ELong's CEO Discusses Q4 2013 Results - Earnings Call Transcript

Feb.20.14 | About: eLong, Inc. (LONG)

eLong, Inc. (NASDAQ:LONG)

Q4 2013 Earnings Conference Call

February 19, 2013 7:30 p.m. ET

Executives

Guangfu Cui - CEO

Rong Luo – CFO

Echo Yan - Investor Relations

Analysts

Alicia Yap – Barclays Capital

Wendy Huang – Standard Chartered

Jiong Shaw - Macquarie

Tian Hou – T.H. Capital

Ming Zhao – 86Research

Fawne Jiang - Brean Capital

Operator

Good day to everyone and welcome to eLong's Fourth Quarter and Full Year 2013 earnings report conference call. (Operator Instructions) I will now hand over the line to Echo Yan and I will be standing by for the Q&A session. Please go ahead, thank you.

Echo Yan

Hello everyone, thank you for joining our call. Joining me today, we have Guangfu Cui, our CEO; Luo Rong, our CFO; and Philip Yang, our Chief Accounting Officer. Guangfu will speak about the company’s performance, followed by Luo Rong who will discuss our financial results. After their prepared remarks, Guangfu, Luo Rong and Philip will be available to take your questions.

Before the management presentations, please allow me to read our Safe Harbor Statement. During this call representatives of the company will make certain forward-looking statements within the meaning of the U.S. Securities Act and the Securities Exchange Act. These statements are based upon management’s views and expectations as of today with respect to future events and are not a guarantee of future performance. These statements are, by their nature, subject to a large number of risks and uncertainties that could cause actual performance and results to differ materially from those discussed in the forward-looking statements as a result of a wide variety of factors. eLong undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise. Please refer to the risk factors described in our Annual Report on Form 20-F, as well as the full text of the Safe Harbor Statement in our Form 6-K, containing our fourth quarter and full year 2013 unaudited financial results, for discussion of some of the important factors that could affect future results.

In addition, we encourage you to refer to any disclosures regarding eLong which may be made, from time to time, by our controlling shareholder, Expedia, Inc., which is a separately listed company on the Nasdaq Stock Exchange. Expedia files current, quarterly and annual reports with the SEC pursuant to the rules applicable to US domestic issuers, and Expedia filings can be found in the Investor Relations section of the Expedia website, www.expediainc.com/ir.

I will now turn the call over to Guangfu.

Guangfu Cui

Thank you, Echo. Hello everyone, thank you for being on this call.

In the fourth quarter, hotel room nights increased by 48% year on year to 7.4 million, and net revenues increased by 25% to RMB261 million. In 2013, hotel room nights increased by 60% to 25.8 million room nights, annual gross bookings reached the RMB10 billion milestone, and annual net revenues achieved the RMB1 billion milestone.

We continued to execute our mobile hotel strategy in the fourth quarter. We further expanded our domestic hotel network to more than 260,000 hotels worldwide. We further expanded mobile-friendly hotel products such as prepaid hotels, groupbuy deals and last minute deals. In the fourth quarter, we continued to invest in marketing to promote our brand and mobile applications. Cumulative downloads of eLong mobile apps have now reached more than 45 million. We recently launched version 6.0 of eLong’s iPhone and Android applications with new features including train ticket booking and WeChat Payment. Mobile bookings, through our apps and mobile websites, comprised more than 30% of our total hotel room nights in Q4, compared to 25% in Q3. Mobile combined with PC bookings comprised more than 80% of our total hotel bookings.

To better execute our mobile hotel strategy in 2014, we will put user experience first and aim to deliver experiences that “wow” our users. We will sharply increase investment in product and technology team. We will run hard and fight even more competitively for growth.

eLong also continues to gain external recognition. On January 2, 2014, eLong was promoted to the Nasdaq Global Select Market, the highest of the three tiers of the Nasdaq Market. In addition, in Q4, eLong was recognized as one of the “Top 10 Employers Most Followed by College Students”, and a “2013 China Best Employer” by a leading university and human resource company in China.

Now, I would like to hand the call over to Luo Rong for a review of our financial results.

Rong Luo

Thank you, Guangfu. In the fourth quarter of 2013, our year-on-year net revenue growth was 25%, compared with the fourth quarter of 2012.

In the fourth quarter, hotel revenue grew by 28% year-on-year, driven by 48% room night volume growth, partially offset by lower average commission per room night. Excluding the impact of the Q4 2012 change in the method of recording groupbuy room nights, eLong room nights increased 58% and hotel revenue increased 31% compared to the fourth quarter of 2012.

Fourth quarter commission per room night decreased 13% year-on-year, primarily due to growth of our coupon program. Hotel revenue was 80% of our total revenues, an increase from 78% in the fourth quarter of 2012.

For full year 2013, hotel revenue increased 41% compared to 2012, primarily due to higher room night volume, partially offset by a 12% decrease in commission per room night. Room nights booked through eLong in 2013 increased 60% year-on-year to 25.8 million. Commission per room night declined primarily due to growth of our coupon program and lower average daily rates. Hotel commission revenue grew to 80% of total revenues from 76% in the prior year.

In Q4 2013, air ticketing commission revenue increased 3% compared to the prior year quarter, driven by a 30% increase in air segment volume, partially offset by a 21% decrease in commission per segment, due to lower commission rates, growth of our air coupon program and a decrease in average ticket price. Air revenue decreased to 12% of total revenues from 14% in the prior year quarter.

Air ticketing commission revenue for full year 2013 increased 9% compared to 2012, driven by a 28% increase in air segments to 3.0 million, partially offset by a 15% decrease in commission per segment. Commission per segment decreased due to our air coupon program, as well as a decrease in average ticket price compared to 2012. Air ticketing commission revenue decreased to 12% of total revenues from 16% in the prior year.

Other revenue, which is primarily derived from advertising and travel insurance, increased 31% year-on-year for the fourth quarter of 2013. Other revenue was 8% of total revenues, consistent with the prior year quarter.

Other revenue for full year 2013 increased 32% compared to 2012, mainly driven by increased advertising and travel insurance revenue. Other revenue was 8% of total revenues, consistent with the prior year.

Gross margin in the fourth quarter of 2013 was 72%, consistent with the prior year quarter. Gross margin for full year 2013 increased to 74%, compared to 73% in 2012. The improvement in gross margin was driven by operational efficiencies and mix shift to mobile and online hotel bookings, partially offset by lower hotel revenue per room night.

Total operating expenses increased 52% or RMB85.5 million for the fourth quarter of 2013 compared to the fourth quarter of 2012, and increased to 96% of net revenues from 79% in the prior year period.

Total operating expenses increased 53% or RMB321.0 million for full year 2013 compared to 2012, and increased to 92% of net revenues from 81% in the prior year period.

Service development expenses increased 46% in the fourth quarter of 2013, mainly driven by an increase personnel and share-based compensation charges. Service development expenses increased to 20% of net revenues in the fourth quarter of 2013, compared to 17% in the same quarter of the prior year.

Service development expenses increased 40% for full year 2013, mainly driven by an increase in personnel and share-based compensation charges. Service development expenses increased to 18% of net revenues in 2013 from 17% in 2012.

Sales and marketing expenses for the fourth quarter of 2013 increased 48% over the fourth quarter of last year, driven primarily by marketing expenses and increased hotel commission payments to affiliates. Sales and marketing expenses increased to 62% of net revenues in the fourth quarter of 2013 from 53% in the same quarter of the prior year.

Sales and marketing expenses for full year 2013 increased 58% over 2012, mainly driven by increased marketing expenses and increased hotel commission payments to affiliates. Sales and marketing expenses increased to 65% of net revenues in 2013 from 55% in 2012.

As we have noted on prior calls, we are making aggressive investments in sales and marketing in order to position the business for strong, long-term growth, and plan to continue to do so.

Fourth quarter general and administrative expenses increased 87% compared to the fourth quarter of 2012, mainly driven by higher share-based compensation charges after we granted approximately 6.3 million restricted share units to our CEO and other members of the senior management in September 2013. General and administrative expenses were 13% of net revenues, an increase from 8% in the same quarter of the prior year.

General and administrative expenses for full year 2013 increased 44% compared to 2012, mainly driven by higher share-based compensation charges. General and administrative expenses increased to 9% of net revenues in 2013 from 8% in 2012.

Income tax expense for the fourth quarter of 2013 was RMB3.5 million, compared to income tax benefit of RMB12.5 million during the prior year quarter, mainly driven by the recording of a valuation allowance of RMB9.8 million on certain deferred tax assets.

Income tax expense for full year 2013 was RMB59.5 million, compared to income tax benefit of RMB16.0 million in 2012, mainly driven by the recording of a valuation allowance of RMB91.9 million on deferred tax assets.

Net loss for the fourth quarter was RMB44.0 million, compared to net income of RMB5.7 million in the fourth quarter of 2012.

Net loss for full year 2013 was RMB167.7 million, compared to net income of RMB0.5 million in 2012.

Turning to the Balance Sheet, I’d like to mention that as of December 31, 2013, eLong held cash and cash equivalents, short-term investments and restricted cash of RMB2.0 billion or approximately $323 million US dollars, substantially all of which was held in RMB.

Looking ahead to Q1 2014, we expect year on year net revenue growth of 10% to 20%.

We face fierce competition in this dynamic market, and are working very hard to execute our mobile hotel strategy. Given the long-term market opportunity and rapid development of mobile hotel booking, we expect we will continue to make significant investments in mobile, product development, technology, as well as sales and marketing, which may continue to put pressure on our profitability in future quarters.

This concludes my remarks; and, Guangfu and I look forward to your questions.

Moderator, please open the call for questions.

Question-and-Answer Session

Operator

Thank you. We will now begin our question-and-answer session. [Operator Instructions]

Okay. We now have one question from Ms. Alicia Yap of Barclays Capital. Ma'am, your line is now open, you may begin.

Alicia Yap – Barclays Capital

Hi, thank you. Good morning, Guangfu and Rong. Thanks for taking my questions.

So actually have a question on the Q1 guidance. So with what you guys delivered on the fourth Q and given the 10% to 20% guidance on 1Q, should we indicate anything that, is that more [indiscernible] or is it more factor in a potential intensify on the pricing side that you would be offsetting some of the volume growth? So any colors that you could provide would be appreciated.

Rong Luo

Thank you, Alicia, for your questions. The 10% to 20% guidance in Q1 is our judgment based on a number of factors and the knowledge as of the current date. I think we are seeing two things happen this year. This guidance reflects a continuation of the slower hotel volume growth which we have witnessed in Q4. And we are seeing a continuation of relatively aggressive expansion of our coupon program.

Alicia Yap – Barclays Capital

When you say continuation of aggressive expansion of the coupon program, is that more step up in terms of the higher discount pricing or further broaden up coverage? Can you elaborate a little bit on that, what is -- what do you mean on the expanding the coupon discount?

Guangfu Cui

Alicia, it's Guangfu. It's both. We see a broader coverage of coupon and also increased value attached to the coupon per transaction. Thank you.

Alicia Yap – Barclays Capital

I see. And can I just follow-up on that, sorry about it, is that more, when you say increase, is it compared to a year ago or compared to 4Q?

Guangfu Cui

Compared to a year ago and compared to the fourth quarter, it's broadly [ph] speaking more competitive. But the coupon market is very dynamic. It could change based on the competition, but so far we are seeing more gradual couponing for the first half of the quarter. Thank you.

Alicia Yap – Barclays Capital

I see, I see. That's helpful.

And then second question is on your marketing spend, because I think you say, given some more fierce, I mean the competition is more fierceful and you continue to commit further spending, wanted to kind of know your 4Q, your sales and marketing trend has actually declined a little bit versus 3Q. Is it because of just the seasonality, the quarter effect? And how should we think about these into 1Q and the rest of 2014?

Guangfu Cui

Yes. On the marketing spending, we are -- first of all, we think the online travel market is highly competitive now, so the competition is becoming more intense all the time. So we have to invest according to the market and also remain competitive in terms of coupon, and also there is a great opportunity for us to grow our mobile business, as you can see, that our mobile mix of the total hotel from 25% a quarter before now to 30%. And we continue to see the trend of continue growing mobile business. So we want to invest and grow our mobile business.

So these are the factors that we are -- continue our expanding in marketing. So it's very hard for this, the marketing spending, due to the dynamics of the market and the competition of the market.

Alicia Yap – Barclays Capital

I see. And then lastly, last question is, do you have any plan to expand into like the destination tickets or maybe the car rental business given the mobile app is actually a quite convenient tool for booking those services?

Guangfu Cui

So basically we will execute our mobile hotel strategy, we'll keep investing in hotel business. And in terms of mobile, the features or functions, we recently add train ticket in our new app, and also WeChat payment which we think is really going to increase the payment option for our consumer and make it easy for them to buy our products.

And in terms of other products, we will see and continue [indiscernible] and we'll keep you updated in terms of our new development. Thank you.

Alicia Yap – Barclays Capital

I see, I see. And then just last question if I may, given eLong has been always focusing on the hotel business, which I think is great, and then is there any plan for, given I think there's a lot of other companies specialized in the packaged tour or anything, would eLong consider any potential business combinations with some of the packaged tour or peers or anything that can make eLong a more well-rounded business or would you just focus on just the hotel even in the longer term?

Guangfu Cui

In terms of our own resources, we will invest most our resources in the hotel business. But we are open to connect with the third-party service provider or other services. For example, we recently launched our train ticket, but this service is not actually [ph] provided by eLong. But we are looking for the service provider, they are mobile ready [ph], with API that we can connect and play.

So we are not going to devote resources [indiscernible] to sign up for the attraction ticket or packaged business or any other business. So we will connect with third parties who can provide such service and we can just sell and use eLong as a platform to sell and provide this type of service to our customers. Thank you.

Alicia Yap – Barclays Capital

I see. Great. Thank you. I'll get back to the queue. Thank you.

Operator

Thank you. Our next question is from Ms. Wendy Huang of Standard Chartered. Ma'am, your line is now open, you may begin.

Wendy Huang – Standard Chartered

Good morning. Thanks for taking my questions. First of all, your hotel volume growth declined from 68% in Q3 to 48% in Q4. So how should we look at total volume growth going forward? Will this continue to decline or [indiscernible] we should be able to see the acceleration? And also if you can provide some color on the reasons behind the [indiscernible] trend as well as the forward-looking trend, that will be great. Thank you.

Rong Luo

Thank you, Wendy. Yes, we are seeing in Q4 our room night growth is 48% while in Q3 it's 68%. In Q4 we have seen fierce competition in the group buy hotel space and which has contributed to a slowdown in our group buy hotel business. Also as we have noted in and I talked about in my script, the one-time change we made in Q4 2012 to the method of recording group buy room nights created a more difficult year-on-year comparison in Q4 2013. Excluding this change, our Q4 room night growth was 58%.

And about our outlook about our Q1 room night growth, I think all of that have factored in to our guidance.

Wendy Huang – Standard Chartered

Okay. And also what's the current volume contribution from the group buy hotel?

Guangfu Cui

We didn't break down the group buy, but budget hotel is approximately 50% [ph] of our business. Thank you.

Wendy Huang – Standard Chartered

Okay. And also can you give us some update on your cooperation with Qunar in terms fo the hotel inventory as well as the mobile side? Thank you.

Guangfu Cui

Yes. So in cooperation with Qunar, there is -- I think I want to take one step back, talking about the overall cooperation with Baidu and Qunar, because this is really kind of now linked because Baidu and Qunar have a cooperation in terms of Baidu [indiscernible] agreement. So under existing agreement, Baidu directs most travel-related search to Qunar and have a smaller charge to its other advertisers including eLong. In addition, Qunar also directs traffic to its own hotels so that other advertisers such as us may also over time see smaller chart [ph] of Qunar traffic than before. So we continue cooperating with Qunar on CPC, but the affiliation, cooperation [ph] has been terminated by Qunar in September 2013. We followed and filed lawsuit to protect our interests under the cooperation contract.

I want to give you update also in that lawsuit. We seek resumption of termination cooperation and the damage for our loss. So far the court had held a number of preliminary procedure hearings and we expect the first decision [ph] on the merits to occur later this quarter. I hope that answers your question about the overall cooperation with Baidu and Qunar. Thank you.

Wendy Huang – Standard Chartered

Okay. Thank you. That's very helpful.

Operator

Thank you. Our next question is from Fawne Jiang of Brean Capital. Your line is now open, you may begin.

Fawne Jiang – Brean Capital

Good morning, Guangfu and Luo Rong. Thank you for taking my questions. First question is actually regarding your sales and marketing spending. Just wonder, for your 4Q, the 158 million, 159 million, how should we look at the contribution from the brand campaign versus promotion versus your traffic [ph] acquisition cost? Any color would be helpful.

Guangfu Cui

This is Guangfu. We don't give breakdown of the marketing spending just mainly for competitive reasons. And we have spent aggressively to promote our mobile downloads. And so it doesn't matter if we are doing the offline marketing or the mobile download marketing. We -- our chief purpose is to promote our mobile downloads. And so that has been the main marketing theme for Q4, and I think it's going to remain the same going forward. Thank you.

Fawne Jiang – Brean Capital

Got it. Thanks, Guangfu. Second question is regarding your R&D. There was a step up in 4Q. Just wonder if that's more related to hiring or it's more like a [indiscernible] update.

Rong Luo

So for the research and development, so the research and development expenses going up in Q4, I talked about it in my script, the increase is majority driven by the share-based compensation. At the same time we also have invested more to hire more people as well as to increase our capability in technology. So that has both.

Fawne Jiang – Brean Capital

Got it. Any color on your international business, how like outbound travel is growing and how much is that a contributor to your hotel revenue as of now?

Guangfu Cui

Yes. So the outbound basis continue growing very nicely. We grew in triple-digit in the fourth quarter and continue to grow nicely in the first quarter. We don't provide the breakdown of number of the international hotel room nights. I think our international hotel is very competitive with the Expedia -- hotel inventory from Expedia, and we also offer 10% off to our -- for our international hotel products for most of the hotel products. So we remain optimistic about growing the international business. Thank you.

Fawne Jiang – Brean Capital

Got it. Thanks, Guangfu. Last question, it's actually regarding the group buy segment. You mentioned that competition has stepped up. Just wonder like how should we look at that area in 2014 and like the increase on the group buy, what -- that will have a negative impact on the overall I think condition revenue per room night in '14?

Guangfu Cui

Yes. So we in the 2013, one of our key growth drivers is group buy business and, however, that business is under tremendous competition from the general group buy players such as Maytuan [ph]. And what we are doing right now is focus on expanding our product offerings, we increased our group buy hotel products from approximately 28,000 deals in 2013 to now more than 40,000 deals. So that is that we are doing and I think the business is still facing fierce competition from the general group buy players and we don't expect a sharp increase in that business going forward.

Fawne Jiang – Brean Capital

Got it. Thank you, Guangfu.

Operator

Thank you. Our next question is from Jiong Shaw of Macquarie. Your line is open, you may begin.

Jiong Shaw – Macquarie

Good morning. Excuse me. Thank you for taking my question.

You talked about competition from group buy players such as Maytuan [ph]. Could you expand a bit in terms of whether one has changed from competitive perspective from Ctrip and Qunar? Because, the reason I'm asking is because it looks like it used to grow much faster than some of your bigger peers, but now I think the fourth quarter growth rate was on average slightly below your competitor and your guidance is also a bit below. Any color will be helpful.

Guangfu Cui

Yes. So I think there's [indiscernible] on the growth rate that in the fourth quarter we grew, if you're taking out the one-time accounting adjustment, grew 58%, and our key competitor Ctrip grew 55%. So we are, in terms of growth rate, we are growing in line with our key competitor. Yes, you are right that we are not over-growing our competitors as we have been doing for the past several years. So I think the competition landscape has changed over the past few years. Other than Ctrip, new competitors including Qunar which use the method [indiscernible] OTA model and general group buy players such as Maytuan [ph] who have entered online travel by selling group buy room nights. As you can see, the competition is now -- it's not only between the same model but amongst different business models.

As for Maytuan [ph], I think it puts a little more pressure on us, the reason being that the average ADR is quite low. And we used to be very competitive in the low-end market, and so that we feel pressure from the Maytuan [ph] in terms of the group buy business more than the rest [ph] of our competitors. Of course we have been doing better in group buy business than our key competitors, but we also face a little bit more exposure to the competition from Maytuan [ph].

So that I hope explains the reason that we have been growing a little bit slower than we have been growing for the past few years. Thank you.

Jiong Shaw – Macquarie

Okay, great. Thank you very much for the color, Guangfu. And my follow-up, could you share with us your thoughts on just longer term, in two, three years, what do you think the industry landscape will look like in terms of, you know, what kind of business model you're seeing will be sustainable? Which ones will get merged or separated? Any thoughts would be helpful.

Guangfu Cui

I think right now the market is still under-shapen [ph] and all the key players are trying to shape the [ph] market and trying to make sure that we compete and make our model the model going forward. So I also think that the model will converge. We will take some of the features of our competitors to put in our own market and I'm pretty sure that our key competitors like Qunar will want to add OTA, and they are doing in their model. So I think it's going to be more competitive with convergence of the market model. Thank you.

Jiong Shaw – Macquarie

Okay. Thanks. My next and last question is on the marketing expenses. As all the major players are trying to grab market share in still very fast-growing market and there -- some of them are stepping up big time on the marketing expenses, as you know, so could you talk about what's your plan for 2014 in terms -- your strategy is to match those marketing expenses as much as you can or you try to rationalize or allocate smartly, more efficiently where you're going to spend your market dollars? Thank you.

Guangfu Cui

Yes. I think our marketing strategy is trying to achieve our strategy of leadership on the mobile hotel sector. So that's our purpose and we want to support that strategy and [indiscernible]. And second, we want to remain very competitive in the market so that, in terms of pricing, so that we can continue to grow. So that is our rationale of how we are going to spend our marketing dollars. Thank you.

Jiong Shaw – Macquarie

Okay, thank you.

Operator

Thank you. Our next question is from Tian Hou of T.H. Capital. Your line is open.

Tian Hou – T.H. Capital

Hi, Cui Guangfu and Luo Rong. Good morning. I have several questions.

The number one question is regarding the hotel bookings. You mentioned that there are about 35 or 30% of bookings right now comes from mobile. So I wonder, you know, for the rest of the bookings, how much of that comes from call center, how much of that comes from internet? That's the first question.

Rong Luo

Okay. So we have [indiscernible] now both PC and online together is more than 80%, while mobile is 30% [indiscernible] 5% through mobile in the past four or five quarters. The rest, the less than 20%, that's coming from call center.

Tian Hou – T.H. Capital

Okay. So I got it, that one. And regarding the brand advertising, in the past, like sometimes you will spend some money on the brand advertising and now in the market I think you know more better than us and your peers, you know, first of all, they do have a lot of money, second, they are doing the brand campaign. And so what's your strategy there in terms of brand marketing in 2014?

Guangfu Cui

So we will measure each of our marketing programs based on the return on investment. So we will do what's good for eLong regardless of competitors. So we have been using in the 2013 key offline channels, that's TV, focused media and also other sort of marketing programs. So we will keep our learning and then test and learn and then expand type of approach, so to formulate our own strategies. But the key to [indiscernible] is that we will do what's good for eLong regardless, not putting so much focus on our competition. Thank you.

Tian Hou – T.H. Capital

Okay. So the follow-up question would be, I remember 2012 when you guys started a hotel coupon program. I think the goal was quite clear, which was to accomplish market share. So we saw a rapid growth in your sales volume or booking volumes. And as previous analyst question, you're now, you know, we still spend a lot of money on sales and marketing, our market share growth has been slowed down. So going forward, besides coupon program, what do you think the most effective market share gaining strategy could be for eLong?

Guangfu Cui

Yes. I think the key for us is trying to maintain competitive in the market, so that is -- has always been our attitude towards coupon. So in terms of our marketing going forward, I think all the strategy going forward, broader strategy, so we have been executing our mobile hotel strategy since last year. So the key to that strategy is, number one, provide broader hotels and to price as competitive. So basically we want to grow our consumers, our users, more hotels and lower price. So that's number one.

Number two is that we want to make sure the user interface or user experience is outstanding, both from the consumer standpoint and from the supplier standpoint. So then the last but not least, to keep promoting our mobile hotel business [indiscernible] of marketing [indiscernible]. So that is our [indiscernible] that going forward. Thank you.

Tian Hou – T.H. Capital

Okay. I have two more questions. One is, you guys started train ticket program. So I guess that is some kind of a newer business. Do you mind to give us just some color on that business?

Guangfu Cui

The train ticket business is doing very well. We launched it, and the consumer, we have received a very good feedback from consumers, and we don't provide the daily volume to you, but it's -- what I think I can say is it's quite popular among our existing users. It's a value add to what we provide on the vendor hotel business.

The way we do it is that we connect with a third-party technology company and they are very good at mobile so that we are able to connect and play. So that's the type of [indiscernible] are looking to add into our mobile apps. Thanks.

Tian Hou – T.H. Capital

Okay. So, as a last question is, one thing I have witnessed in China market, particularly in the travel business, the competition is very interesting. Sometimes this started in one area and then move to another one. So for eLong as a hotel or much lower-tier hotel vendor, and so how can you, you know, to, how to say, to compete or to fight in some many fronts such as, you know, we're talking about the hotel market share, then secondly we have this competition on coupon, then maybe one day you will have another competition from kind of the short rental or whatever. So what is our market position? How do we deal with the evolving, emerging market competition?

Guangfu Cui

So basically it's quite simple to us and our business has been very simple ever since I became the CEO of eLong [indiscernible] we want to become the number one of hotel booking service provider in China. And so that has been our focus, that has been our goal, is [indiscernible] various new competition across the -- what we have been doing in the last several years is keep expanding our hotel network. We are now providing more than 260,000 hotels worldwide and we keep expanding our domestic hotels and networks and we are making sure that we're not only doing coupon but also procure other type of products for our consumers such as prepaid products which is much cheaper than the agency hotel rates.

And we are working on group buy deals. We are working on the last-minute for the mobile-only products. So we want to gain competitive advantage in pricing. We have been always doing to improving our user interface for mobile apps and our website, and improve our service, and then keep promoting our mobile booking and laptop [ph] booking.

So that has been our -- what we are doing. And it's not going to change going forward. So we are all about working [ph] and we are all about, you know, want to make sure consumer can use eLong to easily book a room during their trip. So that's our market proposition, very simple, it's not that complicated. Thank you.

Tian Hou – T.H. Capital

Thank you. That's all my questions.

Operator

Thank you. Our next question is from Ming Zhao of 86Research. Your line is now open, you may begin.

Ming Zhao – 86Research

Thank you. I just have one question. So yesterday we have this news about Tencent investing in Dianping. Dianping is going to get a button on the [indiscernible] app. So besides Weixin pay and public accounts, Tencent is your number two shareholder, are you talking to them to also put a button on the WeChat? That's my question. Thank you.

Guangfu Cui

Thank you, Ming. Tencent continues to be supportive of our business and we actually welcome their investment in the auto [ph] areas. I think that shows that we are part of the overall business. And if Tencent keep investment [indiscernible] that means that we have already could list auto [ph] in the higher ranking order of their strategy. So we want to take advantage of that, their part of strategy, being able to -- kind of keep talking to them about the importance of auto [ph], and we are glad to see that we are making some move, significant move in the market.

And we are working with Dianping in terms of hotels and group buy deals. So we have seen very good traction in the hotel booked from out of Dianping.

So the way to cooperate with Tencent is not only to just put a bar in there [indiscernible] we can put a button, that'd be great, we keep talking to them. But with, even with Dianping's button, that we are also able to participate in Tencent platform. And also by launching Weixin payment, WeChat payment, we are also taking a ride [ph] on the Tencent platform. And in fact we're also doing various marketing in Tencent's other marketing platforms.

So that has been our cooperation with Tencent. We are actually happy to see the investment of Tencent into Dianping. Thank you.

Ming Zhao – 86Research

Thank you.

Operator

[Operator Instructions]

At this time there are no further questions. I will now hand the call over to the eLong management team for closing remarks.

Guangfu Cui

Thank you, moderator, and thanks to everyone for joining the call. I have no further comments. Moderator, you can now end the call. Thanks.

Operator

That concludes the eLong fourth quarter and full year 2013 earnings report conference call. Thank you for participating. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!