Performance exceeded expectations to recover Why did Tongcheng Travel eat the dividend of "National New Tourism"

On May 24, Tongcheng Travel (00780. HK) released its 2023 first quarterly report (see the online economic and social feature: Tongcheng Travel's revenue in the first quarter of 2023 was 2.59 billion yuan, a year-on-year increase of 50.5%, http://www.100ec.cn/zt/tclxsgtcly/). As the first quarter under the lifting of the epidemic, how did Tongcheng Travel perform?

Produced 丨Digital Life Service Department

Author丨XIX

Review丨No traces

I. Core Summary of Financial Reports

1. For the three months ended March 31, 2023, revenue increased by 50.5% year-on-year to $2,586 million in the first quarter of 2023 from $1,718 million in the first quarter of 2022.
2. Adjusted EBITDA for the period increased by 67.0% year-on-year to $732.2 million in the first quarter of 2023 from $438.4 million in the first quarter of 2022. The adjusted EBITDA margin increased from 25.5% in the first quarter of 2022 to 28.3% in the first quarter of 2023.
3. Adjusted profit for the period increased by 105.6% year-on-year to $503.6 million in the first quarter of 2023 from $245 million in the first quarter of 2022. The adjusted net profit margin increased from 14.3% in Q1 2022 to 19.5% in Q1 2023.
4. Average monthly active users increased by 16.9% year-on-year from 240 million in Q1 2022 to 290 million in Q1 2023.
5. The average monthly paying users increased by 30.6% year-on-year from 31.7 million in the first quarter of 2022 to 41.4 million in the first quarter of 2023.

Second, Tongcheng pressed the recovery "accelerator button" and the multi-line business grew rapidly

According to survey data released by the Ministry of Culture and Tourism, in the first quarter of 2023, the total number of domestic tourism trips was 1.216 billion, an increase of 386 million over the same period of the previous year, an increase of 46.5% year-on-year, and recovered to 68.4% of the same period in 2019. Domestic tourism revenue (total tourism expenditure) was 1.30 trillion yuan, an increase of 0.53 trillion yuan over the previous year, an increase of 69.5%. According to data released by the National Bureau of Statistics, residents' travel demand continued to recover in the first quarter, with air tickets, travel, transportation rental fees and hotel accommodation prices rising by 30.6%, 6.5%, 4.2% and 3.5% respectively.

Benefiting from the recovery of the industry, in the first quarter of 2023, Tongcheng Travel achieved revenue of 2.59 billion yuan, a year-on-year increase of 50.5%, and the highest since listing.

In terms of segmentation, the revenue of accommodation business was 830 million yuan, an increase of 53.6% year-on-year, an increase of 70.5% over the same period in 2019, and the number of domestic hotel room nights increased by more than 130% compared with the same period in 2019. Transportation revenue was RMB1.38 billion, up 35.9% year-on-year, 9.8% year-on-year, and air ticket volume up more than 35% over the same period in 2019.

Chen Liteng, a digital life analyst at the e-commerce research center of NetEconomics, said that the recovery of tourism enterprises generally has a certain period of time before it can move towards a normal development track. However, from the financial performance of Tongcheng Travel, it directly skipped the repair period, and its performance ushered in a high-speed recovery and overtaking.

In terms of profit, Tongcheng Travel Adjusted EBITDA (earnings before interest, taxes, interest, depreciation and amortization) increased by 67% year-on-year to RMB730 million during the reporting period. Adjusted net profit was 500 million yuan, a year-on-year increase of 105.6%, also the highest since listing. The adjusted net profit margin increased to 19.5% from 14.3% in the same period in 2022.

Chen Liteng believes that the reason why Tongcheng Travel has achieved rapid recovery is due to the surge in user demand after the lifting of the epidemic; On the other hand, through the past three years of tempering and accumulation, through horizontal expansion of product and service technical capabilities, improve consumer travel experience, vertically cultivate the upstream and downstream of the travel industry chain, help the digital upgrade of the industry, and carry out digital empowerment in multiple sectors such as accommodation, transportation, and tourism destinations.

In the field of accommodation, the eLong Hotel Technology Platform, established by Tongcheng Travel in 2021, integrates resources such as hotel management, information technology, procurement and trade, and can solve various technical and service problems of hotels from preparation, opening to daily operation in one stop. As of April 2023, eLong Hotel Technology Platform has opened more than 900 hotels and signed more than 1,500 hotels. At the same time, relying on its four major hotel PMS brands, Luzhi Cloud, Suzhe, Golden Swan and Cloud Shopkeeper, TravelSmart Technology continues to empower the accommodation industry through technological innovation, helping hotel groups, independent hotels and homestay owners improve quality and efficiency, and realize digital operation and management.

In the field of travel, Tongcheng Travel has carried out strategic cooperation with Yichang Three Gorges Airport, Guizhou Airport, Hunan Airport Group, Urumqi Airport, Daxing Airport, etc., to promote the digitalization of airports. Tongcheng Travel and Hunan Huaiyun Group jointly promote the digital transformation of "smart stations", continuously optimize station service levels, improve passenger turnover efficiency, and reduce personnel investment costs through technological upgrades. In addition, with the rich experience accumulated in the Tencent ecosystem, Tongcheng Travel helps scenic spots connect content and services on WeChat and help the development of cultural tourism in destinations.

By creating a complete infrastructure that can carry the needs of users, covering accommodation, transportation, tourism destinations, etc., improve the service capabilities of all aspects of the tourism industry, and feed back the revenue structure of Tongcheng Travel.

According to the data, in the first quarter of 2023, Tongcheng Travel's other business revenue was 370 million yuan, a year-on-year increase of 134.1%, and an increase of 945.9% over the same period in 2019. The share of revenue from other businesses increased from 2% in the same period of 2019 to 14.2% in 2023.

Third, the mass tourism market broke out and users reached a new high

According to data released by the Ministry of Culture and Tourism, in the first quarter of 2023, the total number of domestic tourists in China reached 1.216 billion, an increase of 46.5% year-on-year. Domestic tourism revenue was 1.3 trillion yuan, a year-on-year increase of 69.5%.

Chen Liteng believes that since 2023, the mass tourism market has exploded, and the domestic tourism market has recovered rapidly. Compared with cross-border travel and long-distance travel, which have a long decision-making cycle and high travel costs, peripheral travel and local travel are the first to recover, which also brings recovery opportunities to Tongcheng travel, which pays more attention to non-first-tier markets.

Chen Liteng believes that in the past, the main growth point of the online travel market was in first- and second-tier cities, and the future will be the era of the rise of mass tourism. The huge consumer groups in non-first-tier cities have become a "gold mine" for the growth of online travel platforms with increasingly strong consumption potential, which has more first-mover advantages for Tongcheng Travel that has been deployed in non-first-tier markets early.

According to the financial report, in the first quarter of 2023, Tongcheng Travel had an average of 290 million monthly active users, a year-on-year increase of 16.9% and an increase of 43.6% over the same period in 2019. Among them, about 68.7% of the new paying users on Tongcheng's WeChat platform are from non-first-tier cities in China. As of March 31, 2023, Tongcheng Travel accounted for approximately 86.6% of the total registered users residing in non-first-tier cities in China.

In addition, the mass travel market occupied by Tongcheng Travel has also shown stronger user stickiness. In the first quarter of 2023, Tongcheng Travel reached an average of 41.4 million monthly paying users, an increase of 30.6% year-on-year and an increase of 79.2% over the same period in 2019. Among them, the "Black Whale Member", which has the strongest user stickiness, has achieved a significant increase in user scale.

In addition to the growth of users in non-first-tier cities, the "Z generation" young people represented by the "post-95s" and "post-00s" have gradually become the leaders and vanes of new national tourism. For different user circles, Tongcheng Travel conducts in-depth interaction with users by holding activities such as "Tongcheng Cup" e-sports events, "Feiermeng Dream Festival" market, and "Tongcheng Live" music festival. In April 2023, Tongcheng Travel held the "Fei'er Meng Meng Dream" market in Guilin, Guangxi Province, which gathered elements such as outdoor sports, intangible cultural heritage experience, coffee craft brewing, and creative handicrafts, attracting hundreds of millions of people.

Fourth, the "new national tourism" is coming, and the precise card slot of Tongcheng travel takes the lead

According to the data center of the Ministry of Culture and Tourism, during the "May Day" holiday in 2023, the total number of domestic tourism trips nationwide will be 274 million, a year-on-year increase of 70.83%, and it will recover to 119.09% of the same period in 2019 on a comparable basis; The domestic tourism revenue reached 148.056 billion yuan, a year-on-year increase of 128.90%, and recovered to 100.66% of the same period in 2019 on a comparable basis.

Chen Liteng said that the vigorous recovery of the tourism market demonstrates the strong resilience of the tourism industry. At the same time, users' consumption concepts and habits have quietly changed, market demand has become more diversified, and new trends and opportunities have been formed.

From the "Zibo BBQ" hit and "Luoyang Hanfu" popular in early 2023, to the "panda fever" in Chengdu... There are various indications that the mainland mass tourism market is ushering in a large-scale increase, and the era of popular "new national tourism" is coming. This model has a larger user scale, higher travel frequency and more diversified travel needs. This makes the development of tourism not only in a period of important strategic opportunities, but also facing new requirements for high-quality development. This is also a new opportunity and challenge for online travel platforms.

Tongcheng Travel accurately grasped the development trend of the industry and made a layout in advance. In the past three years, Tongcheng Travel has continuously enriched its tourism products and services, not only consolidating traditional travel fields such as air tickets, train tickets, and hotels, but also establishing a product system covering the full service chain of leisure vacations, scenic spot tickets, bus tickets, cars, visas and so on. The service scene penetrates from the "aorta" of travel to the "capillaries" such as weekend leisure, life services, and daily commuting.

In addition, at the end of 2022, Tongcheng Travel announced the acquisition of all the shares of Tongcheng International Travel Service and completed the in-depth integration of its tourism and vacation business. In 2023, Tongcheng Travel will continue to build a complete leisure tourism and vacation segment.

The "new national tourism" characterized by new circles, new services and new scenes is developing rapidly. Tongcheng Travel accurately card slots, layout in advance, and become the beneficiary of the first wave of dividends of "National New Tourism".