The vast space of the domestic and foreign markets has been opened.
Wen 丨 Fan Dongcheng
Following the successful start of the Spring Festival, the wind of recovery of domestic tourism is still continuing.
According to data from online travel platform Ctrip, as of February 20, 2023, Ctrip's bookings for domestic independent travel products from February to March increased by more than 446% year-on-year, and the number of bookings for group tours increased by 188% year-on-year. According to data from BTG Homeinns Hotel Group, an offline wine and tourism service organization, RevPAR (average room available for rent) of the group's mid-to-high-end business unit on February 8 reached 142% of the same period in 2019, with 31 full rooms and 72 stores with a occupancy rate of more than 90%.
Avoid long holidays and staggered peak travelers. Ruoruo, a clerk, told Heike Finance that she was worried about the large number of people during the Spring Festival and the need to accompany her family, so she chose to take a vacation to Shanghai Disneyland in mid-March after finishing her work. Ruoruo's friend Xiao Na has just booked tickets for a music festival in Xi'an at the end of March. In the past three years, they have loved to travel, and their life trajectory has been limited to their hometown and the city where they work, and now they have finally got their wish to travel.
Travel restrictions have led to the darkest moment for the travel industry. According to data from the National Bureau of Statistics, in 2019, there were 6.01 billion domestic tourists and tourism revenue of 5.7 trillion yuan; in 2020, these two figures were 2.88 billion and 2.2 trillion yuan, respectively, a decrease of more than 50%; In 2021, it was 3.25 billion and 2.9 trillion yuan, and in 2022, it was 2.53 billion and 2 trillion yuan, which is 45% of the level in 2019.
The 2022 State Council Government Work Report specifically mentioned that tourism and other industries have a large employment capacity and are seriously affected by the epidemic, and all assistance policies must be tilted. The 2023 State Council Government Work Report once again clearly mentioned that it is necessary to help the development of tourism.
The pick-up comes with policy changes at the end of 2022. According to data from the Ministry of Culture and Tourism, during the Spring Festival holiday in 2023, 310 million domestic tourists traveled nationwide, with tourism revenue of 375.83 billion yuan, which has recovered to 88.6% and 73.1% of the same period in 2019, respectively.
Ctrip, a representative enterprise in the industry, has also ushered in the dawn of a turning point. On March 7, 2023, Ctrip released its financial results for the fourth quarter and full year of 2022. According to the financial report, in the fourth quarter of 2022, Ctrip's revenue was 5 billion yuan, a year-on-year increase of 7%, and its net profit was 2.1 billion yuan; For the whole year, Ctrip's revenue was RMB20 billion, unchanged year-on-year, and its net profit was RMB1.4 billion.
Needless to say, Ctrip was able to turn a profit against the trend in its financial report by the end of 2022. Behind this set of data, it can be seen that it has worked hard around users, products, supply chain and other aspects. Spring has arrived in the industry, and companies such as Ctrip, which rely on internal strength cultivation to survive the extreme cold, may reap more in the long run.
01
Kinetic energy is higher than imagined
From the financial report, Ctrip's revenue is supported by accommodation booking, transportation ticketing, travel and vacation, business travel management, and others.
In the fourth quarter of 2022, the revenue of these five businesses was RMB1.689 billion, RMB2.204 billion, RMB164 million, RMB277 million and RMB697 million, accounting for 34%, 44%, 3.3%, 5.6% and 13.1% respectively; The annual revenue was RMB7.4 billion, RMB8.253 billion, RMB797 million, RMB1.079 billion and RMB2.526 billion, accounting for 37%, 41%, 4%, 5% and 13% respectively.
Ctrip's revenue structure, which focuses on accommodation booking and transportation ticketing, is quite stable, with the best result being the 45% year-on-year increase in transportation ticketing revenue in the fourth quarter of 2022. In the fourth quarter of 2022, Ctrip's outbound air ticket bookings increased by 200% year-on-year, Asia-Pacific air ticket bookings increased by 300% year-on-year, and overall air ticket bookings on global platforms increased by 80% year-on-year.
The inflection point of the epidemic, which arrived at the end of 2022, had a limited impact on the fourth quarter, but Ctrip's focus on its multi-year business layout to prioritize overseas market popularity partially offset the impact of the previous control. Accommodation and tourism businesses related to transportation ticketing also rose. In the first three quarters of 2022, the number of overseas hotel bookings on Ctrip's international platform exceeded the same period in 2019, and the fourth quarter reached a record high, with local hotel bookings in overseas markets increasing by 140% compared with the same period in 2019, and GMV (gross merchandise transactions) of overseas play business increasing by more than 130% year-on-year.
While focusing on overseas business, Ctrip also maintains its long-term advantages in domestic business. In order to adapt to environmental and policy changes, Ctrip's long-distance and short-haul businesses are parallel, each with its own emphasis.
As travel restrictions and differences in provincial policies have led to more users favoring intra-provincial and peripheral tours in the past three years, Ctrip has launched a customer service module for short-distance tours such as local tours and local breaks, providing users with short-distance products from different perspectives such as local day trips and surrounding theme tours.
Ctrip CEO Sun Jie mentioned in the earnings call that since the first quarter of 2023, domestic short-distance travel bookings on Ctrip's platform have doubled compared with the same period in 2019, long-distance travel bookings have also exceeded the same period in 2019, and domestic hotel and air ticket bookings have also exceeded the same period in 2019, and it is expected that domestic business will continue to grow in 2023.
As we all know, since the third quarter of 2022, in response to the requirements of policy adjustments, the "circuit breaker" of inter-provincial tourism has been accurate to counties, and the scope of prevention and control has been more accurate. This has led to a resurgence in domestic long-term travel demand, with Ctrip's domestic long-distance hotel bookings increasing by more than 130% month-on-month. The rapid growth of local hotel bookings and the rapid repair of long-haul hotel bookings enabled Ctrip's overall hotel bookings in the fourth quarter of 2022 to return to the same period in 2019. This means that Ctrip outperformed the market when the number of tourists was far lower than the same period in 2019.
The financial report also reflects Ctrip's results in reducing costs and increasing efficiency. In 2022, Ctrip's general and administrative expenses decreased by 3% year-on-year to RMB2.8 billion. Product R&D expenses were RMB8.3 billion, down 7% year-on-year; Sales and marketing expenses decreased 14% year-on-year to $4.3 billion.
Investment bank Jefferies mentioned in a research report released on March 7 that Ctrip's revenue and earnings for the fourth quarter and full year of 2022 were better than expected, giving Ctrip a target price of US$45 for US stocks and HK$352 for Hong Kong stocks, both with a "buy" rating. Investment bank Morgan Silidan predicted in a recent research report that Ctrip's revenue in the first quarter of 2023 will reach 8 billion yuan, the profit may be 1.5 billion yuan, and the stock price has a 70%-80% chance of outperforming the market in the next 60 days.
02
Resilience has its origins
The steady performance is due to Ctrip's all-round layout.
In response to the pandemic, Ctrip launched the "Rejuvenation V Plan" to boost the tourism economy based on content, including live streaming of upstream suppliers, sharing communities for tourism content, and platform recommendation lists. With the support of the huge OTA volume, the platform's content, marketing, and transactions can serve users in one stop. In 2022, the number of Ctrip's KOLs increased by 47% year-on-year, and user-generated content increased by 33% year-on-year, and the average number of user content views continued to grow.
The "BOSS Live Broadcast" started at the end of March 2020. Liang Jianzhang, co-founder and chairman of the board of directors of Ctrip, broadcasts live once a week, and even brings goods live with cosplay images of various characters. As a result, Ctrip has built different types of live broadcast matrices such as BOSS live broadcast and industry live broadcast, promoting destination culture and specialties while bringing various tourism products, and working with upstream and downstream partners to create consumption scenarios for users. For example, Ctrip has cooperated with Shanxi Xiangning Cultural Tourism Bureau to create a mini program called "Xiangning Chinese Cultural Tourism Festival Online Check-in Map" to help the tourism development of the national intangible cultural heritage folk customs "Zhonghe Festival".
The results of a series of charging movements are remarkable. In January 2023, shortly after the adjustment of China's entry and exit policies, Ctrip and the Tourism Authority of Thailand launched a live broadcast in Bangkok. On that day, the order volume of Thai products exceeded 11,000 orders, and the GMV accumulated 40 million yuan. In March, the popularity of Ctrip-related keywords increased by 169% year-on-year, and the number of air tickets and hotel bookings by mainland tourists to Japan increased by nearly 7 times and 10 times year-on-year. On March 1, Ctrip's "Super Global Tour" overseas BOSS live broadcast in Tokyo, Japan, exceeded 7 million in popularity, and the GMV on the day of the event exceeded 23 million yuan.
Behind the steady growth is Ctrip's insistence on overseas business expansion under the special environment. In particular, it invested in Travelfusion, a British low-cost air ticket website, in 2016, in 2016, in India's OTA platform MakeMyTrip, in the US travel e-commerce platform Tufeng.com ToursForFun.com and in the UK travel search platform Skyscanner, and in 2017 in the US travel search platform Trip.com.
Apptopia data shows that Trip.com ranked ninth in the 2022 global OTA platform app download ranking with 14.1 million, surpassing Tripadvisor.
Whether domestic or overseas, platform development is necessarily based on users. If you can still pay attention to the user experience when the environment is poor, user stickiness will naturally increase. For example, if it is difficult for human service to process orders caused by the epidemic, Ctrip has promoted the automation process of service scenarios, so that users can easily operate in the app. With the support of technology, the processing efficiency of cancellation and change orders in March 2022 has increased by 78.4% compared with the epidemic control in early 2020 and the summer of 2021, and the proportion of self-submitted ticket refunds and changes is close to 95%.
Travel control has reduced users' willingness to spend, but the market has never disappeared, and maintaining praise is to enhance word of mouth and lay the foundation for users to return. In June 2022, Ctrip released service data showing that the overall number of customer positive reviews increased by 6%, and NPS (Net Promoter Score) increased by 10% for three consecutive years. Ctrip also launched its chatbot TripGen in February 2023, which aims to provide users with real-time travel itinerary planning and itinerary suggestions through artificial intelligence technology, which will undoubtedly further enhance the user experience.
03
The potential can be unleashed
Horizontally, the global tourism industry has been deeply affected by the epidemic. Expedia, Tripadvisor and Booking, the world's leading online travel players, all saw revenue decline from 2019 to 2020, falling by 54%-61%; From 2020 to 2022, it will grow significantly, with annual revenue growth of 35%-65%, of which Tripadvisor's revenue in 2022 will be $1.49 billion and net profit will be $20 million.
2023 is a long-awaited turning point for the travel industry. The China Tourism Academy predicts that in 2023, the tourism economy will open and grow steadily, with the number of domestic tourists reaching 4.55 billion and tourism revenue reaching 4 trillion yuan, a year-on-year increase of 95%. The number of inbound and outbound tourists is expected to exceed 90 million, twice as many as in 2022.
More eyes are on Ctrip.
In terms of volume, Ctrip is a well-deserved domestic industry leader. Taking the 2021 data as an example, according to the research agency Fastdata, the top five online travel market shares in China in 2021 are Ctrip (36.3%), Meituan Travel (20.6%), Tongcheng Travel (14.8%), Qunar Travel (13.9%), and Fliggy Travel (7.3%).
According to data from QuestMoible, the average daily usage time of Ctrip during the 2023 Spring Festival holiday increased by 30.6% year-on-year, and the number of DAUs (daily active users) reached 14.22 million, a year-on-year increase of 28.1%. Qunar Travel is similar to Fliggy's DAU, about one-third of Ctrip's.
Behind the effective methodology is Ctrip's long-term strategy of "deep domestic and global thinking", with domestic and cross-border development in parallel. In the first month of the implementation of the "Category B managed" policy, the number of cross-border flights on Ctrip's platform increased by 47% compared with the previous month. During the Spring Festival, Ctrip's platform accounted for nearly 70% of cross-provincial hotel bookings, exceeding the same period in 2019, with mainland travelers booking overseas hotels more than 4 times year-on-year, and cross-border air ticket bookings increasing by more than 4 times year-on-year.
With the resumption of cross-border group travel and the optimization of entry and exit policies, Ctrip's advantages may be further expanded.
In the first two months of 2023, outbound travel bookings on Ctrip's platform increased by more than 300% year-on-year. In mid-to-late February, the number of domestic outbound flights was less than 20% compared with 2019, but Ctrip's air ticket search popularity has reached 80% of the same period in 2019. Liang Jianzhang said on the March 7 earnings call that with China's full liberalization, Ctrip's outbound travel bookings have recovered to more than 40% of pre-pandemic levels.
Based on this, Ctrip launched the "318 Global Travel Bargain Festival", covering popular destinations such as Hong Kong, Macau, Maldives, and Thailand. With years of accumulated OTA resources and product packaging capabilities at home and abroad, the platform provides overseas travel products with discounts and comprehensiveness as the core, including 100-yuan popular hotels, 3% off tickets, air ticket discount cards, etc. Taking the pre-sale of Japanese hotels launched at 0:00 on March 1 as an example, well-known hotel products such as Tokyo Prince Hotel and InterContinental Yokohama were sold out in 15 minutes. These figures have paved the way for the upcoming travel boom.
According to the World Tourism Organization, China was the world's largest tourism market before the pandemic, with 166 million international trips and US$270 billion in total tourism expenditure in 2019. 2022, which is highly related to the twists and turns of the epidemic, is in the past, and a spring of vibrant tourism has arrived. Ctrip, which has gone through several harsh winters in its more than 23 years of entrepreneurial history, may be able to open up a broader sky in the domestic and international markets than before.