Source | bohuFN

Ctrip's first-quarter financial report continues to be noteworthy. Overseas and tier-2/tier-3 cities remain the growth points for Ctrip.

01 Ctrip Delivers Another Positive Report in the First Quarter

The financial report shows that Ctrip Group achieved net revenue of 11.92 billion yuan in the first quarter of 2024, representing a year-on-year increase of 29% and a quarter-on-quarter increase of 15% compared to 9.21 billion yuan in the same period last year. Net profit reached 4.31 billion yuan, an increase of 27.51% compared to 3.38 billion yuan in the same period of 2023.

It is worth noting that the first quarter of last year was the first full quarter after the pandemic, with a rebound in domestic travel demand. Driven by market demand, Ctrip achieved a revenue growth rate of up to 124%. Despite the high base in the previous year, Ctrip still maintained growth this year, demonstrating its growth potential.

Specifically, Ctrip's business is mainly divided into four segments: accommodation, transportation, tourism and leisure, and business travel management. Among them, the tourism and leisure business grew the fastest year-on-year.

The financial report shows that Ctrip's revenue from tourism and leisure business in the first quarter of 2024 was 883 million yuan, a year-on-year increase of 129%. Ctrip explained in the financial report that this is mainly due to the increase in bookings for tourism and leisure products. Revenue from tourism and leisure business increased by 25% quarter-on-quarter, mainly due to seasonal effects.

In addition, accommodation bookings contributed revenue of 4.5 billion yuan, representing a year-on-year increase of 29%; transportation ticketing contributed revenue of 5 billion yuan, a year-on-year increase of 20%; and business travel management revenue was 511 million yuan, a year-on-year increase of 15%.

Among them, accommodation booking revenue accounted for 37.82% of revenue in the first quarter of 2024, while transportation ticketing revenue accounted for 42.02%. Together, these two categories account for nearly 80% of Ctrip's revenue, remaining its core business.

Data shows that since the beginning of 2024, Ctrip's share price has risen from a low of around $31 to a high of $58, achieving a near-doubling increase, ranking first among major companies.

The recovery of the tourism industry has accelerated Ctrip's development and gained the favor of outsiders.

02 Overseas and Tier-2/Tier-3 Cities: Ctrip's Growth Path

In the first quarter, Ctrip's growth path mainly came from overseas and tier-2/tier-3 cities.

According to the passenger flow big data monitoring of the Data Center of the Ministry of Culture and Tourism, the total number of inbound and outbound tourists during the "May Day" holiday reached 3.672 million. Data from the National Immigration Administration shows that the number of foreigners entering China in the first quarter increased by more than three times compared to the same period in 2023, with tourism accounting for more than 30%.

Inbound and outbound tourism has become an important growth point for Ctrip.

Currently, Ctrip has teamed up with over 600 domestic top scenic spots to provide support for foreign tourists in multiple languages and over 20 currencies, facilitating online bookings. Meanwhile, on the international version of Ctrip's platform, Trip.com, overseas users can book inbound travel products and services such as hotels, air tickets, train tickets, car rentals, airport transfers, attraction/event tickets, cruises, travel photography, dining, and WiFi/phone cards.

To create inbound travel products, Ctrip has also launched various initiatives. For example, in 2023, it launched a China travel guide to educate foreign tourists; participated in creating the "Hello, China" series of activities and content, which were disseminated on social media in multiple destinations around the world; collaborated deeply with multiple overseas destinations; and invited overseas KOLs to visit and experience domestic tourism products and attractions.

In addition to product development, Ctrip has also continued to increase its investment and acquisitions in overseas travel companies. For example, it has invested in overseas travel companies such as Skyscanner in the UK, Travelfusion, MakeMyTrip in India, and Travix in the Netherlands.

Financial report data for 2023 shows that Ctrip's revenue outside of Greater China accounted for approximately 13%, while Trip.com is expected to account for approximately 6%-7%, which is also the core of the company's overseas business development.

During the first-quarter earnings call, Sun Jie, CEO of Ctrip Group, said that the total revenue of Ctrip's international version, Trip.com, increased by approximately 80% year-on-year in the first quarter, with inbound tourism contributing 20% to Trip.com's revenue, and Trip.com contributing approximately 10% to Ctrip Group's revenue in the first quarter, of which more than 70% came from the Asian market.

Inbound tourism is also continuing to grow. Data shows that Ctrip's summer vacation product bookings have nearly doubled year-on-year; visa applications for summer travel have increased by 1.5 times year-on-year; charter tour outbound orders have increased by approximately 70% year-on-year; and inbound airport transfer orders have increased by 80% year-on-year.

In 2021, Ctrip's revenue in the international market was 1.6 billion yuan, which had grown to nearly 5.9 billion yuan by 2023. It can be seen that the proportion and importance of international business in Ctrip's total revenue are increasing significantly.

In line with the development trend of the travel market, tier-2/tier-3 cities have also been an important growth topic for Ctrip in recent years.

The "2024 May Day Holiday Travel Consumption Report" shows that hotel bookings in tier-3 cities and below have increased by more than 100% year-on-year, and ticket bookings for popular county-level scenic spots have increased by more than 200% year-on-year.

Ctrip also pointed out during the earnings call that due to the diversion of travel preferences to outbound destinations and lower-tier cities, the ADR (average daily rate) of domestic hotels has declined. To adapt to this travel consumption trend, Ctrip has increased its cooperation with tier-2/tier-3 cities, established resort farms, and expanded into lower-tier markets.

In the first quarter, Ctrip cooperated with cultural and tourism departments in Rongjiang, Taijiang in Guizhou, Kunshan in Jiangsu, and multiple counties in Jiangxi, helping to improve the quality of tourism supply in lower-tier markets through hotel training, investment attraction, and integrated marketing.

It is reported that since last year, Ctrip's resort farms have significantly increased the supply of rural homestays, and overall, they have driven an increase in bookings for surrounding homestays by over 80% in 2023, creating 20,000 new job opportunities.

During the 2021 Tourism Marketing Hub Launch Event, Liang Jianzhang announced that Ctrip plans to invest in building 10 sample resort farms nationwide on a public welfare basis. He also mentioned that Ctrip would comprehensively promote the rural revitalization strategy through a "five-year action plan," specifically including: incubating 10 key internet-famous villages, creating 100 high-quality rural tourism routes, training 1,000 rural tourism talents, producing 10,000 pieces of rural tourism content, establishing a 1 billion rural tourism infrastructure fund, and cultivating at least 10,000 rural tourism talents to effectively attract local young people to "return" to the countryside.

03 Ctrip's Barriers

In recent years, the local lifestyle market has been fiercely competitive, but Ctrip has maintained a "stunning alone" style.

According to calculations by Guohai Securities, the local lifestyle market size is expected to increase from 968 billion yuan to 1812.8 billion yuan from 2021 to 2025, with the hotel and tourism market reaching 1.0637 trillion yuan in 2025, accounting for more than 50% of the local lifestyle market.

The local lifestyle battle has not significantly affected Ctrip, likely due to its strong barriers built on its supply chain and service system.

For example, Ctrip has a vast high-end hotel resource pool. Industry observers point out that high-end hotels have high construction costs, long cycles, and scarce local resources, making them difficult to replicate or replace, thus becoming a core competitiveness of Ctrip. "For example, the coastline of Yalong Bay in Sanya is almost divided up by various five-star hotels."

During the Spring Festival this year, Ctrip collaborated with relevant destinations in nearly 20 provinces and municipalities, including Hubei, Shaanxi, Jiangsu, Sichuan, Chongqing, Ningxia, Liaoning, Anhui, Tibet, Zhejiang, Xinjiang, Fujian, Hainan, Heilongjiang, Jilin, Gansu, Hebei, and Qinghai, to successively launch Spring Festival cultural and tourism consumption vouchers to stimulate consumption in destination cultural and tourism markets. This also shows, from the side, Ctrip's strong resources and brand recognition in the industry as a leading OTA platform.

To some extent, Ctrip's rapid growth and market capitalization surpassing Baidu are similar to Pinduoduo's market capitalization surpassing Alibaba and ByteDance's revenue surpassing Tencent. They may all further confirm the trend of the internet industry towards diversified segmentation.

References:

1. 36Kr: How did Ctrip achieve a doubling of its stock price in three years?

2. New Consumer Daily: Inbound tourism is hot, and Ctrip earned 4.3 billion yuan in Q1

3. Photon Planet: Ctrip and Tongcheng are chasing each other

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