ChinaTravelNews, Ritesh Gupta – Trip.com Group is hopeful that the blend of robust demand for travel along with improved safety perception augurs well for the future. The online travel company asserted that after rather an exacting first quarter (Q1), the domestic market in China is already witnessing signs of recovery.
Underlining this positive outlook during the company’s Q1 earnings call, James Liang, Trip.com Group’s Executive Chairman said, “Global travel continues to recover at a strong pace as governments continue to open up. We anticipate seeing a similar pattern in China once the restrictions are eased.”
Reflecting on the financial performance of the January-March period, the senior management highlighted that the total net revenue remained largely stable year-over-year, which was a net result of a relatively well-performed first two months and a weaker March owing to the Covid-19 resurgence that derailed the progress of the sector. The group posted net revenue of RMB 4.1 billion (USD 649 million), which was flat compared to the same period last year.
Trends in hotel bookings in China
In China, hotel bookings for the group were around last year’s level. “…in Q1, our interprovincial hotel booking grew about 20% compared with the pre- Covid 2019 level with the local hotel bookings actually increased by over 60% compared with the 2019 levels,” shared Jane Sun, CEO of the group.
Jane also mentioned that the hotel business recovery was much faster in areas less impacted by the pandemic. “For instance, hotel bookings in Southern China and Western China have already surpassed 2019 levels in the recent months.” Referring to these two regions, Jane said, “…wherever we see a relaxation in the unnecessary lockdown, we see a boom in the industry.
“In the past two weeks, our total hotel bookings have also surpassed 2019 level following the easing of Covid situation,” said Jane, who added that in the transportation ticketing business, air reservation grew faster than the market rate.
Jane stated that users of Trip.com app in China were accustomed to booking long-haul travel, but with the team’s product and marketing strategy for trends like drive tourism or curtailed travel radius itineraries, this is bringing in incremental business. “… (with the strengthening of products for short-haul travel or drive tourism, now customers) can easily find value for many products for their local travel booking,” she said. The travel industry acknowledges the fact that drive tourism (a journey or a trip featuring a destination that tends to be a two-three hour drive), has picked up a trend in China's Mainland over the last couple of years.
Waiting for borders to open up
The industry is eagerly waiting for the borders to open up so that both Chinese and international travelers can freely engage in outbound and inbound tourism respectively. Regarding the same, Jane said, “Though being very optimistic about the pent-up demand for the outbound travel, especially where we (have) noticed recent quick recovery of the domestic travel during the summertime, we do not expect to see drastic changes in the inbound and outbound travel policies in the near future but we strongly believe that the pent-up demand is there.”
Cindy Wang, CFO of the group, aptly summarised how the perception around the threat posed by the virus, especially considering the zero-Covid policy adopted by China, is evolving. “…with the current healthcare measures and reporting of a lower mortality rate, we are finally seeing the Covid becoming a hopefully more manageable threat,” said Wang.
Operations outside China
Jane acknowledged that the domestic market in China and the global market exhibited different trajectory of progress.
“Traffic on our global platforms, has already surpassed the 2019 level,” said Jane.
As for operations outside China, Liang said the group has come across “strong travel demand in many countries, especially across Europe and especially Asia-Pacific”, and the team is witnessing “strengthening trends of business performance across our global platforms, with air bookings achieving triple-digit year-over-year growth and hotel bookings significantly improved in especially the Trans-Atlantic and Asia markets”. He added, “Overall hotel reservations on our global platforms achieved 25% growth versus 2019 with significant contribution from domestic reservations in overseas markets.”
The group also mentioned that it is in the process of working on content-related initiatives for global platforms, considering the fact the team continues to achieve milestones across key metrics such as content generation, user engagement and conversion to orders in China. Key highlights in China: daily average user-generated content rose by 140% sequentially, the number of KOLs also increased by 10%, and content viewed per user increased by around 40%.
If on one hand, this enables travel shoppers to make well-informed decisions, on the other, the same is bringing in advertising revenue. “In Q1, for example, our domestic travel advertising revenue increased over 20% compared to the pre-Covid level,” said Jane.
“In light of global travel recovery, we also worked on expanding our content strategy to cover our global businesses. Leveraging our successful experience in the China market, we managed to improve the daily average traffic of Trip.com content channel by 80% year-over-year, and the content engagement rate increased by 150% year-over-year. This also helped to nearly double our users’ retention rate,” said Jane.
Jane admitted that the group is now better equipped to deal with demands of managing business during the downturn. There have been spurts of recovery, too. “…we actually frequently assess our liquidity position with latest business data and are confident to conclude that the combination of our existing cash reserves, cash flow from operations and financing sources are sufficient to meet our anticipated cash needs, including our working capital, capital expenditure and repayment of financial obligations for the foreseeable future,” she said.
At the end of the first quarter, the group’s net cash was USD 1.9 billion.