China's OTA Q2 Are All Released, And Ctrip's International Business Begins To Recover

Summary

• Ctirp's  best season performance for tourism after the epidemic.
• The content strategy has achieved initial results, and Ctrip's four business revenues have grown across the board.
• The global travel market has slowly recovered.

The best season for tourism after the epidemic.

Ctrip(TCOM.US)released its 2021 Q2 financial report. So far, China-listed OTA (Online Travel Agency)companies has already released its Q2 financial report. Compared with the quarterly data after the outbreak, Ctrip achieved substantial growth in Q2 of 2021, with operating revenue of 5.9 billion yuan($907.7M), an increase of 86% year-on-year and an increase of 43% month-on-month; However, it is still down about 32% year-on-year in Q2 of 2019 before the epidemic. The net loss attributable to shareholders of Ctrip Group in Q2 was 647 million yuan($99.5M), which was an increase of about 36% compared to the net loss of 476 million yuan($71.8M) in the same period in 2020. The reason for the year-on-year increase in losses was the loss of the investment part. The financial report pointed out that if the loss of the investment part was not taken into account, the net profit attributable to the shareholders of Ctrip Group in the second quarter of 2021 was 728 million yuan($112M).

Data source: Ctrip(TCOM.US), Tongcheng(00780.HK), Tuniu(TOUR.US), Q2 of 2021 report

Ctrip pointed out that the revenue growth is mainly due to the effective recovery of the domestic market. Q2 of 2021 is the fastest quarter of the tourism industry recovery after the epidemic. Relying on the effective control of the domestic epidemic, the vigorous marketing of tourism companies, and the gradual and stable opening of cross-provincial tourism, The revenue of most tourism companies has recovered on a large scale.

During the May 1st holiday in 2021, according to the data center of the Ministry of Culture and Tourism of China, 230 million domestic tourists travelled, an increase of 119.7% year-on-year, and restored to 103.2% of the same period before the epidemic on a comparable basis; domestic tourism income was 113.23 billion yuan（$17.4Bn）, A year-on-year increase of 138.1%, returning to 77.0% of the same period before the epidemic on a comparable basis.

The content strategy has achieved initial results, and Ctrip's four business revenues have grown across the board.

The commission revenue of accommodation booking, transportation ticketing, travel and vacation, and business travel management increased by 96%, 80%, 182%, and 141% respectively year-on-year, and 55%, 37%, 117%, and 55% month-on-month.

                     Data source: Ctrip's 2021 second quarter report

Among them, Ctrip's accommodation booking and transportation ticketing accounted for 42% and 36% of total revenue respectively. The financial report pointed out that Ctrip's domestic hotel and air ticket GMV both increased by about 150% year-on-year. Compared with the same period in 2019 before the epidemic, domestic hotel and air ticket bookings both reached double-digit growth in Q2.

This is mainly due to the company's continued efforts in the product supply chain. In Q2 of 2021, Ctrip strengthened its comprehensive solution for smart customer ticket purchases, strengthened cooperation with 27 airports, and improved the passenger transfer efficiency of 27 domestic airports through intermodal transportation. Through intermodal transportation, the passenger transfer efficiency of 27 domestic airports has increased by nearly 40% compared with the same period in 2019; through the "air ticket + hotel" marketing method, the hotel also obtained additional orders from Ctrip air ticket users, and the hotel transaction volume increased by nearly 200% year-on-year.

In addition, since Ctrip announced in 2020 that it will "deeply cultivate content" as one of its business strategic directions, it continued to develop potential business through Ctrip’s planet, live broadcast and other content, and improved the conversion rate from content to transaction in this quarter. Ctrip’s CEO SunJie pointed out at the financial report meeting that the number of KOLs on Ctrip increased by nearly 50% from the previous quarter. The company will continue to expand the Ctrip’s planet to provide value to market participants, improve service reliability and price transparency in the future.

Strengthen the penetration of the supply chain

Obviously, even if the tourism industry recovered in Q2, but tourists' confidence in cross-provincial travel has not been fully boosted. Local travel and surrounding vacations are still the current trend. According to data from Ctrip, as of September 21, during the Mid-Autumn Festival of 2021, the number of people booked for nearby tours accounted for 56% of the total number of travellers, which was higher than the level of Mid-Autumn Festival 2019 and the Dragon Boat festival and Qingming holidays this year.

The main means for OTA to enter the down-market and reduce costs and increase efficiency: shift to lower-tier cities, and optimize the supply chain by improving the efficiency of products and services. In the second quarter of this year, the number of low-tier hotel bookings on Ctrip's platform increased by more than 50% compared to 2019. Local travel continues to be the main driver of the domestic recovery. Compared with the same period in 2019, local hotel bookings have increased by nearly 80%.

In the accommodation supply chain, Ctrip focuses on high-end vacations and accommodations. it launched a five-year rural revitalization plan in Q2 ,it has launched three holiday farms so far. Ctrip plans to invest 1 billion yuan($15.4M) in the rural tourism industry fund, to empower 100 tourist villages on a large scale, and to train 10,000 rural tourism revitalization talents, etc., To build 10 Ctrip vacation farms and improve the rural destination accommodation experience.

In addition, the company and Fliggy Travel(A company owned by Alibaba) have strategically invested in Xiaozhu Homestay and reached an in-depth cooperation. The two parties aim at rural revitalization opportunities and explore more perfect solutions for the long-term and sustainable development of the homestay industry.

Throughout the industry, OTA has long penetrated into a wider supply chain, but the epidemic has accelerated the penetration of OTA. Ctrip, Fliggy, Meituan(03690,HK), Tongcheng Travel(00780,HK), Tuniu(TOUR.US), etc. have optimized supply chain efficiency through a series of investment, strategic cooperation, etc., Objective to expand its business territory and promote the growth of local consumption and cross-city consumption business.

The global travel market has slowly recovered

The continuous "involution" of OTA in the domestic market is largely affected by the lack of inbound and outbound tourism. However, the recovery efficiency of the global tourism market this year has been significantly improved compared to 2020,.

The Booking.com (owned by Priceline Group)’s Q2 bookings totaled US$22 billion, an increase of 852% year-on-year, and it has returned to about 88% of the same period before the epidemic.

Expedia Q2's total revenue was US$2.1 billion, a year-on-year increase of 273%, equivalent to 67% of the same period in 2019; total bookings exceeded US$20.8 billion, a year-on-year increase of 6.7 times, returning to 74% of the pre-epidemic level.

The substantial improvement in Q2 performance of the two means that the European and American markets have also seen significant improvements, and the overseas travel market has also entered a period of recovery, which provides greater support for the future performance growth of Ctrip's global brand.

The overseas transportation business is an important fulcrum for Ctrip's growth. In addition, the continued loosening of entry policies in various countries may also promote the growth of Ctrip's international business in the next quarter.

On July 1, the European Union officially issued the digital new crown pass, which is divided into three types: a certificate for inoculation of the new crown vaccine recognized by the EU, a certificate for negative nucleic acid test, and a certificate for recovery after infection with the new crown virus. The certificate is issued in the form of a mobile phone QR code, or it can be downloaded and printed. The pass is issued by the governments of EU member states and recognized by countries participating in the system.

On September 20, US time, the United States announced that it will reopen its borders to air passengers from 33 countries and regions, including China, India, Brazil, and most of Europe, who have been fully vaccinated against the new crown. .

There is no doubt that the tourism industry is back on track. However, there are still many barriers between the interoperability between overseas markets and the full interoperability of the domestic market. Even if the international market is opened, the epidemic is still a barrier to hinder users from going out, and consumer confidence is difficult to boost in the short term.