Q3 2024 Trip.com Group Ltd Earnings Call
Speaker Change: Thank you. Good morning and welcome to TRIP.com Group's third quarter of 2024 earnings conference call.
Speaker Change: Joining me today on the call are Mr. James Liang, Executive Chairman of the Board, Ms. Jane Sun, Chief Executive Officer, and Ms. Cindy Wang, Chief Financial Officer.
Speaker Change: During this call, we will discuss our future outlook and performance, which are forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.
Speaker Change: Forward-looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the views expressed today.
Speaker Change: A number of potential risks and uncertainties are outlined in TRIP.com Group's public filings with the Securities and Exchange Commission. TRIP.com Group does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
Speaker Change: Operating Highlights and Financial Performance for the 3rd Quarter of 2024, as well as the Outlook for the 4th Quarter of 2024.
Speaker Change: After the prepared remarks, we will have a Q&A session. With that, I will turn the call over to James. James, please.
James Liang: Thank you, Michelle. And thanks everyone for joining us on this call today. In the third quarter of 2024, the China travel market demonstrated remarkable resilience, with strong performance in both domestic and cross-border travel. This surge in demand reflects a recovery in consumer confidence and a growing enthusiasm for travel.
James Liang: The National Day holiday clearly highlighted this momentum, with passenger trips and travel bookings surpassing pre-pandemic levels. As consumer confidence rises, the demand for diversified and personalized travel experiences has become increasingly evident. During the holiday, our Trip Best ranking revealed notable user preferences and significant growth across themes such as family travel, food, culture, and seasonal specialties. In particular, young people are increasingly prioritizing travel in their spending. This trend is further reflected in the rising demand for concerts, music festivals, exhibitions, and sporting events, which are particularly appealing to this demographic.
James Liang: The events featured on our trip events list have gained significant traction among younger travelers, highlighting the growing influence of such events on travel preferences.
James Liang: Riding the wave of this trend, we are excited to roll out our Entertainment Plus travel products. For example, we teamed up with Dunhuang City to host the 2024 Echoing Sand Mountain and Crescent Lake concert.
James Liang: To make this desert-side concert truly unforgettable, we added a sprinkle of fun with activities like camel-riding, sand-sliding and transport packages, ensuring customers enjoyed an adventure that went beyond just music. As AI plays an increasingly pivotal role in enhancing the travel experience, our innovations not only streamline the planning process, but also offer personalized solutions. In this rapidly evolving landscape, our goal is to make travel more accessible, efficient and enjoyable for everyone. By continuously integrating AI into our services, we aim to empower travelers with smarter and more tailored options. While the advancement of AI technology
James Liang: revolutionizes the travel industry by enhancing customer experiences and operating efficiency, it is equally crucial to develop robust ESG practices to ensure sustainable and ethical growth within the sector. Over the years we have diligently built a framework to embed ESG principles into every aspect of our operations and actively promote ESG adoption across the industry. Beyond our commitment to environmental stewardship, our ESG philosophy centers on people, focusing on creating jobs, fostering an inclusive and diverse workplace and raising service standards to enhance the experience for customers.
Speaker Change: This approach benefits the broader community and promotes sustainable economic development. We are honoured to receive the Forbes China Best AI-Driven and Digitized Employer of the Year 2024 award, a recognition that celebrates our efforts and motivates us to continue advancing our ESG initiatives. In conclusion, the China travel market in Q3 has demonstrated strong resilience, driven by growing consumer confidence and robust demand across both domestic and international segments. As the travel industry continues to evolve, we are confident that technological advancements and favourable market conditions will drive sustained growth and shape the future of global travel. With that, I will turn the call over to Jane for operational highlights.
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Thank you, James. Good morning, everyone.
Speaker Change: As a quick overview, our net revenue in Q3 grew by 16% year-over-year.
Speaker Change: We are pleased to see that travel consumption in China remains resilient and delivered strong performance in the past summer vacation and the National Day holiday. Outbound travel continues to experience strong growth during this peak season of the year. During the quarter, international flight market restored to about 80% of the pre-pandemic level. Our outbound hotel and air ticket bookings recovered to 120%, compared with 2019 levels, continuing to outperform the industry by 40%. Japan remains the top destination for Chinese outbound travelers.
Speaker Change: will be followed by other APAC regions. Additionally, there is a growing interest in long-haul destinations such as Europe, the Americas, Oceania and the Middle East.
Speaker Change: Notably, citizens from higher tier cities are eager to expand their travel radius and explore more distant destinations, while those from lower tier cities are beginning to venture beyond national borders and emerging as a new growth driver in outbound travel. During the National Day holiday, travel bookings from tier 4 and 5 cities surged by 100% and 300% respectively. In the domestic Chinese market, travel demand remains robust, with travel patterns becoming more evenly distributed across the country. It is encouraging to see travelers increasingly exploring inland and lesser-known destinations, contributing to the further development of the Chinese economy.
of Local Tourism.
Speaker Change: We are committed to innovating our product offerings in close collaboration with them.
Speaker Change: By developing hotel package deals, we can explore various use cases and address emerging customer needs through co-branding and mutual membership initiatives.
Speaker Change: We aim to enhance value for customers and cultivate stronger brand loyalty. Additionally, we support domestic hotels in gaining visibility among inbound travelers, driving demand from international markets. With our global network, suppliers can effortlessly reach both domestic and global audiences, maximizing their exposure and impact through integrated marketing efforts on our platform. On the international front, our global businesses continue to witness strong momentum in Q3. Air ticket and hotel bookings on our international OTA platform rose by over 60% year over year, with bookings from the A3 to Q4.
APEC region increasing by more than 70%.
Speaker Change: Our international OTA platform has become the most downloaded OTA app in many markets including Hong Kong, Macau, Taiwan, South Korea, Singapore, Malaysia and Thailand Reflecting the outstanding results we have achieved and our strengthened presence across the APAC region
Speaker Change: building on our success as the most downloaded OTA app in several APAC markets. Our global development efforts are further enhancing inbound travel as these regions are also major sources of international visitors. In Q3, inbound hotel bookings on our platform increasing by around 100%, reflecting a heightened interest in traveling to China among global travelers.
Speaker Change: Notably, 25% of total inbound travelers this year have visited China more than once, demonstrating the country's appeal to repeat visitors eager to explore its rich culture and lifestyle.
Speaker Change: To capitalize on this opportunity, we offer a range of services designed to enhance the travel experience.
Speaker Change: International visitors can directly book tickets for over 2,000 attractions and access more than 8,000 day and half-day tour options available on our platform. We also provide convenient currency exchange services and collaborate with Internet service providers to offer eSIM card solutions.
Speaker Change: ensuring travelers stay connected. At popular attractions like the Great Wall and the Terracotta Warrior Museum, we have implemented ticket vending and check-in machines customized for international visitors, allowing for expedite entry. Additionally, we offer complimentary city tours for international travelers with layovers exceeding eight hours at Shanghai's Pudong International Airport, ensuring their every moment in China is memorable.
Speaker Change: With the continuous resumption of flight capacity, improvement in entry convenience, and a strengthened inbound supply chain, the outlook for the inbound travel market is optimistic. We look forward to contributing to the industry development and assisting our partners in seizing these opportunities. We see that the travel demand among senior population continues to show significant potential and growth. In the first three quarters of this year, travel bookings from users aged 50 and above have risen by 26% compared to the same period last year, outpacing growth in other age groups, notably the 61 to 65 age cohorts.
Speaker Change: has experienced the most substantial increase, with an impressive rise of 58%.
Speaker Change: More than 70% of transactions were booked directly by senior users through our old Friends Club channel, while approximately 20% were booked by family members using the Family Card function.
Speaker Change: Over half of these Silver Generation travelers come from Tier 1 and emerging Tier 1 cities.
with a higher level of disposable income.
Speaker Change: This cohort exhibit a greater propensity for air travel, prefer to stay in high-star hotels, with per capita spending 30% above the group average. They also show a preference of customized trips over traditional group tours, usually with a theme of natural sightseeing and cruise vacations, seeking flexible, relaxing and enjoyable experiences. We see immense potential in tailoring nature and culture-themed trips to capture the travel demand of this demographic. Additionally, seniors are becoming active contributors to online content, comprising 7% of creators and generating over 10% of all travel-related material, with their output increasing by 50%.
Speaker Change: by nearly 40% this year. We anticipate that this increased content output will help inspire fellow senior travelers and bolster their confidence in our old friends club services, thereby amplifying the flywheel effect.
Speaker Change: Travel is a powerful tool for addressing many of the world's challenges.
Speaker Change: It creates dignified livelihoods and job opportunities while driving economic investments that benefit the environment. Representing 10% of global GDP and generating over 300 million jobs, the travel industry plays a crucial role in fostering global prosperity. Trip.com group has been instrumental in supporting their growth over the past 25 years, providing exceptional services to millions of travelers and creating extensive business opportunities for our partners.
Speaker Change: To enhance travel experiences, we are dedicated to continuously improving service quality and are always prepared to assist with any customer issues, ensuring a hassle-free journey. Our customer service team is just 30 seconds away, ready to address concerns and facilitate smooth trips.
Speaker Change: with a view to rural revitalization. Travel is a tool for economic growth, a bridge to understanding and a path toward a peaceful world.
Speaker Change: By fostering economic development and job creation, Trip.com Group makes a significant impact on both local communities and the global economy.
Speaker Change: In summary, our strong performance across various travel segments highlights the resilience of travel consumption and the industry's potential. With a bright outlook ahead, we remain committed to contributing to providing excellent services to our customers, bringing robust business to our partners.
Speaker Change: Our domestic and international hotel bookings have also seen robust growth. Transportation ticketing revenue for the third quarter was 5.7 billion renminbi, representing a 5% increase year-over-year and a 16% increase quarter-over-quarter. Outbound air ticket bookings have surpassed the 2019 level, with our domestic air business outpacing the market and international air business. Experiencing robust growth, package tour revenue for the third quarter was 1.6 billion renminbi, representing a 17% increase year-over-year and a 52% increase quarter-over-quarter.
Speaker Change: The year-over-year growth was mainly driven by outbound package tour, which has increased by triple digit. Corporate travel revenue for the third quarter was R656 million, representing an 11% increase year-over-year and a 4% increase quarter-over-quarter. This was driven by more companies adopting our managed corporate travel services, excluding share-based compensation charges. Adjusted product development expenses for the third quarter increased by 3% year-over-year. Adjusted G&A expenses for the third quarter increased by 5% year-over-year, mainly due to increase in personnel-related expenses, adjusted sales and marketing expenses for the third quarter.
Speaker Change: emician, Reporterつの日記、ア知事スヅの直訳処理器 suspective light the industries rebooting Looking ahead, we will continue to innovate and collaborate with our partners to capitalize on new market opportunities With an aim of delivering sustained value to our shareholders With that operator please open the line for questions
Speaker Change: Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.
Please stand by while we compile the Q&A roster.
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Speaker Change: Our first question comes from the line of Yang Liu from Morgan Stanley
Yang Liu: Thanks for the opportunity to ask questions and congratulations on the solid results. My question is, could you please...
Yang Liu: Could you please provide some insight into your recent performance following the National Day holiday? Additionally, what should investors expect for 2025?
Thank you.
Speaker Change: Thank you. After the National Day holiday, we observed that the China travel market is generally following the normal seasonality. On a year-over-year basis, the overall momentum has further strengthened. Industry data shows that the hotel occupancy rates over the past months have surpassed the last year's level.
Speaker Change: improving from the lower than 2023 levels in Q3. This is partly due to comparatively easier count days and more travelers choosing to travel during off-peak seasons.
At Trip.com Group, we continue to maintain a growth rate.
Speaker Change: that surpasses the industry average. The outbound flight and hotel bookings also maintained very strong year-over-year growth momentum, exceeding 120 percent of the same period in 2019.
Speaker Change: And Trip.com's flight and hotel bookings continue to maintain a mid to high double-digit growth.
Speaker Change: With regard to the colors for the next year, it's actually a very challenging for us to make an accurate estimate for the year to come.
Speaker Change: But we anticipate a normalized growth pattern for our China-related business, with continued emphasis on the inbound and outbound cross-border travel.
Speaker Change: Trip.com brand will continue to maintain a very strong growth momentum and expand our presence in Asia and other global markets. Thank you.
Thank you.
Thank you. One moment for our next question.
Speaker Change: Our next question comes from the line of Brian Gong from Citi.
Brian Gong: Good morning, James, Jane, Cindy, and Michelle. Congratulations on the solid results. A question regarding hotel side.
Brian Gong: How have hotel prices changed recently per your observation, and has the growth on China hotel inventory began to slow down? And also, could you please share your thoughts on 2025 outlook? Thank you.
Speaker Change: Sure, the industry data shows that hotel prices are still below last year's level but the gap has narrowed from double digits to mid to low single digits.
Speaker Change: in line with our expectation. With regard to the hotel supplier, our platform, it continues to grow, reflecting a long-term market confidence.
Speaker Change: However the growth rate has been normalizing. At the end of the third quarter the numbers of hotels in China listed on our platform was six to seven percent higher compared with last year's level.
Speaker Change: In the longer term period, we believe that the expansion and diversification of travel supplier will significantly contribute to the overall growth of the travel industry. Thank you.
Thank you.
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Thank you. One moment for our next question.
Xiaofan Wang, Jianzhang Liang, Michelle Qi
Speaker Change: Our next question comes from the line of John Che from Daewoo.
John Che: Good morning, thank you very much for taking my question and congratulations on a strong set of results. Could you update on the outbound flight capacity changes for the summer and for Q? When can we expect a full recovery, given some airlines have reduced their flights? Thank you.
Speaker Change: The outbound flight capacity reached around 80% of the 2019 level in Q3 and exceeded 80% in the fourth quarter, while it is normal for some airlines to reduce flights.
Speaker Change: during the off-peak season. We are pleased to see increases in flight from certain airlines and countries, for example, Canada. And we expect such capacity to further improve in the year to come.
Thank you. One moment for our next question.
Speaker Change: Our next question comes from the line of Andre Chang from J.P. Morgan.
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Speaker Change: Thank you, management, for taking my question. I have a question a little bit different on the recent trend, right? Have there been any changes in travelers' overspending? Have the recent stimulus measures boosted the travelers' spending? Thank you.
Xiaofan Wang, Jianzhang Liang, Michelle Qi
Speaker Change: Sure, in the third quarter, we are pleased to see that our users' average spending remained quite consistent with last year's level, and is approximately 20% higher than the pre-COVID 2019 level.
Speaker Change: With regard to the recent trend, it may be too early to determine the direct impact of the recent stimulus measures, but a healthy economic environment should benefit all industries, including travel. Thank you.
Thank you.
Thank you. One moment for our next question.
The End
Speaker Change: Our next question comes from the line of Boris Vaughn from Bernstein.
Boris Vaughn: Hello, hi, good morning, management. Thank you for the question opportunity and congrats on the great, great quarter. Just wondering if I could ask a little bit more detail on the operational and financial performance for this quarter. So for example, you know, how have the domestic hotels done? How are you doing on our international business and Skyscanner, et cetera? Thank you.
Speaker Change: In the third quarter, Trip.com's air and hotel reservations grew robustly by 60-70% year-over-year.
Speaker Change: and the APAC region accounts for over 70% of the total bookings and was the farthest growth among all the regions.
Speaker Change: and hotel and air reservations from the APEC region grow by more than 70% year over year in the third quarter.
We're also very glad to see that.
Speaker Change: For example, in the Q3, our hotel-related revenue accounted for more than 40% of Trip.com's total revenue, with cross-selling from transportation to hotels continued to rise.
Speaker Change: and our mobile app remain the top channel for the Trip.com brand which contribute 65% to 70% of the global orders and over 70% in the APAC region.
Speaker Change: With regard to the financial results, the Trip.com brand contributed around 9% of the group's total revenue, up from 77% in the same period last year.
Speaker Change: and yeah we will continuously to make investment in the Trip.com brand in the international market especially in the APEC region. Thank you.
Xiaofan Wang, Jianzhang Liang, Michelle Qi
Thank you. One moment for our next question.
Group. Group. Group
Speaker Change: Hi, good morning management. Thank you for taking my question and congrats on a very solid quarter. I wanted to follow up on our trip.com's global business. So could management maybe elaborate your strategy in Asia? How do we plan to gain market share further, you know, given this is a vast market opportunity and potentially we're going to see maybe increasing investments from international peers? Thank you.
Speaker Change: It represents 50% of the GDP growth. It also represents 50% of the growth for the travel industry. When we focus on our customers, we pay a lot of attention just to make sure we provide the best products and best service to our customers.
Speaker Change: And we focus on a couple of things. First of all, we offer a one-stop shopping platform. Therefore, anything that our customers need when they travel around the world, Trip.com offers that services for them.
Speaker Change: Secondly, our 24 hours times seven excellent call center employees give our customers peace of mind. Thirdly, we also make sure the user's experience on our app is excellent.
Speaker Change: And lastly, because of the volume we have, we also drive lots of good products.
Speaker Change: to our overall customers around the world. So going forward, we will focus to provide the best product and excellent services to our customers in Asia. Thank you.
Group. Group. Group. Group.
Thank you. One moment for our next question.
Speaker Change: Our next question comes from the line of Wei Fang from Mizuho.
Speaker Change: Thank you for taking the question. This is Wei calling for James Lee. Just one on your AI initiative. Could management help elaborate on your AI kind of initiative and maybe share more on your operating highlights?
if possible. Thank you.
Speaker Change: Sure, we invest heavily in our technology and AI. Many engineers are working very hard to make sure AI supports our operation.
Speaker Change: There are four main usages of our platform. The first one is AI is helping us to improve the user's experience.
In the past,
Speaker Change: customers need to use search to find the right product for their needs. Right now, we use AI. We can use a very smooth conversation with our system, and our system will promote the right product that is suitable for our customers based on their trouble habit.
Speaker Change: The second thing is using AI, our engineers will be able to cut the coding time anywhere between 15 to 30 percent.
Thank you. Thank you.
Speaker Change: Thirdly, we also use AI to improve our customer service level to make sure we provide excellent services to our customers.
Speaker Change: The last one is content generation. By using AI, our accuracy and efficiency for generating video and pictures and content is improved.
Speaker Change: And going forward, AI will provide a very useful tool for us to improve the efficiency and enhance our users' experience. Thank you.
Thank you.
Thank you. One moment for our next question.
Speaker Change: Our next question comes from the line of Xiong Xiao from Barclays.
Xiong Xiao: Thank you for taking my question. Jian, I just want to follow up on what you just said. I think you highlighted some of the...
Xiong Xiao: operational benefits from AI. I was wondering if you can expand a bit beyond that to talk about perhaps what it comes to the dollars and the cents.
Xiong Xiao: on the financial impact both for the short-term and for the long-term from AI. Thank you.
Yeah, so, go ahead Cindy.
Cindy Wang: Sure, we have consistently integrated our new technologies into our operations.
Speaker Change: and progressing from the mobile technology to non-generative AI and now to the generative AI. And the financial impact on the investment so far has been minimum compared with our financial, especially the top line as well as the bottom line.
Speaker Change: However, from an operational perspective, AI definitely can improve our user engagement.
and conversion rates as Jane explained.
Speaker Change: and at the same time, which will also enhance significantly on the service efficiencies and boost our internal operational efficiency. These improvements will eventually be reflected in our financial performance. Thank you.
Group. Group. Group.
Thank you. One moment for our next question.
Thank you.
Thank you. Thank you. Thank you.
Speaker Change: Our next question comes from the line of Pooresh Jain from HSBC.
Speaker Change: Thank you and hi, I, Jian and the team. I have two questions. First, so now in a post-COVID world, the group has taken a leapfrog in terms of setting the setting the standard with respect to operating margin performance. Now consistently generating a huge amount of free cash flow. If you can give us some
with respect to your
Speaker Change: So, let's start with the one question. What are the potential uses of capital? Are you seeing enough M&A opportunities or it is about time where we come fully? We hear more on what will be the potential uses of those capital, whether it's some dividend or a buyback. And my second question is, now, in terms of the GMB, you are at scale.
Speaker Change: leverage lever in terms of your product and marketing costs going forward. Like is there a ceiling or pretty much quarter by quarter you will keep surprising us? Thank you.
Thank you for watching!
Sure, thank you. Yeah, we...
Speaker Change: generated a lot of free cash flow. But in terms of the use of capital, of course we as a leader in the travel sector, we will continue to look at different opportunities in the market. However, we think
At this moment, we already have a very, very important
Thank you so much.
Speaker Change: the travel assets in the whole international market. And at this moment, our top priority is to maximize the synergies among of our different brands in the international market.
Speaker Change: And with regard to the cap-to-return policies, year-to-date, we have already repurchased approximately 6 million shares.
or approximately 1% of our outstanding shares.
Speaker Change: The scale of our future capital return will depend on our financial conditions, operational results, cash flow, capital needs, and other relevant factors.
Speaker Change: and we anticipate an expanded capital return program for the year to come, 2025, and potentially will include a mix of dividends and buyback, also subject to our board approval.
And the second question is about the margin rate.
Yes.
I mean how much operating leverage do you have?
Yeah, we...
Speaker Change: First of all, OTA is a very scalable business model. As you may know this already, in the past a couple of year after the, in the past two year after the COVID, we already achieved a very efficient operational efficiencies across all the expenses line, including the cost, the product development, as well as the sales marketing expenses.
Speaker Change: But sales and the marketing expenses as a percentage of our gross booking actually were less than 1%, benefiting from our very high customer royalty and strong cross-selling ratio through our mobile app.
Speaker Change: and we anticipate our marketing expenses ratio will actually increase in the Q4 especially compared with our net revenues due to seasonality and fluctuations in the revenue mix.
between our China and international businesses.
Speaker Change: And in the longer-term period, we aim to enhance our marketing efficiencies across all markets by prioritizing direct mobile app traffic and cross-sellings.
Again, we are continuously to increase our efficiencies.
Speaker Change: across all the expenses line item, especially after introduce AI to help us to increase the efficiencies. At the same time, we need to investment, especially in the international market. Thank you.
Thank you.
Speaker Change: Thank you. At this time, I would like to now turn the conference back over to Michelle Qi for closing remarks.
Thank you.
Group. Group. Group.
Thank you, everyone.
You may now disconnect. Have a great day!