Jane maybe it and is it any way you can help us understand maybe some of the policy support for.

For the travel industry, that's coming up this year and what kind of Sun should we look for you know for possible lifting and restriction for outbound travel or should we think about you know.

Those signs as widely available vaccine and Asian countries, where the government kind of consider re establishment of the Green channel that we talked about earlier and also kind of as we look beyond the pin debit right. Now do you have a sense when you talk to a hotel partners and general there'll be wrong.

And more on the Otas and certainly we saw that trends and the U S. S O T gained market share.

Post the financial crisis, just curious what you're thinking there. Thanks.

And.

Thanks.

Let me illustrate the interest income off layers and first of all for domestic travel.

During the January and February timeframe during the winter season, there were a small upgrades of the virus. So we stay put and for the whole country. They were quickly content that's more outbreaks.

And after the Chinese new year, we have seen very good recovery for domestic travel. So we expect the Chinese domestic travel will have a very strong rebound this year and our team is very well prepared in terms of so this capability and content generation and our <unk>.

Acknowledged investment so were they were positive in for recovery for the Chinese domestic travel.

Secondly, with the vaccine is being adopted by more and more countries. There were a couple of things we would like to see first of all for medical experts across the world They need to form a consensus in terms of for the people who have taken medicines are taking that a vaccine.

And how long do they need to.

The quarantine and when they return to their home country ome and enter into another country.

And secondly, with the consensus built by the global medical experts every country will form their policy in terms of opening up per grilling opening a special channels for travelers and thirdly when's. The countries every country has their policies.

Ready Otas, which are strong.

And in technology, we will make sure the cross borders inflammation as well as the service capability is coupled with the policy impulse buy every country and make sure all the information and services is a very well supporting our customers when they go across.

And so our team is making the right investment in terms of information assimilation in terms of the technology capability to support our customers now looking into different continents, We believe China and.

And in most.

Our nation and control.

The virus very well so the domestic travel is leading the recovery among all the global players and secondly on many countries in Asia have also demonstrated their ability to well control the virus countries, such as Singapore, Japan, and Korea has been very.

Well. So we expect these country in domestics were recovered very well and we're hopeful that with the effectiveness of the vaccine will be able to see.

I see some kind of recovery and in Greenland.

Limited travel as the test off the water, leading the recovery for cross border transactions.

Yeah.

Thank you and your next question comes from Natalie <unk> from Haitong International. Please go ahead.

Hi, Good morning, Thanks for taking my question, just a follow up with themselves and modeling question.

And again, a rough sense of what propelled or sales and marketing plan and the first half of this year keeping your book recovery of domestic business Hum and Chinese new year and I'm wondering if there is any change of sales and marketing spending ally related and criteria loosening or tightening across different channels.

During the pandemic.

And also one day, if you can keep us and update of your App and they view last year and how much of that is newly acquired a first time user and.

You have observed and demographic features and cohorts that would be grateful that would be great. Thank you.

And I. Thank you Natalie the sales and marketing expenses.

For us are largely discretion, though and we will continue to monitor our returns are based on our ROI and the criteria is pretty consistent.

Not losing.

And.

Our tightening all all eyes threshold.

But we were swiftly are adjusted.

Adjusted EBITDA, our sales marketing budget based on purely on the return.

And and studying as we explained starting from last year, we did notice that the content.

And as well as the content, including the for example, the live streaming as well as the fresh cell.

A significantly help us to improve our conversion rate.

And therefore, our overall marketing efficiency has been improved debt.

And and moving into 2020, one we will continuously to make investment in our content product.

And hopefully our marketing efficiencies well and continuously improving.

Okay.

Sorry, what what's your what's your second question.

Oh about new users.

Firstly, its about a penny and.

And they you just wondering if you can deepens and update I'll be I'll add that last year and how much of that is and it's like a brand newly acquired first time user.

And also and.

It is.

If there's any new demographic reach it all user cohorts related and can you use it.

Oh yeah.

Oh and you and then you have seen quite a consistently increasing especially with more and more content in our App are we did see we did notice and.

And Oh the debt the debt.

The time at the timing of debt.

And the stickiness of our users increased significantly.

Significantly in terms of the new users. We did notice that there are more and more percentage of our new users coming from the lower tier cities.

Especially coming from the third and.

And the force and as well as five tier cities. They may not make a booking at the first time, but today, we'll spend some time and.

Looking at the content that we provide are on the app at the beginning.

Got it thank you.

Thank you.

Thank you and your next question comes from Alex Poon from Morgan Stanley. Please go ahead.

Thanks management for taking my question and.

My question is mainly related to the overall, new revenue opportunities coming out of Covid.

And the post Covid World do you mentioned actually many things, particularly I want to understand.

And the content strategies and how this new content strategy can drive the long term conversion paying user conversion and also you talk about many of the other things actually like advertising short hauls vacation local attraction and cross selling lower tier city, you Fisher and marketing.

High online penetration so.

Trying to understand on the overall basis and not just domestic marketing OXXO.

The international opportunities, how how and how much how should we quantify all these new revenue opportunities as we go out of Covid. Thank you very much.

Yeah I think this is a new.

Space was Oh.

A week.

Additionally, only basically most of our money from division, So it's really coming out of the sales such as well.

Your line, so destinations and hotels of course, and we know they also have a marketing budgets and branding budget.

Probably just as large and the same order of magnitude and.

And as large as it.

Budgets.

The area that.

We hope to through our marketing and.

Platforms and our content.

Ability to be able to tap into.

And in the future.

Yeah. In addition.

And as we have seen China's infrastructure has been developed a quite significantly penetrated into many areas and China is a very big country. So during the lockdown period.

And I and our team has been visiting different provinces and there are great potential are leading our customers not only to the most famous attractions, but also many many other newly developed attractions.

The staycation local attractions and represent new opportunities for us to gain market share and lastly, I think we are also be very prepared to further and taking market share when the cross border transaction opens I think this is it now.

Great opportunity almost every country Oh, the travel industry related job opportunities are being depressed. During this pandemic. So there is a search of the demand for us to drive the volume into these area. So we are working.

Very closely with the players in the global places to make sure. Once the vaccine is adopted was the cross border.

The transaction take place will be very well prepared to bring to Chinese customers into these areas.

Right.

Thank you.

Your next question comes from Brian Gong from Citi Group. Please go ahead.

Yeah, 60 months and for taking my questions and so my Christmas and regarding the margins. So we have done and I was wrong.

And then considering mergers and cyclicality and there's only two which are also reflected in our financials.

My question is if we assume for recovery on our bonds and international travel and a decent growth.

Domestic travel.

And somebody can retool to Lincoln is free.

Our operating margins would be under that scenario compared to pre COVID-19 level assumption.

Yeah, we are although there are some fluctuate volatilities and the margin due to the COVID-19.

But Ah Ah Ah Ah in general, we still targeting at the 20% to 30% non-GAAP operating margin.

Which we think is very achievable if everything was June.

Normal.

Thank you. Thank you.

Thank you and your next question comes from Tien how from Th capital. Please go ahead.

Apologies that question I has disconnected that does conclude our time for questions I would now like to hand, the conference back to senior director and Michelle Qi.

Hello, Hello, Hello, Hello.

It's back and.

Yeah.

And what I always meal kit to be try to okay. So oh. Okay. This is the question. So first I'd say congratulations on the group Q4, it should be.

Really no easy Cooper and back to top line bottom line back to old with more and more so as a company.

Focus sufficient to domestic zone, and then I do believe domestic is going to be really great 2021.

The company Big motion and lots of possibilities. So in the short haul and the high frequency per Doc and the travel market and whats.

The company's plan to walk into it and what is our advantage that is.

And my question. So I'm very excited for this two products. So I want to know more detail about it. Thank you.

Yeah.

Thank you Tien and.

And first of all I think we are as we are very focused on the travel verticals.

And all the content will be more relevant for our customers.

And look for their for example debt we can't get away, so staycations and same tourists and secondly, thanks to our very strong product team, our Shanghai and vacation products, especially the hotel and hotel related packages are very competitive in terms of both pricing as well.

And the coverage.

And our live streaming and special deals channels have become the go to platform for travelers our debt seek value for money deals.

Travel market is immense and we are confident that our growth potential will be further iraq to especially in the quality travel market segment.

Thank you.

<unk>.

Okay. Thank you.

Thank you that does conclude our time for questions I would now like to hand, the conference back to senior director and Michelle Qi.

Thank you thanks to everyone for joining US today, you can find the transcript and webcast of today's call on Investor day to Stockholm, and we look forward to speaking with you on the first quarter 2021 earnings call. Thank you and have a good day. Thank you very much. Thank you.

That does conclude our conference for today. Thank you for participating you may now disconnect.

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Thank you for standing by and welcome to the trip Dot Com Group 2020 Q4 earnings Conference call.

All participants are in a listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question you will need to press the star key followed by the number one on your telephone keypad I would now like to hand, the conference over to Michelle Qi Senior Director. Please go ahead.

Thank you.

Good morning, and welcome to trip Com Group 2020 Q4 earnings Conference call. Joining me today on the call are Mr. James now executive Chairman of the board with cash.

And Chief Executive Officer, and MS, Cindy Wang Chief Financial Officer.

During this call we will discuss our future outlook and performance, which are forward looking statements made under the safe Harbor provision of the U S. Private Securities Litigation Reform Act and a 1995.

Forward looking statements involve inherent risks and uncertainties.

As such our results may be materially different from the views expressed today.

And number of potential risks and uncertainties are outlined a two dose group.

Public filings with the security and Exchange Commission.

They'll come group does not undertake any obligation to update any forward looking statements ex that.

And as required under applicable law.

Jim John and Cindy will share and our strategy and business updates operating highlights and financial performance for the fourth quarter of 2020 as well as and also for the first quarter of 2021.

After the prepared remarks, we will have a Q&A session.

With that I will turn the call over to Jim Jim.

Thank you Michelle Thank you everyone for joining us on our call today.

Looking back at 2020 days per year filled with both challenges and opportunities.

Despite the negative impact and then.

We have continued to innovate our product and improve our service and.

To strengthen and grow.

Aberration with our partners.

Such results demonstrated a strong as it is and it helps to make us stronger as a company.

As a result, we sit and gain market share across.

Bottom line is.

Domestic China and maintain a strong recovery momentum throughout the year.

Yes totally.

Third to take additional market share and upcoming and global recovery.

Moving forward will do.

And can you just focused on the domestic market in terms of supply chain.

<unk> comprehensive capabilities and quality and technology.

And the same zone, we are pushing ahead with our global ambition and international travel recovery and speaking for opportunities and the long run.

Our focused assets and not only and our products.

And additional market share during the pandemic, but also lays a solid foundation.

These growth drivers.

And Covid.

Today, I would like to shed some light on the leather first of all auto supply chain is our core competency we have built over the decades.

Operation.

Therefore, we are best positioned.

And the breadth and depth of offerings to cash.

Actually use us and Wally.

And.

Such as the east and <unk>.

The experiences as alternative book.

Outbound travel and.

Sure and its vacation kits, which are incremental to the typical long haul pipe.

This is and near term growth and that's already started to bear fruit.

We're glad to see reservations per football and travel and leisure destination activities.

These strong year over year growth, despite industry fluctuation and the past winter.

Secondly, we are working hard to strengthen.

Our content is worth it.

Which is highly synergistic.

And with our core price business.

And can bring meaningful revenue sources and the years to come.

We expect to follow a preset strategy and developing and our content and roadmap first of all.

<unk> two <unk>.

Enriched content selection and <unk>.

Terms of categories different formats, we believe comprehensive content offering and will help attract new users and improved engagement and in terms of frequency and <unk>.

And all that.

Yes.

Next we will strength of the integration of content generation.

Effective and recommendation and product.

Innovation and improved conversion rates.

Especially for the short haul products.

Completely gone contents per transactions will form a virtuous cycle.

The benefits our sustained growth.

Okay.

Third.

The deep integration of contact is branded products and our quality.

User base and extensive marketing network enables us to serve as a tourism marketing hub group.

Branding promotion and other marketing activities, leading to incremental revenue opportunity and tourism and.

And paying industry advertising and marketing.

Last but not least because these upgrades and our service quality and technology capability.

I would anticipate a smooth and effortless delivery of our products and users.

And it remains our core competency.

And we will continue to invest and further our leadership and competitive and the <unk>.

And that was big.

Finally.

Looking beyond the Covid, we remain deeply excited.

And by the global travel opportunities, we believe steady international markets presents an attractive long term growth potential.

And stopped travel platform.

One that could be multiple of China's domestic market, particularly day for international travel partners.

Dot Com group uniquely positioned to reach a truly global audience.

And our brand portfolio.

From a marketing perspective.

With that I will turn the call over to Jane well operating highlights.

Thanks James.

And everyone.

I'd like to start with a quick overview of Q4 and the full year of 2020.

Despite the industry fluctuation and a weakened.

Weaker seasonality and the winter in Q4, we are glad to see that trip Com group delivered solid performance and have consistently outgrow the industry average across the product lines.

Total net revenue so a further narrowed year over year decline in Q4 to 40%.

And as domestic accommodation reservation.

<unk> business ground transportation and other domestic travel products recovered nicely in Q4.

In addition, we achieved positive non-GAAP profit margin of 10% in the fourth quarter.

On a full year basis.

Our core OTA April and deliberate GMB of 395 billion RMB 161 billion USD.

Again, leading the industry worldwide.

For full year 2020.

And to our efficiency improvements and strong cost control.

We're able to achieve 2% non-GAAP operating profit margin.

Today, I would like to share some operating highlights in four areas.

First mid to high and troubled market second.

Second low tier city penetration.

But our new strength in higher frequency categories and force improvements of our content capabilities.

First we continue to improve our product competitiveness.

Competitiveness and increased market share in the fourth quarter, especially in the middle to high end market.

Our middle to high end hotel bookings reached the double digit growth year over year far exceeding the industry average by 15% to 20%.

In addition high quality niche and a boutique travel has become an important alternative for our previously outbound customers.

We saw and average spending on domestic package tours grew significantly year over year in the fourth quarter and.

Especially for our mobile users.

Second.

We gained further market share in the low tier markets in.

In 2020 more than 40 per cent of our new customers came from third tier cities and below.

Transportation products has become important to channels to acquire new users with whom we can cross sell other product.

Third as James mentioned.

And we worked hard to unlock a nuisance in highly frequent categories, such as Shaw short haul and vacation.

We attracted more diversed and high quality partners to our platform to expand our product offerings and also broaden the scope of collaboration with existing partners.

The number of our in destination activity and supply increased by over 25% year over year by the end of last year.

As a result short haul and then local travel has become a key contributor to our recovery.

In the fourth quarter, our hotel G M. B for the same probably space increased by over 20% year over year and.

And reservation for attraction and activity increased almost 100 per se.

Such strong performance for short haul and local travel and extend it into the past Chinese new year holiday.

Compared to the same period in 2019, our hotel G. M. B for the same probably stays achieved 20% year over year growth and reservation for local attractions and activities more than tripled.

Over the past year, we focused on improving our content offering.

We achieved we believe the content will generate unique and long term long lasting value and user engagement as well as the new earnings power.

By the end of 'twenty 'twenty, our content channel contribution to the total.

And traffic more than doubled compared to the beginning of the year.

And the visit time of our information seats more than tripled during the year.

Our livestream and special deals channel has now become a place where people come to find attractive deals.

Which contribute approximately 5 billion G M b during the past year.

We are also glad to see the initial development in advertisement to revenue opportunity.

I went to that stick advertising and marketing revenue.

Increased significantly year over year in the fourth quarter and maintained and overall or how such a growth throughout the year.

In the future, we will continue to build our content ecosystem.

And concerted efforts.

The ecosystem will enable our users engagement and make our platform our comprehensive market place.

Turning to the year of 'twenty, 'twenty, one and the domestic travel demand.

Remain resilient despite industry headwinds due to the small outbreaks and tightened and travel restrictions during the Chinese new year holiday.

And what domestic hotel and air reservation.

Quickly rebounded.

Most of the holiday and reached for recovery recently.

Compared to the same period in 2019.

We are fully confident that the domestic market will come back with the growth trajectory in the year of 2021.

Due to the effective pandemic control and wider distribution of vaccine.

I remember just the World Cross border travel is still under pressure.

However, the domestic travel and day trip Dotcom has started its recovery.

According to China, Tourism Academy and increased distribution of its active COVID-19 vaccine worldwide.

Global travel will resume.

Order in.

And the new year.

We are optimistic and it will be fully prepared to take advantage of the upcoming recovery in the international travel.

Finally, I would like to thank our team again for their dedicated efforts and commitment in.

And maintaining quality associates during this challenging time.

As always we are committed to leading the best in the industry practice for all our stakeholders, including our customers business Partners Inc.

<unk> shareholders and communities.

Lastly, we released our first ESG report, which cover our approaches and efforts in developing and inclusive workplace promoting responsible travel and providing quality user experience.

Going forward, we will continue to improve our airports and ESG to lead our sustainable growth in the long term.

With that I will now turn the call over to Cindy.

Thanks, Jane Thanks, everyone for the fourth quarter net off 2020 trips I'll call group reported net revenue of RMB 5 billion.

Presenting a 40% decrease from the same period in 2019.

And the further narrowed declines reflect a continued recovery of our China domestic market, especially for short haul and Staycations.

I'd like to first go through some business highlights that drives the recovery of our domestic revenues.

Accommodation reservations for China domestic market sustained positive growth in Q4 was mid to high and hotel reservations growing at double digits, and intra province hotel GMB grew by more than 20%.

Domestic air revenue maintained positive year over year growth in Q4, despite the higher base in the previous year with transportation bookings for early Chinese new year holiday.

Reservations for domestic in destination activities achieved strong growth during the quarter.

Mainly driven by short haul trips.

Recovery for domestic package product was slower due to industry fluctuations with small outbreaks of Covid cases in this quarter.

International business is still under pressure however, similar to what we experienced in China. Our brand tripped I'll call also saw strong growth with domestic hotel reservations in many markets.

Gross margin was 82 per cent for the fourth quarter of 2020.

Increased from 17, 9% for the same period in 2019 and 81% for the previous quarter.

The increase of gross margin was mainly helped by a favorable change in product mix and continued improvement in service and efficiency.

In the mid to long term, we still expect the gross margin to be around 75% to 80%.

Total non-GAAP operating expenses decreased by 36% from the same period in 2019 and increased by 14% from the previous quarter.

Thanks to our large lay flexible cost and expenses structure and efficient operating management.

During the past year, we have further streamlined our operations across business lines. In addition to search and adjustment related to Covid.

In addition, our improvements all content and cross selling and have further lift the marketing efficiencies.

Product development expenses for the fourth quarter and decreased by 20 per cent to RMB. Two 2 billion from the same period in 2019 and increased by 8% from the previous quarter.

The sequential increase was mainly due to the normalization of our personnel arrangement.

Sales and marketing expenses for the fourth quarter decreased by 58% to RMB. One 2 billion from the same period in 2019 and increased by 9% from the previous quarter.

The sequential increase was mainly due to the increased marketing spending in response to continued travel demand recovery.

Excluding share based compensation charges non-GAAP operating margin was 10% for the fourth quarter of 2020.

Compared to 12% in the same period in 2019.

Diluted earning per ads were RMB 165 are U S dollar 25 cents.

For the fourth quarter of 2020.

Excluding share based compensation charges and fair value changes of equity security investments and exchangeable senior notes.

Non-GAAP diluted earning per ads were RMB, one seven and five are U S dollar 27 cents.

The fourth quarter of 2020.

As of December 31, 2020 debt.

Balance of cash and cash equivalents.

Restricted cash and short term investment held to maturity time deposits and financial products was RMB $59 6 billion or U S. Dollar 191 billion.

Now turning to the first quarter of 2021.

S. Jane shared early we saw significant but liability and our booking trends in the first two months of 2021.

Mostly due to COVID-19 related travel restrictions during the Chinese new year.

Our visibility for the full quarter. It is still very limited as of today due to the ongoing volatility of the recovery pace and the short booking window.

Therefore, we will not provide our fourth quarter guidance at this time.

Instead, I'd like to share some color on our recent performance.

We have sustained better than industry performance across major business lines and.

And in the first quarter of Q1 in the first half of Q1, the recovery of our domestic hotel reservations, let the industry average performance by around 15% against the same period of 2019.

In particular <unk>.

Reservations for intra province travel and in destination and activity reservations maintained solid growth.

After the holiday, we've seen that travel demand quickly rebounded and our hotel and air ticketing achieved a full recovery recently compared with the same period in 2019.

We remain fully confident on the general trend that the domestic market is getting back to the growth trajectory.

And increasingly more positive on the potential reopening of international travel and <unk>.

<unk> by the wide availability of vaccines and relaxation of travel restrictions.

We are fully prepared to continue gaining market share and capturing the opportunities during the recovery domestically and internationally.

With that operator, please open the line for questions.

And should you wish to ask additional questions you need to register again and rejoin the queue.

Your first question comes from Alex Yao from Jpmorgan. Please go ahead.

Thank you management for taking my question.

So I have a question on the content strategy Jonas you talk to briefly.

Content strategy and the prepared remarks.

Can you elaborate a bit and more on our strategy.

Particularly from a competition perspective, how do you plan to compete.

Got it.

The more these published content platforms with exposure to travel such as they show them through and until you. Thank you.

Yeah.

First we are the largest travel transaction platform and final so many of our users.

Oh, they used to writing authentic reviews and travel channel.

Our platform the more importantly.

A strong fathers and transaction can visit day allow us and they cause.

Turning to transaction conversion easy and frictionless.

For example, and Livestream channel.

Highest conversion rate and travel and industry last year.

Okay.

For these reasons, we are confident to see.

But we will be one of the golden platforms for users seek both travel and explorations and value.

Four.

And.

Yeah.

Shaw and Mohawk travel demand.

Thank you.

Next question comes from Thomas Chong from Jefferies. Please go ahead.

Hi, Good morning, Thanks management for taking my questions and congratulations on the recovery.

And after Chinese new year My question is more about.

The competitive landscape and low.

And what tier cities.

And management talks about the.

Wise and trend in lower tier cities, as well as Oh, and our strategy and lower tier cities. This year. Thank you.

Yes for the lower tier cities, we are putting lots of efforts fully utilizing the comprehensive comprehensiveness of our platform first.

<unk> are not only we have a online platform. We also have.

Thousands of the lower tier cities.

Offline stores, which enable us also to sell our products in these oh cities, we will be able to input even more products, including a hotel.

Coverage as well as the price to make sure the people in the cities get the best deal when they select products from different.

Product line and so our efforts for the lower tier cities.

And is simply to be strengthened and also we have special teams to look at specific markets such as us.

And what people call it required et cetera.

Segments also presents a different opportunities for our new businesses.

Thank you.

Yeah.

Thank you.

Next question comes from Ronald Keung from Goldman Sachs. Please go ahead.

Thank you. Thank you James Jane Cindy and Michelle and I guess my question and kind of follows on the competitive landscape.

The hotel.

Given the very good performance, you mentioned 15 percentage points above the industry.

The overall industry and how.

Do we see that that amongst the online players.

With with more bookings online and I see so hot ways online penetration for hotel for the overall industry now.

For all and penetration and between say ourselves plus our associates total how do we see ourselves doing amongst our within the online trend maybe your thoughts with other players, including and make one and other players and all.

Within the online space. Thank you.

For the hotel business the majority of the hotel bookings still its offline so with the concerted efforts by every player there are more volumes moving online and the work and lots of shares through this movement.

And as we discussed are from lower tier from mid to high and we are outpacing the industry growth growth by a 15% gaining market share in that segment and a lower tier cities. We're also putting concerted efforts to make sure our price.

It's the best penetrating into the lower tier cities and thirdly, we also offer a comprehensive one stop shopping platform to everyone who are interested in using our platform to travel. So all these efforts give us the advantage leading to industry growth.

Thank you.

Thanks.

Thank you and your next question comes from Binnie Wong from HSBC. Please go ahead.

Yeah.

Oh, Hi, good morning measurement and thank you for taking my questions I have two questions here and one or two short questions. One is there and also a fall off and on.

That would trend in terms of line on the subsidies wise do you have to step up on debt, especially watching T cells, and mark and step up in the fourth quarter.

And then also I.

And I guess your book in terms of our all of our cross selling.

Efforts right in terms of like when you get like a retention and also the cross selling and any metrics that you can share with us off wants to see and tons of our user retention.

Retention and also cross selling.

And there will be very helpful to better understand our strategy.

Thank you.

Yeah with regard to the.

Competition I think our strategy is to as Jane explained our strategy is quite consistent and also time schools and for the high end hotels.

The subsidy have been proved effective.

We keep focusing on strengthening our core competence and.

And the AR inventory service as well as the content, especially during the pandemic. We know all these strengths and our collaborations with our hotel partners by launch and a broader range of room and non real offerings at very attractive prices, but also developed a preorder offerings.

And which allow our users to locking in.

And a competitive pricing, while enjoying great flexibility in determining the actual travel date.

We also launched the channel, it's like a shock of holidays and fresh cell to help hotels are run.

<unk> targeted marketing and.

These off these kind of efforts to some extent further strengthening our strategic partnership with.

And for the low and hotel.

And.

In this segment.

We did notice that the our customers tend to be more price sensitive and therefore, we will continue to lead the price competitiveness.

And the targeted market and acquire new users with competitive, but lower and hotels.

We also work very closely with our partners third party partners, especially in the.

Cheerful and share of five cities to help our inventory flow market share against the peers in the segment.

And as our low and hotel business has a.

Very limited contribution to our total revenue as well as the net profit and competition in this area have limited impact to our group level our financial performance.

In the long run our proposition is much more sustainable for hotels, as we focus on bringing new customers and incremental demand.

From other places.

Instead of serving as just ink circuits paid channel to bring hotels existing local demand on line.

Okay.

Thank you and manager for a quick follow up also on the margin side.

We think about like the margin because free QC at very good margins and the gym book to is because of seasonality.

And also a high investment and Choctaw positive drivers and you should expect and training for me one on the module side. Thank you.

Ah yes.

Debt total non-GAAP costs, and operating expenses decreased to around 39% year over year in Q4 are largely and thats largely thanks to our largely flexible cost expenses structure and very efficient operating management.

During the past year, we have further streamlined our operation across business lines. In addition to certain adjustments related to Covid.

In addition, all improvements all content and cross selling has further lift the marketing efficiency.

Our non-GAAP sales and marketing expenses did increase debt.

And now.

And are in the queue.

Looking forward in 2020, one we expect a modest increase in our personnel expenses in 2021.

While we did expect that the total head count will largely be stable, especially for our core businesses.

Sales and marketing expenses are largely discretional and be adjusted in Ocado.

Caught us with our business recovery and we will continue to adopt and.

And I like the strategy, we believe our improvement on content and cross selling will help improve our marketing efficiency, but at the same time, we will also reserved certain budgets in the short term to develop.

And our strategic long term strategic project for example, the content ecosystem and to prepare for the recovery and our potential growth and the international market.

Thank you. Thank you once again, if you wish to ask a question. Please press star one on your telephone and wait for your name to be announced we ask that all questioners. Please restrict themselves to one question per person. If you do wish to ask additional questions you will need to reach them.

And the queue. Your next question comes from Jed Kelly from Oppenheimer. Please go ahead.

Good morning management and thank you for taking my question.

Just sort of looking like big picture.

You know with the global Otas and online travel there's a lot of investor enthusiasm that these companies are going to emerge from the pandemic and structurally higher margins.

You see that's the case for you do you think you can cut.

Coming out of actually moving higher margins. Thank you.

[laughter] and yeah.

And as I explained I think that the in terms of the long term margin.

We still think although and a very short term because of the volatility and.

On the top line, we especially for the Q1 as well as the 2020, while we'd profit.

Cannot provide at this moment a player guidance in terms of the margin, but and the La Ronde, we still think that the original 20% to 30% margin.

It's very achievable for us and compare with the compare with international carriers.

In terms of Sel Sem marketing efficiency.

A trip I'll call probably is the most efficient players in the in the market because we are and as always.

We focus on gaining market share by growing our own customer, especially the mobile app.

Customers and.

And we will continue to focus on this and in addition, and.

And this year.

And because of the pandemic to we also noticed that.

The content product will help us significantly improve our conversion rate as well as the stickiness of our users and therefore, we think we can have some.

Some leverage, especially compared with the global peers and on the sales and marketing side. Thank you.

Right.

Thank you.

Next question comes from James Lee from Mizuho. Please go ahead.

Great. Thanks for taking my question Jane maybe can is there any way you can help us understand maybe some of the policy support for.

For the travel industry, that's coming up the share and what kind of Sun should we look for.

For possible lifting and restriction for outbound travel should we think about you know.

Those signs as widely available vaccine and Asian countries, where the government kind of consider re establishment of the Green channel that we talked about earlier and also kind of as we look being non independent debit right. Now do you have a sense when you book the hotel partners and general there'll be one.

And more on the Otas and certainly we saw that trends and the U S. As OTT gained market share.

Post the financial crisis, just curious what you're thinking there. Thanks.

And.

Thanks.

Let me illustrate the interest income pulse layers first of all for domestic travel.

During the January and February timeframe during the winter season, there were a small upgrades of the virus. So we stay put for the whole country. They were quickly content that's more outbreaks.

And after the Chinese new year, we have seen very good recovery for domestic travel so we expect.

The Chinese domestic travel will have a very strong rebound this year and our team is very well prepared in terms of so that's capable.

Ability.

And to a generation our technology investment so were they were positive and for recovery for the Chinese domestic travel.

Secondly, with the VI a vaccine is being adopted by more and more countries are there were a couple of things we would like to see first of all for medical experts across the world They need to form a consensus in terms of for the people who have taken medicines are taking that met a vaccine.

And how long do they need to be.

And the quarantine and when they return to their home country or when they enter into another country if any.

Currently with the consensus built by the global medical experts every country will form their policy in terms of opening up a great lengths opening a special channel for travelers and thirdly when's. The countries every country has their policies are ready.

And the Otas, which the strength.

And in technology, we will make sure the cross borders inflammation as well as the service capability is coupled with the policy and posts by every country and make sure all the information and services is a very well supporting our customers when they go across.

And most are.

Our nation and control.

Virus very well so the domestic travel is leading the recovery among all the global players and secondly on many countries in Asia have also demonstrated their ability to well control the virus countries, such as Singapore, Japan, and Korea has been there.

Well. So we expect these country in domestics were recovered very well and we're hopeful that with the effectiveness of the vaccine will be able to see.

I see some kind of recovery and in Greenland.

Limited travel assets.

Test off the water, leading the recovery for cross border transactions.

Yeah.

Thank you and your next question comes from Natalie <unk> from Haitong International. Please go ahead.

Hi, Good morning, Thanks for taking my question, just a follow up with the sales and marketing question.

And I get a rough sense of theyre propelled or sales and marketing in the first half of this year keeping your book recovery of domestic business pumps, and Chinese new year and I'm wondering if there is any change of sales and marketing spending ally related criteria loosening or tightening across different channels.

During the pandemic Oh, so one day, if you can give us an update of your App and they view last year and how much of that is newly acquired a first time user and.

You have observed and.

Demographic features and cohorts that would be grateful and that would be great. Thank you.

And I. Thank you Natalie the sales and marketing expenses.

For us are largely discretion, though and we were continues and may to monitor our returns are based on our ROI and the criteria is pretty consistent are not losing our oh.

And I'll try to move all our lives threshold.

But we were swiftly adjusted.

Adjusted EBITDA, our sales marketing budget based purely on the return.

And and studying as we explained starting from last year, we did notice that the content and.

And as well as the content, including the for example, the live streaming as well as the fresh cell.

A significantly help us to improve our conversion rate and therefore, our overall marketing efficiency has been improved debt.

And and moving into 2020, one we will continuously to make investment in our content product and.

And hopefully our marketing efficiencies well and continuously improving.

Okay.

Sorry, what what's your what's your second question.

Well, how about new users.

With me is about your opinion and.

And they you just wondering if you can deepens and update I'll be I'll add that last year and how much of that is there's like a brand newly acquired the first time user.

And also then and.

It is.

If there's any new demographic feature all user cohorts related and said he uses.

Oh yeah.

Oh and you and then you have seen quite a consistently increasing especially with more and more content in our app.

We did see we did notice a.

And Oh.

The debt at that time at the timing of debt.

And the stickiness of our users increased significantly.

Significantly in terms of the new users we did notice that there are more.

More and more percentage of our new users coming from the lower tier cities.

And especially coming from the sort of force and as well as five tier cities. They may not make a booking at the first times that today, we'll spend some time and are.

Looking at the content that would provide a on the app at the beginning.

Got it thank you.

Thank you.

Thank you and your next question comes from Alex Poon from Morgan Stanley. Please go ahead.

Thanks management for taking my question.

And my question is mainly related to the overall, new revenue opportunities coming out of Covid and.

In the post Covid World do you mentioned actually many things, particularly I want to understand.

And the content strategies and how this new content strategy and drive up the long term conversion paying user conversion and also you talk about many of the other things actually like advertising short hauls vacation local attraction and cross selling lower tier city, you fish and marketing high online penetration so.

And trying to understand on the overall basis and.

Not just domestic market and OXXO.

International.

Opportunities, how how how much how should we quantify all these new revenue opportunities as we go out of Covid and thank you very much.

Yeah I think this is a new.

Space was a weak traditionally only basically most of our money and some commission so they are coming out.

Sales such as well.

Airlines' destinations and hotels.

Of course, as we know they also have a marketing budgets and branding budget.

Probably just as large and the same order magnitude and it just.

This large.

Its budget.

The area that.

We spoke to our marketing and.

Platforms and our content.

Moving to be able to tap into.

And in the near future.

Yeah. In addition.

And as we have seen China's infrastructure has been developed to quite significantly penetrated into many areas and 'twenty, it's a very big country. So during the lockdown period.

And I and our team has been visiting different provinces and they are a great potential leading our customers not only to the most of the famous attractions, but also many many other newly developed attractions. So the staycation local attractions and represent.

And new opportunities for us to a day.

And market share and lastly, I think we.

We'll also be very prepared to further and taking market share when the cross border transaction opens I think dishes and a great opportunity almost every country Oh, the travel industry related job opportunities are being depressed during this pandemic.

So there is a search after day meant for us to drive the volume into these area. So we are working very closely with cash.

In the global places to make sure once the vaccine is adopted was the cross border.

Transaction take place will be very well prepared to bring to Chinese customers into these areas.

Yeah.

Thank you.

And Keith Your next question comes from Brian Gong from Citi Group. Please go ahead.

Yeah, six months and for taking my questions. So my question is regarding the margins. So we have done and those phones.

And our cost saving measures and cyclicality into there's only two which are also reflected in our financials.

My question is if we assume for recovery on a bond and then international travel and a decent growth.

Domestic travel.

The income they tended to open and this week, which was our operating margin would be under that scenario compared to pre COVID-19 levels yes.

Okay.

Yeah, we are although there are some fluctuate volatilities and the margin due to the COVID-19.

But in the AR in general, we still targeting at that 20% to 30% non-GAAP operating margin.

Which we think is very achievable, if everything with students and normal.

Thank you. Thank you.

Thank you and your next question comes from Tien how from Th capital. Please go ahead.

Apologies that question and I has disconnected that does conclude our time for questions I would now like to hand, the conference back to senior director Michelle Qi.

Hello, Hello, Hello, Hello.

It's back and.

Yeah.

What I always meal kit to be try to okay. So okay.

The question. So first I'd say kind of reservations on the group Q4, it should be.

Really now easy Cooper and back with top line bottom line back to almost normal so that's the company.

Focus sufficient to domestic zone, and then I do believe domestic it's going to be really great 2021, So the company deep emotion and lots of possibilities. So in the short haul and high frequency per Doc and the travel market and it works.

The company's plan to develop into it and what he saw vantage that is there are you know.

And my question. So I'm very excited for this two products. So I want to know more detail about it. Thank you.

[laughter].

Thank you Tien and.

And first of all I think we are as we are very focused on the travel verticals.

And all the content will be more relevant for our customers.

And look for their for example debt, but we can't get away, so staycations and same tours and secondly, thanks to our very strong product team, our Shanghai and vacation products, especially the hotel and hotel related packages are very competitive in terms of both pricing as well.

And the coverage.

And our live streaming and special deals channels have become the go to platform for travelers our debt seek value for money deals.

And the travel market is a mess and we are confident that our growth potential.

He further Iraq to especially and the quality travel market segment. Thank.

Thank you.

Thanks.

Okay. Thank you.

Thank you and that does conclude our time for questions I would now like to hand, the conference back to senior director and Michelle Qi.

Thank you and thanks, everyone for joining US today, you can find the transcript and webcast of todays call and investors those trees dotcom, we look forward to speaking with you on the first quarter 2021 earnings call. Thank you and have a good day. Thank you very much. Thank you.

That does conclude our conference for today. Thank you for participating you may now disconnect.

Q4 2020 Trip.com Group Ltd Earnings Call

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