On November 19, Ctrip released its third-quarter financial report for 2024, reporting a net operating revenue of 15.9 billion yuan, up 16% year-on-year, primarily driven by strong growth in travel demand. Net profit stood at 6.8 billion yuan, compared to 4.6 billion yuan in the same period last year.

On the same day, Tongcheng Travel also released its third-quarter financial report for 2024, reporting revenue of 4.99 billion yuan, up from 3.3 billion yuan in the same period last year, also due to the robust development of the tourism market. Adjusted net profit increased by 46.6% to 910 million yuan from 620 million yuan in the same period of 2023.

The next day after the financial reports were released, the opening prices of Ctrip (primarily traded on US stock markets) and Tongcheng (traded on Hong Kong stock markets) shares both rose significantly.

The third quarter is the peak travel season of the year, so the data from these two major OTA platforms during this period is representative. In Ctrip's financial report, indicators related to inbound and outbound travel performed impressively, with outbound hotel and flight bookings fully recovering to 120% of the same period in 2019; Tongcheng Travel, which targets the domestic mass market, also recorded an overall growth rate exceeding 50%, with a year-on-year increase of 51.3%.

Apparently, Ctrip is focusing on international expansion, while Tongcheng continues to expand domestically. Along these different directions, both are using distinct strategies to integrate their businesses, specifically choosing between developing AI or hotel management.

01. Ctrip Shines in International Travel

Ctrip's primary revenue sources include accommodation bookings, generating 6.8 billion yuan in operating revenue, up 22% year-on-year, and transportation ticketing revenue of 5.7 billion yuan, up 5% year-on-year. Together, these two segments contributed 78.6% to total revenue, compared to 80.3% in the same period of 2023, indicating a relatively stable contribution.

This quarter's financial report highlights the growth in outbound travel. Outbound hotel and flight bookings have fully recovered to 120% of the same period in 2019, with hotel and flight bookings on the company's international OTA platforms increasing by over 60% year-on-year. As stated in the report, "Both domestic and international travel showed strong growth momentum in the third quarter of 2024."

In recent years, OTA platforms have often used 2019 as a benchmark to showcase the recovery of the hotel and travel industry, especially in international markets. In the third quarter of 2023, Ctrip's outbound hotel and air travel bookings had recovered to about 80% of the same period in 2019. By the second quarter of 2024, outbound hotel and flight bookings had recovered to 100% of pre-pandemic levels in 2019. It now appears that Ctrip's outbound business is expected to recover to its 2019 levels with a slight increase for the full year.

However, observing the outbound travel business also requires considering the recovery of international flights. In the third quarter of 2023, Ctrip noted that the recovery rate of international air passenger traffic for the entire industry exceeded 50%; by the second quarter of 2024, the recovery rate of international flight capacity exceeded 70%. In other words, Ctrip's outbound business previously maintained a difference of about 30 percentage points from the flight recovery rate.

According to FlightAware data, in the third quarter of 2024, China's international airline flights totaled 159,000, representing a 15.2% increase from the previous quarter and a 62% year-on-year increase, recovering to 78.3% of 2019 levels. Considering Ctrip's reported recovery rate of international flight capacity, both changes and data are consistent. Compared to Ctrip's 120% recovery rate in this quarter, it significantly exceeds the international flight recovery rate for the same period, indicating accelerated growth in Ctrip's international outbound business in the third quarter of this year.

On the other hand, revenue from other segments, including Ctrip Finance, surged by over 40% to 1.234 billion yuan this quarter. Simultaneously, the proportion of revenue from other segments also increased year-on-year, from 6.3% in the same period last year to 7.76% this year. This increase is speculated to be driven by financial business impacts.

It's worth noting that the year-on-year growth of hotel and flight bookings on Ctrip's international OTA platforms exceeded 60%, which is closely related to the surge in inbound tourism in 2024.

In 2016, Ctrip acquired Skyscanner, a European travel search and price comparison platform. In 2017, Ctrip wholly acquired Trip.com, an American online travel platform. Coupled with Ctrip's investment in MakeMyTrip, an Indian online travel company, Ctrip proposed the "G2" development strategy of "High Quality" and "Globalization" in 2019. Logically, Ctrip's international business should have entered a peak growth period starting in 2019.

Until 2024, with the strong recovery of tourism, the trend of "inbound tourism" has become significant. According to data from the State Immigration Administration, 14.635 million foreigners entered China through various ports in the first half of 2024, a year-on-year increase of 152.7%. Besides using these platforms to book international hotel and flight services, international tourists may also use these platforms to book domestic hotel and flight services during their inbound travels. In the previous second quarter, the total revenue of Ctrip's international OTA platforms increased by 70% year-on-year.

Additionally, Ctrip is closely monitoring the AI business. In the second half of 2023, Ctrip released its first vertical large model for the travel industry, "Ctrip Asks," which serves as an intelligent assistant to help users address more personalized travel needs. Travel planning assistants are one of the important application areas of AI, and many of the functions demonstrated by AI large models when they were first introduced were related to travel planning or itineraries.

In the second half of this year, the entire AI industry has gradually evolved from focusing solely on "large models" to focusing on AI Agents. During the second-quarter financial report meeting, Liang Jianzhang also mentioned AI Agents.

Currently, domestic AI Agents related to travel planning include Zhixiaobao, launched by Alipay. AI Agents can help users break down and execute complex tasks. Meanwhile, AI's ability to process different languages is also suitable for Ctrip, which is actively involved in inbound and outbound travel business.

02. Tongcheng: High Volume and Low Profit Margin in the Lower-tier Market

Tongcheng Travel, which caters more to the domestic mass market, recorded revenue of 4.99 billion yuan in this quarter, a year-on-year increase of 51.3%. Among this, accommodation booking revenue amounted to 1.377 billion yuan, and transportation ticketing revenue was 2.026 billion yuan, accounting for 68.2% of total revenue.

Adjusted net profit increased by 46.6% year-on-year to 910 million yuan, while the profit margin decreased from 18.8% in the third quarter of 2023 to 18.2% in the third quarter of 2024. In the first half of the year, Tongcheng's profit margin had already declined from 20.1% in the same period last year to 15.0%. Overall, the profit margin for the full year is expected to decrease compared to 2023.

Despite the decline in profit margin, Tongcheng's user base is still growing at a high rate. The average monthly paying users increased by 5.0% year-on-year to 46.4 million. The annual paying users increased by 3.4% year-on-year to 230 million. By the end of the quarter, Tongcheng's annual cumulative service users increased by 19.9% year-on-year to 1.88 billion. In the first half of this year, the growth rates for these three indicators were 1.9%, 4.8%, and 29.9%, respectively.

This is inseparable from Tongcheng's WeChat channel advantages and its downmarket strategy.

In addition to its own app, Tongcheng also occupies the important channel of WeChat. Tencent provides traffic support to Tongcheng Travel, and both parties provide each other with advertising and marketing promotion services. As mentioned in this financial report, "In the process of continuously expanding traffic acquisition, we have fully utilized online and offline channels and focused on improving operational efficiency. The WeChat ecosystem remains an important source of traffic for us, and we have successfully strengthened our operations and customer acquisition initiatives within this ecosystem."

As of the end of the third quarter, registered users from non-first-tier cities in China accounted for more than 87% of Tongcheng's total registered users, and about 71% of new paying users on the WeChat platform came from non-first-tier cities in China. Tongcheng's WeChat channel advantages are well-suited to its downmarket strategy.

Tongcheng's downmarket strategy aligns with the overall trend in the domestic tourism market this year. According to the domestic tourism sampling survey data for the first three quarters of 2024 released by the Ministry of Culture and Tourism, the number of domestic trips by urban residents increased by 14.9% year-on-year, and the number of domestic trips by rural residents increased by 16.8% year-on-year. Urban residents spent 3.71 trillion yuan on travel, a year-on-year increase of 17.1%, while rural residents spent 640 billion yuan, a year-on-year increase of 22.5%.

On the other hand, cities previously considered niche tourist destinations have also welcomed a new wave of visitors this year. Following Zibo's barbecue and Harbin's ice sculptures, Gansu Tianshui, known for its spicy hot pot, Xinjiang Altay, which has gained more attention due to television dramas, and ancient buildings in Shanxi, made famous by the domestic 3A game "Black Myth: Wukong," have all become new tourist attractions.

Regarding Tongcheng's own app, the company tends to use it to attract younger customers. The company's own app continued to grow significantly this quarter, with the daily active user count reaching a record high before the National Day holiday. Tongcheng successfully attracted young users by launching innovative marketing campaigns and introducing customized products and services within its app.

In addition, Tongcheng's asset-light hotel management business continues to develop. As of the first half of the year, the number of hotels operated by Tongcheng's hotel management division had further increased to about 1,900, with over 1,000 more hotels in preparation; by the end of the third quarter, this number had exceeded 2,100, with nearly 1,200 more hotels in preparation.

For Tongcheng, which focuses on the downmarket, the asset-light hotel management business is indeed an important part of its layout. However, given its current size, the impact of this business layout on profit margin growth is not yet evident in the financials, but it is expected to become a key factor in stabilizing Tongcheng's profit margin in the future.

03. Final Thoughts

According to data from the Ministry of Culture and Tourism, in the first three quarters of 2024, the number of domestic trips reached 4.237 billion, an increase of 563 million from the same period last year, representing a year-on-year growth of 15.3%. Total spending by domestic tourists amounted to 4.35 trillion yuan, an increase of 660 billion yuan from the previous year, representing a year-on-year growth of 17.9%.

The overall tourism market continues to boom, and domestic OTA platforms will face new changes.

For Ctrip and Tongcheng, two platforms with similar models but slightly different target customer groups, their development strategies in recent years have been closely related to their customer bases. Ctrip focuses on internationalization and AI development. As mentioned above, AI Agents can connect Ctrip's current business advantages and further differentiate itself. Tongcheng, on the other hand, focuses on increasing user volume, particularly in the hotel sector, which accounts for the largest share of travel expenses, and has developed an asset-light hotel management business.

However, OTA players are not limited to just these two. Meituan, Douyin, and Flying Pigs, along with AI tools like Zhixiaobao mentioned earlier, provide references for Ctrip in areas such as inbound and outbound travel, premium services, and travel AI. However, Tongcheng has a unique approach to the downmarket.

*The lead image and images in the text are sourced from the internet.