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Meituan CEO: Demand for travel was stronger in Q2 versus Q1

09/03/2021| 10:06:57 AM|

Q2 started by facilitating recovery in the travel sector in China before travel restrictions came back to disrupt the same. Nevertheless a company of Meituan’s stature proved that they can sustain their growth trajectory in their hotel business.

ChinaTravelNews, Ritesh Gupta – China’s leading e-commerce platform for services Meituan’s CEO Xing Wang has stated that travellers showed a strong intent in Q2 with respect to Q1. This was aptly exemplified by hotel room night bookings during the Labor Day holiday.  

Meituan’s domestic room nights crossed the 140 million-mark during Q2. 

Speaking about the company’s hotel business during the Q2 earnings call, Wang said, “…for hotel bookings, the intention and demand for travelling was stronger in Q2 versus Q1.”  

Wang added, “This resulted in a quarterly domestic room nights of more than RMB 140 million on our platform, with the daily peak for the Labor Day holiday, reaching more than RMB4 million.” 

He added that overall the focus has been on enabling a gross domestic consumption.

Meituan posted a stellar growth in its in-store, hotel and travel segment in Q2. The segment’s quarterly revenue growing by 89.3% year-over-year, to RMB8.6 billion. Operating profit increased 93.7% to RMB3.7 billion in Q2 from RMB1.9 billion in the same period of 2020, and with operating margin increasing to 42.6% from 41.6%. 

Domestic market and inter-city travel 

Meituan had ended Q1 of this year with over 100 million room nights in its hotel booking business.

Even as the room nights bookings grew in Q2, Shaohui Chen, Meituan’s Senior Vice President and CFO, acknowledged that the industry is yet to fully recover. 

In Q2, Chinese economy was still under the challenge of the pandemic and the travel industry, too, couldn’t perform owing to the same. Still, as Chen shared, the company’s domestic room night increased by 81% year-over-year in this quarter. Also, it resulted in a two-year CAGR of 22% from the same period of 2019. 

“This was largely due to our structural advantages and the strategic focus in the domestic market and inter-city travel scenario, as well as our strong performance during the Labor Day holiday season,” said Chen. 

Wang also highlighted Meituan’s improved offering in the high-star hotel categories. 

“We also continued to strengthen our ability to provide our high-star hotel segment, with the better services and supplying. For low-star hotels, we have solidified our leading position and continued to penetrate further into lower tier markets through the accelerated digitization process and offline traffic conversion” said Wang, who added that as a nation’s leading e-commerce platform for services, Meituan has actively worked on shouldering more social responsibility. “…our hotel booking division acted quickly and arranged relevant hotels to provide emergency shelter for the public as well,” he explained. Overall, with expanding offerings in the hotel sector, he believes the team is going to strengthen its market share. “…we believe that this segment has the potential to maintain a revenue growth of over 25% over the next five years with healthy margins,” he said. 

Digitization 

Wang explained that the company’s business segments, led by food delivery, posted healthy growth in revenue generation as the team continues to digitize the offline and service economies. 

And this is also expected to help Meituan expand its reach, especially in lower-tier cities. “(We believe) in these lower tier markets, the need of both consumers and merchants have yet to be optimally match and there is still ample room for both the industry digitization,” said Wang. 

As for the efficacy of the platform, it is witnessing more buying from the same set of users. 

“Consumers are also transacting more frequently on our platform, with quarterly purchase frequency up 25% year-over-year,” shared Wang. The delivery services also expanded from food to medicine, supermarkets, convenience stores etc. All of this paves way for transactions from relatively-low frequency product categories, including room nights. As indicated by Wang earlier this year, the lower tier cities “still have tremendous room to grow” the hotel business and “these cities will continue to leverage platform capabilities as well as brand awareness among consumers for traffic conversion”. 

In Q2, the total food delivery orders grew by close to 60% year-over-year with a two-year CAGR of more than 30% as measured from the second quarter of 2019, shared the company. Overall, Meituan is already witnessing a rise in operating profit from two key - food delivery, and in-store, hotel and travel.  

Even as Meituan is investing heavily in its “New Initiatives” (operating loss for this segment expanded to RMB9.2 billion in Q2 from negative RMB8 billion in the last quarter), it is looking at operating efficiency and having a bigger say in consumers’ lives in the long-run via its community e-commerce business and categories such as flowers, medicines, groceries etc. 

TAGS: Meituan | food delivery | inter-city travel
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