Written by: Planets
Source: Bedo Finance
2023 is a year of recovery and recovery of the tourism industry, and many cities are "fireworks". Benefiting from the vigorous vitality of the industry, Tongcheng Travel (HK:00780), a one-stop travel online service provider, has also achieved good results in the past year.
According to Tongcheng Travel's fourth-quarter and full-year 2023 results report, the company's various businesses went hand in hand, driving strong revenue and profit growth. However, it should be pointed out that Tongcheng Travel, which is deeply involved in the sinking market, has a serious "dependence" on a single traffic entrance, and its independent customer acquisition capacity is not impressive.
Not long before the release of the financial report, the same city financial APP under the "Tongcheng Department" was exposed by the "3.15 party" to issue usury and collect "head cut interest" in disguise. In addition, negative voices about the management of Tongcheng Travel Service have always existed, and were even publicly bombarded by industry insiders at one point.
This can't help but make people wonder, behind the commendable answer sheet of Tongcheng Travel, how much is it obtained by sacrificing quality and reputation?
1. Profits have increased, and income has exceeded 10 billion yuan
According to public information, Tongcheng Travel was listed on the Hong Kong Stock Exchange in 2018 and has disclosed financial statements for 6 full fiscal years so far. From 2018 to 2022, the company's revenue was 5.256 billion yuan, 7.393 billion yuan, 5.933 billion yuan, 7.538 billion yuan and 6.585 billion yuan respectively, and the performance was not stable.
In 2023, Tongcheng Travel will achieve an operating income of 11.896 billion yuan, which not only exceeded the 10 billion mark in one fell swoop, but also increased by 80.7% year-on-year compared with 2022. Among them, the revenue in the fourth quarter was 3.145 billion yuan, an increase of 109.6% over the same period in 2022.
In terms of operational indicators, Tongcheng Travel will have an average monthly paying user of 41.3 million in 2023, a year-on-year increase of 39.1%, and the annual paying user scale will also increase by 25.2% year-on-year to 235 million. The company's full-year trading volume was 241.5 billion yuan, an increase of 96.8% from 122.7 billion yuan in the same period in 2022 and a record high.
As of the end of 2023, Tongcheng Travel's online platform provides ticket services for more than 420,000 routes, nearly 2.5 million hotels and non-standard accommodation options, about 430,000 bus routes, more than 840 ferry routes, and more than 10,000 domestic tourist attractions operated by more than 780 airlines and agents.
In 2023, Tongcheng Travel Accommodation Reservation Service achieved revenue of RMB3.899 billion, a year-on-year increase of 61.5%, transportation ticketing service revenue of RMB6.030 billion, a year-on-year increase of 78.5%, and other business revenues including tourism services, advertising, business travel, etc., of RMB1.967 billion, doubling from RMB791 million in 2022.
At the same time, Tongcheng Travel's profitability also continued to improve, with a net profit of RMB1.566 billion in 2023 and a loss of RMB164 million in 2022, an adjusted net profit of RMB2.199 billion, a year-on-year increase of 240.3%, and an adjusted EBITDA of RMB3.124 billion from RMB1.437 billion in 2022.
Tongcheng Travel said in its earnings report that China's tourism industry has achieved extraordinary recovery momentum in 2023, driven by diversified travel demand. Based on the growth in demand for various types of travel during the peak Chinese New Year travel period, the company expects this trend to continue in 2024.
In addition, Tongcheng Travel believes that the strong expansion of the domestic tourism market will be driven by the high enthusiasm for travel. At the same time, with the support of the gradual recovery of international flight capacity and the relaxation of visa policies in various countries, the outbound travel business is expected to make significant progress in 2024.
2. Repeated complaints, highly dependent on traffic "blood transfusion"
The growth of performance is inseparable from the strong support of Tencent.
In October 2023, Tongcheng Travel signed a framework agreement with Tencent on the sale of tourism resources. According to the agreement, Tongcheng Travel will pay a commission to Tencent Group to use Tencent's platform to sell its tourism resources, and the agreement will be for a period of three years. Previously, Tongcheng Travel had signed the relevant agreement as early as 2018 and renewed it in 2020.
According to the announcement, the commissions paid by Tongcheng Travel to Tencent in 2021 and 2022 were 3.105 million yuan and 1.94 million yuan respectively, and the commission expenses in the first nine months of 2023 were 5.224 million yuan, and the renewal cost increased significantly. According to the financial report, about 80% of the average monthly active users of Tongcheng Travel come from Mini Programs.
As of now, Tencent indirectly holds about 21.12% of Tongcheng Travel and is one of its shareholders, but the commission fees generated by maintaining non-self-operated channels will undoubtedly eat into the company's profits to a certain extent. In addition, the over-reliance on a single traffic caliber also makes the service autonomy of Tongcheng Travel more passive, and the ability to acquire customers independently is greatly reduced.
In recent years, Tongcheng's selling expenses have continued to rise, from RMB2.131 billion in 2020 to RMB2.801 billion in 2022, with a sales expense ratio of 35.9% to 41.8%, and in 2023, the selling expenses have soared to RMB4.473 billion, with a selling expense ratio of 37.3%.
In contrast, Trip.com Group (09961. HK、TCOM. US) sales expense ratios from 2020 to 2023 are approximately 24.1%, 24.6%, 21.2% and 20.7%, respectively. Under the premise that the scale of revenue and profit is far less than that of the industry's leading players, the sales expense ratio of Tongcheng Travel is significantly higher than that of its peers, and the overall trend is rising.
In contrast to the increase in the cost of sales, Tongcheng Travel has a high service complaint rate. On the Black Cat complaint platform, the cumulative number of complaints related to Tongcheng Travel exceeded 30,000, mainly focusing on problems such as difficulty in refunding and refunding, unauthorized contract changes, arbitrary deductions, and poor customer service handling attitudes.
It's worth noting that it's not just ordinary consumers who have complained about Tongcheng's travel services. Previously, Zhou Hongyi, chairman of 360 Group, posted on Moments during the 2023 National Day holiday, pointing out that Tongcheng Business Travel, an enterprise-level business travel service brand under Tongcheng Travel, was "the worst and worst service".
According to Zhou Hongyi's description, he chose to change his ticket due to the postponement of his previous flight, but "due to the complicated bureaucratic process of business travel in the same city, the ticket change was not changed for half an hour", and in the end, the ticket change was not successful. He also shouted, "Don't use Tongcheng Business Travel's ticketing service again."
In response, Tongcheng Business Passenger Service responded that there was no "bureaucratic process" in the incident, and the commissioner handled it normally according to the process, but due to the lack of seats, Zhou Hongyi's ticket change failed to be refunded. The company said it would seriously reflect on its service process and user experience, and strive to improve service quality and efficiency.
3. "Travel + lending", financial business violations are not the first offense
Tongcheng Travel has always been unabashed its ambition and determination to expand its financial business.
As early as November 2015, Tongcheng Travel launched its financial service company focusing on the tourism industry, Tongcheng Financial Services, officially set foot in the field of Internet finance, and said that it plans to invest 1.5 billion yuan, focusing on optimizing the upstream and downstream industry chain of Tongcheng Tourism and the construction of Tongcheng's financial ecosystem.
Based on this, Tongcheng Travel has set up Xinyi Insurance Brokers (Beijing) Co., Ltd., Suzhou Firefly Microfinance Co., Ltd. (hereinafter referred to as "Firefly Microloan"), Tianyuan Local (Beijing) Insurance Agency Co., Ltd., etc., to operate finance-related businesses.
Among them, Xinyi Insurance Brokers (Beijing) Co., Ltd. has been deregistered in 2020. In the same year, Tianyuan Local (Beijing) Insurance Agency Co., Ltd. changed its name to "Tongcheng Insurance Agency Co., Ltd." At present, the insurance section of the Tongcheng Travel App is undertaken by the insurance agency.
However, Tongcheng-Elong (renamed Tongcheng Travel in December 2021), which was listed earlier, did not include financial business in its table. In 2022, Tongcheng Travel spent 450 million yuan to buy a 13.85% stake in Guangzhou Lujin Technology Group Co., Ltd. (hereinafter referred to as "Lujin Technology"), increasing the layout of its financial business.
It is understood that Guangzhou Firefly Microfinance Co., Ltd. (hereinafter referred to as "Firefly Microloan"), a wholly-owned subsidiary of Lujin Technology, is the channel for the company's loan business and the provider of various financial products such as "Tongyi Rong" and "Money Transfer".
According to the Tianyancha App, Firefly Microfinance was established in April 2016, and Tongcheng Network Technology Co., Ltd. was a wholly-owned shareholder of the company. In June 2018, Lujin Technology became a wholly-owned shareholder of Firefly Microfinance. At present, the registered capital of Firefly Microfinance is 600 million yuan.
According to the Interim Measures for the Administration of Online Microfinance Business (Draft for Comments) issued at the end of 2020, the registered capital of a microfinance company operating online microfinance business across provincial-level administrative regions shall not be less than RMB 5 billion, and it shall be a one-time paid-in monetary capital. This also means that the Firefly Micro Loan has not met the requirements for the time being.
Returning to Lujin Technology, Tongcheng Travel announced in February 2024 that it plans to acquire 55.14% of the shares held by Suzhou Tongcheng Travel Technology Co., Ltd., a shareholder of Lujin Technology, for no more than 1.15 billion yuan. Upon completion of the acquisition, Tongcheng Travel will hold a 68.99% stake in Lujin Technology.
However, a month after Tongcheng Travel's announcement, its financial services appeared on the "black list" of CCTV's "3.15" party. Gift card routines such as "forcible tie-ins", "layers of deductions" and "illegal lending" have exposed the illegal acts of Tongcheng Travel.
Beduo Finance learned that some users reported earlier that after Tongcheng Travel's use of "Money Tour" or "Chengcheng Baitiao" was rejected, credit enhancement could be achieved by purchasing Tongcheng Tourism-related products, and the way was to purchase "Fun China Rights and Interests Card" and "Scenic Spot Audio Explanation Card".
When asking the customer service "why does it prompt low credit when borrowing", the online customer service said, "You can preempt the loan limit by purchasing the dark horse customer equity card product and improve the success rate of the loan". At the same time, the customer service said that "the account will be detected every time you borrow, and if the page prompts that you need to buy a dark horse customer rights card for review, you still need to buy it."
According to CCTV's 3.15 report, users can use the method of first enjoy and pay later to purchase gift cards in the Tongcheng installment mall, and then realize them through the recycling channel of the platform itself. However, after consumer testing, the gift package worth more than 40,000 yuan was actually only 28,000 yuan, which was suspected of being a disguised "routine loan" and charging "cut interest".
As soon as the matter was exposed, Tongcheng responded that the company attached great importance to relevant matters and set up a special team at the first time to comprehensively investigate related problems. In addition, it will immediately take the relevant products off the production line, and at the same time conduct compliance checks on all products, and fully cooperate with the rectification requirements of the relevant departments.
Beduo Finance found that the "gift packages" in the Tongcheng installment mall were all taken off the shelves, and relevant mini programs, official accounts and other channels were also disabled. The company issued an article explaining that related problems are in the process of rectification and upgrading, or there are situations where some users' online functions cannot be used, and they can be contacted through customer service.
After the "March 15" incident, it is unclear whether Tongcheng Travel will continue to acquire and expand its financial territory. However, it is certain that as a "cross-border player" with the double helix gene of "online tourism + financial lending", Tongcheng Travel needs more refined operations to improve its internal control.
Up to now, Tongcheng Travel's acquisition of the relevant equity of Lujin Technology has not been completed.