Edit | Yuer Lake
Produced | Tide Rising Network "Yu See Column"
With the rise in travel popularity after the epidemic, OTA platforms have also ushered in a rebound in performance. This travel trend also opens up new opportunities for OTA platforms. However, whether this is an opportunity or a challenge depends on the strength of the major online travel players.
As one of the leading enterprises in the industry, the coexistence of Tongcheng travel crisis is a typical example. Tongcheng Travel relies on the experience accumulated in the sinking market in the past few years and constantly tries to break the circle of services. According to Ma Heping, CEO of Tongcheng Travel, "We will continue to further expand our core business, maintain industry-leading growth rates, and patiently build a second growth engine to lay the foundation for long-term sustainable growth."
However, in addition to continuing to cultivate the sinking market, how will Tongcheng Travel grasp the development opportunities in the international market, re-expand its international business, choose the corresponding investment opportunities, and maintain its leading position in the business? I'm afraid the answer is not that simple.
Highly dependent on external ecology, profit growth or "lack of stamina"
On May 24, Tongcheng Travel released its Q1 financial report for the year ended March 31. Data show that in Q1 2023, Tongcheng Travel recorded a total revenue of 2.59 billion yuan, a year-on-year increase of 51%, during the reporting period, Tongcheng Travel's net profit was 380 million yuan, an increase of 291% compared with 97 million yuan in the same period last year, and the adjusted net profit was 500 million yuan, compared with 240 million yuan in the same period last year, a year-on-year increase of 106%.
This is in stark contrast to the sluggish situation of the past year. According to the previously released annual report, in 2022, Tongcheng Travel's total revenue will be 6.58 billion yuan, a year-on-year decrease of 13%, and adjusted net profit will be 650 million yuan, a year-on-year decrease of 51%. Among them, in Q4 2022, Tongcheng's total travel revenue was 1.85 billion yuan, a year-on-year decrease of nearly 20%, while the adjusted quarterly profit was 37.46 million yuan, a year-on-year decrease of 85%.
In this regard, Tongcheng said that in Q1 2023, after the lifting of various epidemic prevention and control measures, China's tourism market has seen a significant recovery, and the tourism market is showing a development trend of "new national tourism" characterized by new circles, new services and new scenarios, and different from the traditional elite "new tourism", the popular "national new tourism" has a larger user scale, higher travel frequency and more diversified travel demand.
This travel trend also brings new development opportunities for OTA platforms, and Tongcheng Travel continues to try to break the circle by relying on the experience accumulated in the sinking market in the past few years. In Q1 2023, Tongcheng Travel had an average of 290 million monthly active users, a year-on-year increase of 17%, and an average monthly paying user of 41.4 million, a year-on-year increase of 31%, of which about 15% of monthly paying users came from offline hotels, automobiles and other customer acquisition channels.
However, it is worth noting that Tongcheng Travel's traffic acquisition is still highly dependent on the Tencent ecosystem. According to the financial report, in Q1 2023, about 80% of Tongcheng Travel's monthly active users came from WeChat Mini Programs, of which about 68.7% of the new paying users came from non-first-tier cities, and in order to further attract young users, Tongcheng Travel also reached cooperation with Tencent Games, Tencent Video, Tencent Docs, etc.
The potential risks brought by the high dependence on external platform ecology are self-evident.
First of all, Tongcheng Travel plays the role of an intermediary on the platform, unable to fully grasp the supply chain of travel products, and is vulnerable to factors such as supplier policy adjustments and price fluctuations. If Tongcheng Travel is unable to respond to these changes in a timely manner, it may lead to a decline in profits.
Secondly, the user stickiness of Tongcheng Travel is relatively low. Although Tongcheng Travel offers a convenient booking service, users do not have much loyalty when choosing a travel platform and are easily attracted to other competitors. If Tongcheng Travel is unable to provide differentiated services or experiences on a sustainable basis, users may switch to other platforms, resulting in a decline in Tongcheng Trip's transaction volume and profits.
Third, the competition of external platforms is also a challenge for Tongcheng Travel. Tongcheng Travel competes with other online travel platforms such as Ctrip and Qunar, which have their own supply chain systems and user resources, and can compete for market share through more investment and innovation. If Tongcheng Travel is unable to remain competitive with the competition, it may lose market share and affect the growth of profits.
Therefore, although Tongcheng Travel is one of the leading online travel service platforms in China, it has rapidly risen to become a significant player in the travel industry with its convenient booking process, extensive product coverage and good user experience.
However, in the process of rapid development, Tongcheng Travel also faces the problem of excessive dependence on external platform ecology, which may bring the challenge of "insufficient stamina" to its profit growth.
The product ecology is insufficient, how to "break the circle"?
Previously, Tongcheng announced that it would spend 1 billion yuan to acquire five companies including Tongcheng International Travel Service, in an effort to improve the product ecology. As of the end of March 2023, Tongcheng's platform has covered more than 400,000 routes operated by about 770 airlines and agents, more than 2.5 million hotels and non-standard accommodation products, about 420,000 bus lines, more than 810 ferry routes and tens of thousands of tourist attraction ticketing outlets.
On December 29, 2022, Tongcheng Travel announced on the Hong Kong Stock Exchange that it would acquire Tongcheng International Travel Service and complete the in-depth integration of its tourism and vacation business. It is understood that the consideration for the acquisition of Tongcheng International Travel Service is as high as 200 million yuan. In addition, Tongcheng Travel also announced that it has concentrated its investment in four companies, Guangzhou Golden Travel, Hunan Airlines, Tongcheng Guoqing International Travel Service and Tongcheng Chuangyou International Travel Service, with a cumulative investment of 1 billion yuan.
It is understood that Tongcheng International Travel Service was established in 2010, covering domestic travel, outbound travel, cruise tour, theme tour, customized tour, visa, using centralized procurement and dynamic packaging mode, online and offline and inter-industry channels for sales. Tongcheng said that after the completion of this integration, it will further strengthen the company's product line in the leisure tourism and vacation segment and improve the service capabilities of the "one-stop travel platform".
As we all know, with the rapid "restart" of the tourism market after the epidemic, the tourism and vacation market is expected to enter a new outbreak cycle. However, some travel agencies and upstream and downstream partners are still facing problems such as resource shortage, and urgently need traffic, technology, data, capital and other support to seize new opportunities for industrial rejuvenation.
At this time, Tongcheng Travel is trying to make efforts in the lack of product ecology by acquiring upstream and downstream enterprises, is it chasing after the momentum, or is it "grasping the beard and eyebrows"? At present, the situation is unclear.
Strong growth in business segments or benefiting from "blind expansion"
Benefiting from the expansion of circles, services and scenarios, in Q1 2023, Tongcheng's three major business segments, including accommodation, transportation, and business travel, all ushered in strong growth, of which the revenue of accommodation business was 830 million yuan, an increase of 70.5% over the same period in 2019. Revenue from transportation business was RMB1.38 billion, an increase of 9.8% over the same period in 2019; Other revenue, including business travel, was RMB370 million, an increase of 945.9% over the same period in 2019.
It is understood that Tongcheng Travel has covered traditional business travel and leisure tourism groups by expanding its user groups, and actively developed some specific circles, such as young people, family travel, couple travel, etc. Through precise market positioning and personalized service strategies, it meets the needs of travelers in different circles, provides diversified product and service choices, and achieves strong business growth.
In terms of scenario extension and integration, Tongcheng Travel provides users with one-stop travel solutions by integrating various travel scenarios, such as air tickets + hotels, train tickets + tourist attraction tickets. In addition, Tongcheng Travel has also cooperated with other industries to combine travel with shopping, food, entertainment and other scenarios, expanding users' travel experience and consumption scenarios, and further promoting business growth.
The strong growth of Tongcheng Travel's accommodation, transportation and business travel businesses may reflect its competitive advantages and increased market demand in these areas. However, if it expands blindly, the potential risks are also enormous.
For example, as a business grows, so does the complexity of management and operations. Tongcheng Travel needed to ensure that it could effectively manage all business segments during the expansion process, including supply chain management, service quality control, customer relationship management, etc. Otherwise, expansion can lead to a decrease in operational efficiency and a decrease in service quality.
Moreover, expansion may lead to the diversification of resources and the sharing of risks. Tongcheng Travel needs to balance the allocation of resources between various business segments to ensure that each segment is properly supported and developed. As Tongcheng Travel expands into different business areas, it will face more competitors and market challenges. This requires them to constantly and carefully evaluate their competitive advantages and develop a clear strategic positioning to differentiate themselves and remain competitive in the market.
In addition, business expansion may pose a challenge to the quality of Tongcheng Travel's services. Maintaining a high level of service quality can become more difficult to handle large-scale business and large user bases, with potential risks such as increased customer complaints and improved service response times.
If Tongcheng Travel's customer service system and handling mechanism cannot respond to user problems and complaints in a timely and effective manner, users may feel frustrated and dissatisfied. Long waits and lack of solutions may affect how users rate the Tongcheng travel experience.
epilogue
As a leading online travel platform in China, Tongcheng Travel has a significant share of the market. However, with the changes of the times and the continuous evolution of user needs, a single tourism product and service can no longer meet the changing needs of users, and with it, it is difficult to find greater growth space and form core competitiveness in the white-hot market competition.
The rapid growth of OTAs has brought a new boom to online travel platforms. However, the truth that "this is manna, the other is arsenic" is simple and profound.
So whether this is an opportunity or a challenge for Tongcheng Travel, whether the unpredictable market is an opportunity, we will wait and see.