Tongcheng Travel Holdings Limited Stock Code: 0780 Investor Presentation August 2025 Disclaimer The materials used in this investors presentation are being furnished to you for your information only, which shall be kept in strict confidence. No representation or warranty, express or implied, is made by Tongcheng Travel Holdings Limited (the "Company") or its connected person, or any of their respective directors, officers, employees, advisers or representatives as to, and no reliance should be placed on, th ...

Summary of Tongcheng Travel Conference Call Company Overview - **Company**: Tongcheng Travel - **Industry**: Online Travel Agency (OTA) Key Points and Arguments 1. **Strategic Partnerships**: Tongcheng Travel has formed a strategic partnership with Ctrip to share resources, aiming for mutual benefits and expanding beyond traditional OTA business through acquisitions to deepen its presence in the entire tourism industry chain, including travel agencies and tavern companies, to create new growth curves [2][3] 2. **Market Positioning**: The OTA industry is characterized by a relatively healthy competitive landscape, with Ctrip focusing on mid-to-high-end markets, Meituan expanding into lower-tier local life services, and Tongcheng concentrating on lower-tier markets for long-distance travel. This differentiation allows companies to share market growth while maintaining good profit margins [2][6] 3. **Resource Coverage**: By the end of 2024, Tongcheng Travel aims to cover 720 airlines, 460,000 routes, and 3.9 million hotels, indicating a high entry barrier due to the extensive supply chain it is building [2][8] 4. **Acquisitions and Growth**: Tongcheng Travel is actively acquiring upstream core tourism resources to build a competitive tourism supply chain ecosystem, including the establishment of the Yilong Hotel Technology Platform and a diversified tavern brand matrix. The acquisition of Tongcheng Travel Industry is expected to accelerate product layout and capitalize on the recovery of outbound tourism [2][9] 5. **Financial Projections**: Revenue projections for Tongcheng Travel from 2025 to 2027 are estimated at 19.7 billion, 22.7 billion, and 26 billion yuan, with adjusted net profits of 3.3 billion, 3.9 billion, and 4.6 billion yuan respectively. The estimated valuation for 2025 is approximately 14 times earnings [3][5] 6. **Investment Opportunity**: The current adjusted net profit for the year is projected at 3.3 billion yuan, with a price-to-earnings (PE) ratio of about 14 times, indicating that the current valuation is significantly undervalued relative to the company's growth rate. This presents a good investment opportunity for potential returns [5][10] Additional Important Insights 1. **User Growth**: The daily active users of Tongcheng's app are continuously increasing, indicating a strong user engagement and potential for future growth in the lower-tier market for long-distance travel [8] 2. **Competitive Advantages**: Tongcheng Travel's deep focus on lower-tier markets, combined with the support from major shareholders like Ctrip and Tencent, enhances its resource supply at low costs, making it a formidable player in the OTA space [8] 3. **Profitability Improvement**: The overall profitability of Tongcheng Travel is expected to improve as user marketing strategies are optimized and refined subsidy measures are implemented [9]

Core Insights - The competition in the hotel and travel industry is intensifying, with Douyin, JD, and Alibaba all making significant moves to capture market share [2][3][4] - Douyin is investing heavily in subsidies for the hotel industry, offering discounts and special rates to attract new customers [2][22] - The hotel industry is seen as a lucrative market, with leading players like Ctrip achieving high profit margins compared to other e-commerce platforms [5][8] Group 1: Market Dynamics - The hotel industry has historically been stable, but recent shifts in online traffic dynamics are prompting major players to deepen their involvement [5][10] - Ctrip holds a dominant market share of 56%, with projected gross margins of 81.3% and net margins of 32.3% for 2024, significantly outperforming JD and Alibaba [5][8] - Meituan's hotel revenue grew from 332.37 billion yuan in 2022 to 430.7 billion yuan in 2023, maintaining a consistent revenue share [8] Group 2: Strategic Moves by Major Players - JD's entry into the food delivery market is a strategic move to leverage its large user base for hotel bookings, creating a closed-loop commercial ecosystem [11][14] - Alibaba's integration of Fliggy and Ele.me into its e-commerce group aims to enhance synergies and expand its consumer platform [3][13] - Douyin's approach focuses on content-driven user engagement to convert interest into transactions, utilizing its large user base for hotel bookings [10][22] Group 3: Industry Growth and Challenges - The OTA market is projected to grow, with a 17.8% increase in transaction volume expected in 2024, reaching 2.07 trillion yuan [18] - The supply of hotels is expanding, with the number of hotel rooms expected to reach 17.64 million by the end of 2024, indicating a trend towards standardization and online integration [18] - Despite growth, the hotel industry faces challenges such as declining average daily rates and occupancy rates, with predictions of a 5-7% drop in 2025 [21][22] Group 4: Competitive Strategies - Douyin's competitive edge lies in its ability to offer low prices and attract consumers through its vast traffic pool [22][24] - JD's strategy includes a "three-year zero commission" policy to attract small and medium-sized hotels, enhancing its supply chain capabilities [24][25] - Alibaba's focus on leveraging its existing platforms to drive traffic to Fliggy is seen as a way to capture a larger share of the hotel market [26]

Core Viewpoint - The competition in the OTA (Online Travel Agency) industry is intensifying, particularly with Douyin's recent aggressive entry into the market following JD's announcement to expand into the travel sector. This indicates a strategic shift and heightened rivalry among major players like Ctrip, Meituan, Douyin, and others [6][7][8]. Group 1: Douyin's Strategy - Douyin's local life business will invest significant platform subsidies from July 15 to the end of August, aiming to attract users and enhance its market presence [2][4]. - The platform will support live broadcasts from chain hotel brands and offer various promotional pricing strategies, including discounts as low as 60% [4][6]. - Douyin's initiatives reflect its determination to penetrate the OTA landscape and compete effectively during the summer travel season [6][34]. Group 2: Market Dynamics - The OTA market is characterized by a "7+2+1" structure, with Ctrip dominating with a 56% GMV market share, followed by Meituan and Douyin as emerging players [12][26]. - The competition is driven by the increasing reliance of hotels on online channels, with some hotel groups deriving over 50% of their orders from OTAs [9][11]. - The rise of short video and live streaming has reshaped the value chain in the hotel industry, allowing platforms to leverage traffic advantages [8][9]. Group 3: Competitive Landscape - The competitive landscape has evolved through several phases, with Ctrip initially consolidating its position, followed by Meituan's differentiated approach, and now Douyin's aggressive entry [14][15]. - JD's entry into the OTA space is seen as a potential disruptor, similar to the initial strategies of Meituan and Alibaba [15][16]. - The OTA industry is witnessing a shift in power dynamics, with new players like Douyin and Kuaishou building short links between content and booking, challenging traditional OTA models [43]. Group 4: Financial Projections and Growth - Douyin's hotel merchant payment GMV is projected to reach 90 billion yuan in 2024, a 50% increase from 2023, driven by its content ecosystem and merchant support strategies [37]. - The platform's innovative approaches, such as live streaming and targeted promotions, have significantly boosted conversion rates and user engagement [38][39]. - The OTA market is expected to see a redistribution of market share, with new channels capturing over 12% of hotel booking shares by 2024 [43].

Core Viewpoint - The news highlights the challenges faced by the hotel industry, particularly in Zhengzhou, where a five-star hotel resorted to street vending due to declining business. Meanwhile, Ctrip, a leading OTA, is facing allegations from hotel merchants regarding its pricing practices, indicating a broader issue of profitability and competition in the OTA sector [2][15]. Group 1: Ctrip's Performance - Ctrip Group is projected to achieve a net profit of 17.2 billion yuan in 2024, a significant increase of 72% year-on-year, marking its best performance in five years [3]. - In Q1 2025, Ctrip's net profit was 4.314 billion yuan, maintaining a net profit margin of 34% [3]. - All four major business segments of Ctrip saw revenue growth in Q1 2025: accommodation bookings increased by 23% to 5.5 billion yuan, transportation ticketing rose by 8% to 5.4 billion yuan, vacation services grew by 7% to 947 million yuan, and business travel management climbed by 12% to 573 million yuan [3]. Group 2: Industry Context - The overall OTA industry shows high net profit margins, with Tongcheng Travel reporting a net profit of 679 million yuan in Q1 2025, a year-on-year increase of 69.52% and a net margin of 18% [4]. - Ctrip holds a market share of 56% in GMV, significantly outperforming competitors like Meituan and Tongcheng, despite facing strong competition from them [5][8]. Group 3: Competitive Advantages - Ctrip's early entry into the market allowed it to capture high-end users, establishing a strong brand association with OTA services [8][9]. - The company has exclusive agreements with mid-to-high-end hotels, ensuring a stable supply of hotel rooms and enhancing its bargaining power [11]. - Ctrip's operational model includes a large workforce dedicated to customer service, which adds to its competitive edge in the OTA space [12]. Group 4: Market Dynamics and Challenges - Recent complaints from hotel merchants about Ctrip's pricing practices indicate potential instability in the OTA ecosystem, where one party's excessive profits could lead to unsustainable business practices [15][16]. - The entry of competitors like JD.com into the OTA market may disrupt the current dynamics, prompting existing players to reconsider their pricing and profit-sharing strategies [19][20]. - The need for a balanced ecosystem where all parties benefit is emphasized, suggesting that Ctrip may need to adjust its profit margins to maintain long-term sustainability [17][20].

Core Insights - JD.com has launched a new hotel initiative, including the "JD Hotel PLUS Membership Program" offering up to three years of zero commission for partner hotels and traffic support for newly onboarded hotels until July 30 [1][2] - The initiative aims to leverage JD's extensive customer base of over 800 million consumers and strong supply chain capabilities to enhance hotel operations and efficiency [1][2] Group 1: Company Strategy - The new hotel plan is a response to reduced inventory from major OTA platforms, highlighting the urgency for JD to expand its direct hotel connections [2] - JD's high-end customer base, with over 40 million JD PLUS members, and significant daily active users (1.88 billion) provide a strong foundation for monetizing its OTA services [2][3] Group 2: Financial Implications - The zero-commission policy and associated costs for talent recruitment and potential consumer subsidies may pressure JD's short-term profit margins [3] - The scale of investment in the hotel business is expected to be lower than that of the food delivery sector due to its lower internal priority and strategic value [3] Group 3: Industry Impact - JD's entry into the hotel market is expected to intensify competition in the online travel sector, which had stabilized post-pandemic [4] - The extent of competition will depend on JD's investment budget and execution; a potential price war could negatively impact existing OTA platforms' short-term performance [4]

Group 1 - The core viewpoint is that Chinese companies have a clear insight into consumer trends and market dynamics, which drives their continuous expansion in the stable lodging and ticket booking sectors [1] - The domestic tourism market is experiencing rapid recovery post-pandemic, with four key factors expected to drive growth: lower-tier market consumers, the affluent elderly demographic, the enthusiastic Z generation, and the recovery of inbound and outbound tourism [1] - The current competitive landscape among OTA platforms is stable, and there is optimism regarding the diversification of domestic OTA platforms to enhance business growth [5] Group 2 - Despite the pressure on travel prices due to the rapid recovery of flights and hotel availability, it is anticipated that the decline in travel prices will stabilize by 2025, aided by structural changes in the travel demographic [2] - The OTA platform industry has become an integral part of daily life for Chinese consumers, with increasing penetration rates leading to rapid market growth [3] - Chinese OTA platforms are expanding their business scope through acquisitions and self-built initiatives, particularly in overseas markets, while also launching vacation services to capitalize on the recovery of inbound tourism and the popularity of customized travel [4]