Trip.com Accepts China Antitrust Penalty, Overhauls Distribution and Pricing

Key Points

• Trip.com will comply with China’s antitrust penalty and end its Tier 1 and Tier 2 delegated distribution programs, replacing them with a new multi-tier partnership framework and revising platform pricing practices.
• The company expects to record a CNY 5.179 billion second-quarter expense related to the penalty, plus CNY 122 million in contra revenue; management said the changes should not fundamentally alter hotel pricing or commission economics.
• Second-half financial visibility remains limited because of macroeconomic uncertainty and the phased operational transition, so Trip.com is not providing specific second-half guidance.

Trip.com Group NASDAQ: TCOM said it will accept and comply with an administrative penalty decision issued by China’s State Administration for Market Regulation, outlining operational changes that include ending certain delegated distribution programs and continuing changes to its pricing practices.

Chief Executive Officer Jane Sun said the company views the decision, which concludes the regulator’s antitrust investigation, as an opportunity to strengthen its governance and align its operating model with China’s evolving regulatory and industry environment.

“We sincerely accept the decision and will fully comply with the requirements set forth by the regulator,” Sun said during a special conference call. She added that the company aims to support “healthy, orderly and sustainable development” in China’s travel industry.

Distribution and Pricing Changes

Trip.com said it is ceasing its Tier 1 delegated distribution program and transitioning related partners to a new multi-tier partnership framework. According to Sun, the revised structure is intended to provide greater flexibility, transparency and shared growth for participants in the company’s travel ecosystem.

The company is also discontinuing its Tier 2 delegated distribution program. In March, Trip.com voluntarily decommissioned its automated pricing tool and strengthened its pricing-management processes, according to management.

Sun said the company intends to promote competition based on service quality, product differentiation, customer experience and overall partner performance, rather than relying primarily on pricing-related mechanisms.

Trip.com also plans to optimize platform rules to give partners clearer visibility into policies and available options, while streamlining promotional activities to reduce operational complexity. The company said it will continue investing in data capabilities, technology services and international marketing to help partners improve service quality and pursue growth opportunities.

Financial Effects and Outlook

Chief Financial Officer Cindy Wang said Trip.com will recognize a second-quarter expense of CNY 5.179 billion related to the penalty decision, along with CNY 122 million in contra revenue.

Wang said the company’s capital-allocation priorities remain unchanged and that operations remain focused on its “G2” strategy, referring to globalization and great quality.

Responding to questions about hotel pricing and commission economics, Wang said average daily rates will continue to be driven primarily by market supply and demand. She said management does not expect the operational changes to fundamentally alter that dynamic.

Trip.com’s take rate will continue to reflect the value it provides to travelers and hotel partners, Wang said, with normal fluctuations influenced principally by product mix, promotional activities and partner incentive programs.

Management said it is working to create value for hotel partners by bringing them leisure and business travelers and generating demand across travel categories, including inbound travel, travel by older consumers and event-driven travel.

Second-Half Visibility Remains Limited

Wang said the financial effect of Trip.com’s March decision to discontinue price-checking and automated price-matching tools has been reflected in the company’s second-quarter outlook. The remaining changes, including the end of the Tier 1 and Tier 2 delegated distribution programs, will be implemented as the transition progresses.

“We may see some fluctuations in our financial performance,” Wang said. She added that continued macroeconomic uncertainty, including fuel-price volatility, has limited visibility and means the company is not providing specific guidance for the second half.

Over the longer term, management said it expects growth to be supported by expansion of its global footprint, improvements in product and service quality, and efforts to create incremental demand through innovation.

Sun said compliance will remain a core part of the company’s daily operations. Trip.com plans to strengthen the role of its compliance committee, establish a regular antitrust self-assessment mechanism, expand company-wide training and incorporate compliance considerations into product development and daily operations.

About Trip.com Group (NASDAQ:TCOM)

Trip.com Group NASDAQ: TCOM is a China-based online travel services company that provides a broad range of consumer and business travel products. The company operates consumer-facing travel platforms and mobile apps that enable users to search, book and manage hotel reservations, airline tickets, packaged tours, rail travel, car rentals, airport transfers and local activities. It also offers corporate travel management and B2B solutions that support travel suppliers and downstream distribution partners.

Headquartered in Shanghai, Trip.com Group serves customers across China and increasingly in international markets through a portfolio of brands and global distribution channels.

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