Trip.com Group Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 20, 2024

There are 10 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Trip dotcomgroup2024Q1 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

Operator

I would now like to hand the conference over to Ms. Xiao Qi, Head of Investor Relations. Please go ahead.

Speaker 1

Thank you. Thank you, everyone. Good morning. Welcome to TripDotCom's Q1 of 2024 Earnings Conference Call. Joining me today on the call are Mr.

Speaker 1

James Liang, Executive Chairman of the Board Ms. James Zhang, 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 provisions of the U. S.

Speaker 1

Private Securities Litigation Reform Act of 1995. Forward looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the views expressed today. A number of potential risks and uncertainties are outlined in trip.comgroup's public filings with the Securities and Exchange Commission. Trip.comgroup does not undertake any obligation to update any forward looking statements, except as required under applicable law.

Speaker 1

James and Cindy will share our strategy and business updates, operating highlights and financial performance for the Q1 of 2024 as well as the color for the Q2 of 2024. After the prepared remarks, we will have a Q and A session. With that, I will turn the call over to James. James, please.

Speaker 2

Thank you, Michelle, and thanks everyone for joining us on the call today. The Chinese travel market has experienced remarkable growth over the last year, and 2024 continues to be a strong year for travel, Positioned at the forefront of its thriving sector, trip.comgroup has achieved significant investments across all business lines in this quarter. In 2024, outbound travel continues to be a pivotal force propelling the Chinese travel market forward. With international flight capacity roughly doubling compared to last year and the visa free policies further facilitating trips in the APAC region. Outbound travel is becoming increasingly appealing and accessible.

Speaker 2

Notably, outbound hotel and air ticket bookings on our platform fully recovered to 2019 levels during the major holiday periods, indicating a strong rebound in demand. In addition to outbound travel, the China domestic travel market continued to exhibit strong performance in the Q1 in response to growing interest of Chinese travelers in exploring their homeland. We are also catering to the increasing travel demands of silver generation. This demographic, who are known for their love of leisure travel and the cultural experiences as well as their tendency to travel during off peak seasons represents a substantial growth opportunity within the domestic landscape. To address the unique travel preference, we have already introduced the Old Friends Club initiative, which is designed to empower this cohort to fulfill their travel aspirations.

Speaker 2

This initiative also has the potential to bridge the gap between peak and off peak seasons in China travel market. On the international front, our global business is experiencing rapid expansion, particularly in the APAC region, with revenue growing at an impressive rate of around 80% year over year. Additionally, we have witnessed significant growth in inbound travel to China with a remarkable increase of 400% compared to last year, driven by the benefits of visa free policies. In response to this flourishing trend, we initiated a program in April aimed at providing free city tours to international travelers with layovers exceeding 8 hours at Shanghai Pudong International Airport. This initiative aims to transform their brief stopovers into mini vacations, thereby offering new avenues for international travelers to explore China.

Speaker 2

To conclude, travel remains a resilient and promising business with great opportunities and the possibilities in 2024. As we journey forward, we remain committed to creating value for both customers and shareholders, and we are poised to navigate this evolving landscape and achieve new heights of success. With that, I will turn the call over to Jane for operational highlights.

Speaker 3

Thank you, James. Good morning, everyone. As a quick overview, our net revenue in Q1 grew by 29% year over year. Our adjusted EBITDA margin for this quarter was 33%. We are delighted to observe the sustainable growth in travel momentum in this quarter as it occurs amidst a transition from a pent up demand to a more normalized demand environment.

Speaker 3

This shift indicates a maturing market condition further contributing to our confidence with sustainability of strong performance for the rest of 2024. Trip.comgroupcontinues to identify opportunities across different market segments. 1st, for China domestic market. In Q1, the China domestic market continued to demonstrate robust growth. Our domestic hotel and air ticket bookings increased by 20% to 30% year over year.

Speaker 3

Notably, Chinese consumers are changing their spending habit, placing great emphasis on quality, experience and emotional fulfillment. This evolving mindset is prompting travelers to pursue personalized and high quality travel experience tailored to their unique preferences, presenting a considerable advantage for travel industry. Moreover, it is noteworthy for both government tension and social interest in the travel industry have reached unprecedented levels this year, Intensifying marketing efforts in many provinces effectively encourage travelers to explore diverse destinations, largely contributing to the enduring popularity of the domestic travel. 2nd, outbound travel. The outbound travel market emerged as a driving force behind the the travel market recovery last year and its significance persists into 2024.

Speaker 3

In Q1, the international flight capacity across the industry rebounded to about 70% of the pre pandemic level compared to 20 19. Our platform witnessed outbound travel bookings consistently outpacing the market by 20% to 30%. During the Chinese New Year period, our outbound bookings fully recovered to the pre pandemic 2019 level. On a year over year basis, our Avang hotel and air ticket bookings surged by more than 100%. Alongside a notable increase in the market sentiment and a notable stabilized supply, a relaxed visa requirement in Southeast Asia has further capitalized the attention of Chinese outbound travelers.

Speaker 3

According to CAAC estimate, China outbound travel is anticipated to rebound to 80% of pre pandemic levels by the end of this year. 3rd, global market. Expanded beyond China borders, we have diligently strengthened our product and services offerings in global market, particularly witnessing steady growth in Asia Pacific region. Our core competence lies in delivering a superior user experience through our 1 stop shopping platform, customer service and offering a value a strong value for our travelers, providing top notch service via our mobile app and customer support and furnishing comprehensive information to inspire and aid travelers in making informed decision. We made enhanced collaboration with our global partners to provide hassle free travel experience for travelers around the world.

Speaker 3

In Q1, the total revenue of our overseas OTA platform, trip.com, surged by about 80% year over year. We remain committed to becoming a go to platform in Asia within the coming 3 to 5 years. Now I would like to give some strategic highlights in a couple of areas. 1st, inbound market. While our other segments continue to thrive, the growing potential for inbound travel to China is becoming increasingly evident.

Speaker 3

China has taken proactive steps to bolster its inbound travel sector by implementing visa free entry for citizens for more than 15 countries such as France, Germany, Italy, Netherlands, Spain, Switzerland, etcetera. This strategic move has already yield promising results. Our platform has witnessed a significant 400% year over year increase in inbound travel booking with notably surge in arrivals from key markets such as Singapore, which has surged tenfold followed by Malaysia with 9 folds increased and France, Spain and Thailand each increased by 4 folds. The future of inbound travel to China holds immersed promise with visa free policies and innovative payment solution positioned further to enhance appeal of our visiting to China. As we address the pinpoints and implement solution, traveling to China will become increasingly enticing, offering exciting opportunities for growth and development for the inbound market.

Speaker 3

2nd, the silver generation, which is the senior population, as we explore new market opportunity within China. Another intriguing aspect arises, the growing travel demand from the senior citizens known as the Silver Generation. While the young generation remains a key demographic for travel, a rapid growing senior population is emerging as a significant market segment With longer and healthier lifespans as well as financial stability, many seniors, particularly those in urban areas are willing to invest more leisure activities such as travel. Moreover, today's seniors are more active and adventurous than the preceding generations, demonstrating a key interest in exploring new destinations and immersing themselves in diverse cultures. Our inclination towards off peak travel seasons also has a potential to bridge the gap between peak and off peak travel periods in China.

Speaker 3

According to the estimate from China Tourism Research Institute, By 2025, a number of healthy senior citizens with frequent travel habits and higher spending is projected to exceed RMB 100,000,000 with an estimated market size of over RMB 1,000,000,000,000. It's noteworthy that in 2023, our silver generation cohort accounted for 10% of our total user base. In response to the unique needs and a preference of the senior travelers, we introduced Old Friends Club initiative this year. This program aims to provide senior travelers with high quality one stop travel offerings, complemented by our exceptional customer service and personalized assistance with an initiate launch of over 700 exclusive products, covering more than 40% as of 40 destinations nationwide. Our goal is to collaborate with more partners to develop travel products tailored specifically to preferences of silver generation, thereby infusing new energy into the domestic travel market.

Speaker 3

3rd, young generation, capturing the attention of the young demographic is also important for success in travel market. In China, entertainment event such as concerts, music festivals, sports occasions and cultural events hold significant appeal for the youth. This interest have evolved from traditional sightseeing to immersive experiences, blending recreational activities with broader travel adventures. This trend is not only bound by seasons and the young travelers are eager to embark on journeys at any time. Currently, more than 80% of our customers were born after 1980 and more than 50% of our users were born after 1990.

Speaker 3

We are committed to capturing trips that we are committed to curating trips to seamless integrating entertainment and cultural exploration, as staying attuned to the evolving preference of our young travelers, our goal is not only to attract them for individual trips, but also to forge lasting connection. This strategic approach ensuring our continued relevance and growth within the dynamic travel market. 4th, social responsibility. Our company continues to thrive, and we firmly believe in the importance of giving back to society. Alongside our growth, we actively support and collaborate with various stakeholders in our travel ecosystem, including hotels, airlines, destinations, airports, small agencies, chauffeur drivers, etcetera.

Speaker 3

By assisting them in seizing the market opportunities and expanding their businesses, we aim to fostering a vibrant and interconnect travel community. Furthermore, we are committed to creating more job opportunities and fueling rural development through strategic investments. For instance, our trip of country retreat initiative has sparked a significant increase in number of local lodging facilities with reservation increasing by 80 percent. This initiative has not only created 20,000 new jobs, but also contributed to an incremental income of RMB 40,000 per person in these specific regions. Through these efforts, we are dedicating to making a positive and long lasting impact on both of the Taobao industry and the community we serve.

Speaker 3

In summary, 2024 is shaping up to be a good year for travel, benefiting from a notable shift in consumption pattern Across all of our business segments, we observed resilience in travel demand and anticipated exciting development opportunities on the horizon. Looking forward, we remain optimistic about the market performance in the upcoming quarter and are dedicated to working closely with partners to capitalize on opportunities and continue the growth for the travel industry. With that, I will now turn the call over to Cindy.

Speaker 1

Thanks, Jane. Good morning, everyone. For the Q1 of 2024, trip.comgroupreportedanetrevenueofrmb11.9 billion, representing a 29% increase from the same period last year and a 15% increase from the previous quarter, primarily due to strong recovery in the travel market. Accommodation reservation revenue for the Q1 was RMB4.5 billion, representing a 29% increase year over year and a 15% increase quarter over quarter. Domestic and outbound hotels have seen robust growth and outpaced the industry.

Speaker 1

Transportation ticketing revenue for the Q1 was RMB5 1,000,000,000, representing a 20% increase year over year and a 22% increase quarter over quarter. This is mainly due to robust recovery of outbound air and strong growth in domestic and global air business. Packaged tour revenue for the Q1 was RMB883 1,000,000, representing a 129% increase year over year and a 25% increase quarter over quarter. Domestic packaged tour has already surpassed the 2019 level. The year over year growth was mainly driven by outbound revenue, which increased by multifold.

Speaker 1

Corporate travel revenue for the Q1 was RMB511 1,000,000, representing a 15% increase year over year and a 19% decrease quarter over quarter. The sequential decrease was in line with normal seasonality. Excluding share based compensation charges, our total adjusted operating expenses was 6% higher than the previous quarter and was 24% higher than the same period last year. Adjusted product development expenses for the Q1 increased by 7% from the previous quarter. Adjusted G and A expenses for the Q1 increased by 9% from the previous quarter.

Speaker 1

This is mainly due to increase in personnel related expenses. Adjusted sales and marketing expenses for the Q1 decreased by 1% from the previous quarter and increased by 32% from the same period last year. The year over year increase was mainly was primarily due to increased marketing promotion activities in line with business growth. Adjusted EBITDA was RMB 4,000,000,000 for the Q1 compared with RMB2.8 billion in the same period last year and RMB2.9 billion in the previous quarter. Adjusted EBITDA margin was 33% for the Q1 compared with 31% in the same period last year and 28% in the previous quarter.

Speaker 1

Diluted earnings per ordinary share and per ADS were RMB6.38 or US0.88 dollars US0.88 dollars for the Q1 of 2024. Excluding share based compensation charges and fair value changes of equity, security investments and exchangeable senior notes, Non GAAP diluted earnings per ordinary share and per ADS were RMB86 or $0.83 for the Q1. As of March 31, 2024, a balance of cash and cash equivalents, restricted cash, short term investments, held to maturity time deposits and financial products was RMB81.9 billion or $11,300,000,000 The strong recovery in the Q1 of 2024 across market segment is encouraging. As we venture into the Q2, we are delighted to see persistent strong demand on our platform. This demand continues to drive substantial growth across travel segments, even in the face of challenging comparisons.

Speaker 1

We have noticed a decline in hotel and air prices, which could potentially affect our revenue growth. Nevertheless, we anticipate this will have a limited impact on our net earnings due to our strong management on operational efficiency. With that, operator, please open the line for questions.

Operator

Thank And our first question is going to come from the line of Brian Gong with Citi. Your line is open. Please go ahead.

Speaker 4

Thank you. Good morning, James, James, Cindy and Michelle. Thanks for taking my question and congratulations on solid results. So my question is regarding our group has successfully captured the pent up demand and continue to demonstrate strong growth in the Q1 for domestic, auto bond and international platform or business line. So looking ahead, what growth drivers or new initiatives for the investor to pay attention to in management's view?

Speaker 4

Thank you.

Speaker 2

Thank you very much for the question. In China, we will focus on steadily expanding our user base in the 2nd and third tier cities, improving user acquisition and cross selling ratios. Additionally, we expect to benefit from the growth of outbound travel in the upcoming years. On the international front, Trip.com will maintain its focus in Asia and strive to become a regional and global leading player. As for new initiatives, we are actively pursuing opportunities in China's inbound travel market, which has a great market size at this multi trillion level.

Speaker 2

Domestically, we are introducing tailor made products for the silver generation, which represents another RMB 1,000,000,000 market opportunity. Furthermore, we are introducing new product combinations such as entertainment activities plus travel to cater to the evolving market demands of the younger generation. We remain dedicated to investing in our content strategy and AI development, which are integral to our one stop business model. These investments aim to enhance user stickiness, engagement and operation efficiency.

Speaker 5

Thank you.

Speaker 4

Thank you.

Operator

Thank you. And one moment as we move on to our next question. And our next question is going to come from the line of Thomas Chong with Jefferies. Your line is open. Please go ahead.

Speaker 2

Hi, good morning. Thanks management for taking my question. Recent news headlines and industry data suggest a notable decrease in hotel ADR and slowdown of hotel RevPAR. Have you also observed this trend? Does this indicate a weakening or downgrade in consumer spending?

Speaker 2

Additionally, what are the price trends for outbound hotel enterprise? Thank you.

Speaker 1

Thank you, Thomas. Yes, we also observed a decline in domestic ADR in recent months, which was largely influenced by the shift in travel preference towards outbound destinations and as well as the lower tier cities and the increased availability at the same time and the increased availability of the hotels and flights. Firstly, we think the outdoor travel has notably increased this year, attracting a lot of mid to high end travelers away from our domestic options. Secondly, the lower tier cities now offer excellent value as transportations and accommodation infrastructure have significantly improved over the past few years. Additionally, the increase in hotel and air supply has put pressure on short term prices across the board, particularly when compared to the high benchmark established during last year's peak seasons.

Speaker 1

Overall, we believe the expansion and diversity of travel supplier capacity will greatly contribute to the overall growth and stability of OTAs as a distributor as well as the travel industry at home. With regard to the outbound, the outbound air ticket price has been normalizing as flight capacity continues to recover and the current level stays around about 115% of the 2019 level compared to over 130% of the 2019th level during the same period last year. Average outbound hotel price has been quite stable compared with last year. Thank you.

Speaker 2

Thank you.

Operator

Thank you. And one moment as we move on to our next question. And our next question is going to come from the line of Joyce Ju with Bank of America. Your line is open. Please go ahead.

Speaker 1

Good morning, James, Jane, Cindy and Michelle. Congrats on another set of strong set of results and thanks for taking my question. I would like to ask if management could elaborate more on the company's recent business performance, especially colors during and following the Labor Day holiday. As we are now moving into summer, could management also share your expectations on business momentum for the Q3 and beyond? Many thanks.

Speaker 1

Sure. Our domestic and outbound travel bookings reached the new high records during the recent Labor Day holiday, specifically outbound air and hotel bookings surpassed 120% of the 20 nineteen's level. This achievement is particularly significant considering the tough comparison to the same period last year, which was the 1st major holiday with strong pent up demand for the leisure travels. With regard to the quarter to date, the domestic travel bookings achieved double digit growth with hotels leading the search. Outbound hotel and air bookings have fully rebounded to the pre pandemic level.

Speaker 1

Such robust growth has significantly outperformed the market in terms of booking volumes. For instance, the market level domestic hotel occupancy rate and flight passenger volumes were roughly on par with 2023. Outbound flight capacity was slightly over 70% of the 2019 level. In terms of average pricing, our numbers were generally in line with the market. As I explained before, recently, we noticed hotel ADR and average air ticket price have both seen a year over year decrease.

Speaker 1

Trip.com has maintained robust growth in the mid to high double digit percentage range, and the inbound travel to China has also experienced a multifold increase. Now moving to the summer part. It's still quite early to observe the early booking towards the summer given the short booking windows in China. However, we remain confident about the travel momentum in the summer holiday and beyond. In particular, we anticipate significant growth in the outbound travel sector, driven by ongoing recovery of flight capacity as well as the revolution of the visa backlogs.

Speaker 1

With regard to the global market, we anticipate Con to continue its robust growth, while Skyscanner and other overseas brands are also expected to maintain a very healthy growth trajectory. Thank you.

Operator

Thank you. And one moment as we move on to our next question. And our next question is going to come from the line of James Lee with Mizuho. Your line is open. Please go ahead.

Speaker 6

Okay, great. Also let me add to my congratulations to you on the quarter as well. And let me follow-up maybe a little bit on outbound question. I think, Jane, you spoke about outbound getting back to 80% of FY 2019 by year end. I was wondering what factors that we should think about that will either speed up or slow down that process?

Speaker 6

And also in terms of destination, I guess, where do you see most of recovery? Especially, I think a lot of investors are interested in finding out recovery in the Western, especially in the Western part of the world, especially European market? Thanks.

Speaker 3

Sure. Thank you very much for your question, James. We see a strong rebound in outbound business. The estimate is by the end of the year, the industry should recover to 80% compared to pre pandemic level. Our company can outpace the market by about 20% to 30%.

Speaker 3

There are a couple of major factors impacting the outbound business. The first one is the visa application. Many countries have offered free visa to Chinese travelers such as Singapore, Malaysia, Thailand and the GCC countries such as UAE, Qatar and also Saudi. So we have seen a very strong pickup for the countries which offer free visas. The second factor is the flight capacity.

Speaker 3

So we have seen a very strong rebound in the flight capacity into Singapore, Malaysia, Singapore Thailand and the GCC country. So we sent a lot of people to these countries. And during the Chinese New Year, the long haul travel destinations, the top 3 are Australia, New Zealand and South Africa. So we have seen a very strong demand and interest when customers have free visa, when we see a recovery in the flight capacity and also when customers have time and availability. In the summer, during the summer break, we are excited that our customers will have longer period to take their children to travel around the world.

Speaker 3

And countries which have exhibited their hospitality will be able to capitalize on this upcoming trends for the outbound recovery. However, certain countries still are lagging behind. The flight capacity is yet to recover. So we are eager to work with these regions to make sure that these applications are being processed timely and also the flight capacity is being added before the summer holiday comes. Thank you.

Speaker 4

Great. Thank you.

Speaker 1

Thank you.

Operator

Thank you. And one moment as we move on to our next question. And our next question comes from the line of Alex Poon with Morgan Stanley. Your line is open. Please go ahead.

Speaker 7

Thank you and congratulation management on very strong results. My question is regarding the opportunity of China inbound travel market and how trip.com plans to capture this market? And additionally, can you talk about the contribution of inbound travel to trip.combusiness? Thank you very much.

Speaker 3

Sure. Inbound business is a new opportunity for China travel industry. China can offer so much to the world. It has very rich history. It also has beautiful infrastructure, a high speed railway station connects the countries.

Speaker 3

And every province is very unique. So we are very excited to invite our friends all over the world to come and visit China. There are a lot of good offering being extended. First of all, free visa has been extended to many countries such as France, Germany, Netherlands, Italy, Spain, Switzerland, Ireland, Singapore, Malaysia, Thailand, etcetera. And going forward, as we move forward, we hope there will be more opportunities to invite people around the world to come to China.

Speaker 3

Secondly, for trip.com, we also offer 1 stop shopping platform. Our inventory within China is excellent. We can offer ticket flight ticket, high speed railway tickets. We offer very nice tool packages. We also offer free one day tour for customers who transit in Shanghai.

Speaker 3

So hopefully, through the concerted efforts between trip.com and local community, we'll be able to show the hospitality to our global travelers. And thirdly, for trip.com, we also offer more than 30 languages, our ATP, more than 30 languages in our call center around the world offering 24x7 services. If the customer needs to reach our customer service within 30 seconds, we'll be able to pick up the phone address in the language that is familiar to our customers. So we are very excited for this opportunity to exhibit the beautiful history, hospitality, variety of the food to our global friends. So hopefully inbound travel will become a significant contribution to our business going forward.

Speaker 3

Yes. And the contribution of

Speaker 1

the inbound travel to the trip.com business has improved from the Teams level to over 20% of the overall revenues in the Q1 of 2024. Thank you.

Speaker 7

You, Ojane. Thank you, Cindy.

Speaker 3

Thank you.

Operator

Thank you. And one moment as we move on to our next question. And our next question comes from the line of Jiangsu with Barclays. Your line is open. Please go ahead.

Speaker 8

Thank you very much for taking my question. I think you just mentioned that trip.com contribution is now over 20% of your revenue. I just want to follow-up on that. I was hoping you can elaborate a bit on your trip.com business. Could you talk about, for example, the regional breakdown or product line breakdown for that business.

Speaker 8

And in terms of the take rate and average room rate for that pure internationaltrip.combusiness? And as you compete in Southeast Asia and in other parts of the world, clearly, they are already existing players. Could you talk about sort of what you bring in as a differentiation to obviously grow your market share? What are you doing differently or better than some of the existing players? Thank you so much.

Speaker 1

Thank you. Firstly, just firstly, a clarification on the contribution. Actually, contribution 20% contribution actually is the inbound contribution to the overall trip.combusinessratherthantrip.com's revenue contribution to the total group. With regard to the trip.comrevenue contribution to the total group, which is around 10% in the Q1 of 2024. We in which over 70% or around 70% actually coming from the Asia markets.

Speaker 1

And with an increased cross selling ratios, our mobile hotel bookings now hotel bookings now contribute more than 35% of the total revenues of the trip.com business. And the take rates for the hotel and air reservations on the trip.com are similar to those of our outbound business. While we have recently turned profitable on the contribution margins for the trip.com business and we expected trip.com to achieve a healthy margin as its scale further increase in the longer term period. With regard to the co competence of our trip.com business, yes, there's a lot of players in the international markets as well as in the Asia market. However, trip.com has a lot of unique selling point for our users.

Speaker 1

Firstly, trip.com's mobile app offers a smooth and user friendly search and booking experience and complemented by the AI tools for the personalized recommendations and special offers, which further enhancing our user engagement. For example, the trip.com's global mobile app order share has increased to around 65% in the Q1. With several key markets, the number has reached over 75%. Secondly, we have comprehensive one stop model caters to nearly of nearly all travel needs, which is particularly appealing to mobile app users, and our extensive experience in China further enhance our expertise in these areas. 3rd, we provide 24 hours and 7 days customer service via the phone calls, online chats or the e mails, ensuring our users have reliable support for any issues that they encounter.

Speaker 1

4th, the trip.com offers highly competitive offerings, leveraging the group's strong market presence and well established supplier relationship. Last but not least, with particularly strong product and service in China, the search in inbound travel presents an excellent opportunity for our trip.com business to capitalize on its unique advantages. Thank you. Thank you.

Speaker 8

Thank you very much.

Operator

Thank you. And one moment as we move on to our next question. And our next question is going to come from the line of Alex Yao with JPMorgan. Your line is open. Please go ahead.

Speaker 9

Good morning, management, and congratulations on a solid quarter. So trip.com has been growing very rapidly in the past few years. Can you talk about trip.com's addressable market size and the competitive landscape in Asia? Thank you.

Speaker 1

Sure. When we look at the market size

Speaker 3

outside of China, the total Asia equivalent to 1.5 times China's market. So it's quite significant. Secondly, we feel we have a couple of advantages. First of all, we offer 1 stop shopping platform, which is really convenient for our consumers. Secondly, our users experience on mobile is excellent.

Speaker 3

In China, more than 90% of our customers use mobile. So we'll be able to amplify our experience into the global places. Thirdly is our excellent customer services. And we want to make sure that we serve our customers outside of China as well as the customers within China. And lastly, we also have very strong outbound business, which enable our team to negotiate very good deal for our global customers.

Speaker 3

So these are the strengths we have. We will make sure that we provide excellent products and excellent services to our global customers. Thank you.

Operator

Thank you. And one moment for our next question. And our next question comes from the line of Simon Cheng with Goldman Sachs. Your line is open. Please go ahead.

Speaker 5

Hi, morning. Thanks for taking my question. I just have one small question. Again, in relation to the margins, which has consistently, I guess, beaten market expectations, I've been receiving a lot of inbound inquiry asking the different margin profile for your trip.com business, your outbound business and your domestic business. Perhaps maybe you can share with us if you have any data you can share by the respective business, the relative margins profile, maybe the take rate?

Speaker 5

And secondly, how should we think about the margin trend? We have seen your sales and marketing as a percentage of revenue consistently trending lower. In this particular quarter, we also see product development were actually trending lower on a year on year basis. Any color would be appreciated. Thank you.

Speaker 1

Thank you. Yes, we have achieved a healthy margin level for our domestic business as to the large scale and scalability that we achieved. And the L bomb business normally have slightly higher margin, thanks to our average higher selling price. And at the same time, related cost including the service cost, the product development cost as well as sales marketing cost are quite similar to the compared with the domestic business. So therefore, outbound travel normally is the higher margin business for us.

Speaker 1

With regard to the trip.com business, as I said before, we closely although the trip.com business has still in the investment period, however, we closely monitor the contribution margin of the trip.combusiness. And recently, our trip.combusiness as a whole has achieved at least a breakeven level in terms of the contribution margin. And in the longer term period, we strongly believe that the trip. Com business will also become

Speaker 3

a profitable, healthy growth business in the future.

Speaker 1

So in summary, we expect our margins to align with will be aligned with the typical seasonal patterns, reflecting the strong business growth and disciplined cost management. And looking ahead, our margin expansion will primarily stem from operational scalability and improve the sales and marketing efficiencies. However, this may be partly offset by additional expenses associated with expanding our international operations. Thank you.

Speaker 5

Great. Thanks a

Operator

lot. Thank you. I would now like to hand the conference back over to Michelle Chi for any closing remarks.

Speaker 1

Thank you. Thanks, everyone, for joining us today. You can find the transcript and webcast of today's call on investors. Fift.com. We look forward to speaking with you on our Q2 of 2024 earnings call.

Speaker 1

Thank you and have a good day.

Speaker 3

Thank you very much. Thank you.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.

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Key Takeaways

  • Trip.com Group reported Q1 net revenue of RMB11.9 billion, up 29% year-over-year, with an adjusted EBITDA margin of 33%, driven by a robust recovery in travel demand.
  • China domestic hotel and air ticket bookings rose 20–30% yoy, while outbound bookings fully rebounded to 2019 levels during major holidays and surged over 100% yoy in Q1, aided by doubled flight capacity and relaxed APAC visas.
  • The global OTA platform Trip.com saw revenue growth of about 80% yoy—with over 70% coming from APAC—and inbound travel to China jumped 400% yoy following visa-free policies and free Shanghai layover tours.
  • To tap emerging segments, Trip.com launched the “Old Friends Club” for senior travelers—offering 700+ exclusive products in 40+ destinations—and is rolling out entertainment-plus-travel packages targeting younger demographics.
  • The company ended Q1 with a strong cash balance of RMB81.9 billion and expects sustained Q2 volume growth despite lower hotel ADRs and air fares, relying on operational efficiency to protect net earnings.
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Earnings Conference Call
Trip.com Group Q1 2024
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