Summary of the Conference Call on the China OTA Industry Industry Overview - **Industry**: China Online Travel Agency (OTA) Sector - **Key Focus**: Competitive dynamics and strategic updates within the OTA industry in China Core Insights 1. **High Entry Barriers**: The complexity of building OTA supply chains and service infrastructure creates significant entry barriers, which may take 3-5 years for new entrants to overcome. Established players have clear scale advantages [2][3] 2. **Transportation Supply Chain**: The transportation supply chain is simpler with around 100 airline carriers in China, but the ROI and margins are low due to limited direct monetization through commissions. Revenue opportunities lie in cross-selling value-added services [2] 3. **Hotel Supply Chain Challenges**: Establishing a hotel supply chain is more complex due to nearly 1 million suppliers, including alternative accommodations. Many small and independent hotels require extensive business development efforts [2] 4. **Customer Service Advantages**: Leading OTAs like Trip.com have developed large in-house customer service teams, providing superior service quality through a one-stop shop platform that can address cross-business issues [2] Competitive Landscape 1. **Stable Competition**: Despite new platforms showing interest in the OTA space, the competitive landscape remains stable. New entrants face constraints in supply capabilities, customer service, and user mindshare [3] 2. **Fliggy's Position**: Fliggy has gained traffic support post-Alibaba's restructuring but still lags in hotel inventory depth and price competitiveness compared to market leaders [3] 3. **Douyin's Strategy**: Douyin has shifted from a full OTA model back to a "content + voucher" approach due to slow hotel coverage and customer profile mismatches [3] 4. **JD.com's Early Stage**: JD.com is in the early stages of developing its hotel supply chain, focusing on service provider coordination and system integration [3] AI Disruption Concerns 1. **Limited Immediate Impact**: Concerns regarding AI disruption in the OTA sector are considered overblown at this stage. Current AI platforms are likely to serve as price comparators but face limitations in real-time price retrieval due to OTAs' defensive measures [4] 2. **Long-Term AI Integration**: For AI platforms to facilitate closed-loop bookings, they must improve their supply chains and services, necessitating ongoing monitoring [4] Stock Implications 1. **Earnings Visibility**: The stable competition in the OTA sector supports the earnings visibility of leading companies. The report is optimistic about the OTA sector's prospects in 2026, citing reasonable valuations [5] 2. **Valuation Metrics**: TCOM/Tongcheng is trading at 16x/11x 2026E PE, compared to 14x for the broader Chinese internet sector [5] Risks to Consider 1. **Evolving Competition**: The competitive landscape is subject to change, which could intensify competition [7] 2. **Technological Trends**: Rapid changes in technology and user preferences pose risks [7] 3. **Monetization Uncertainty**: Uncertain monetization strategies could impact profitability [7] 4. **Traffic Acquisition Costs**: Rising costs associated with traffic acquisition and brand promotions are a concern [7] 5. **Regulatory Changes**: Potential regulatory changes could affect the industry landscape [7] Additional Notes - The report emphasizes the importance of monitoring ongoing developments in the OTA sector and the potential for new entrants to disrupt the market in the future [4][5]

Core Financial Performance - Tongcheng Travel (TC) reported total revenue of RMB5.5 billion for 3Q25, reflecting a 10.4% year-over-year increase, which was 1% better than forecasts [1] - Adjusted net profit (NP) reached RMB1.06 billion, up 16.5% YoY, exceeding forecasts by 4% and consensus by 2% [1] - The operating profit margin (OPM) of the core OTA business expanded to 31.2% in 3Q25, slightly ahead of the forecast [1] Core OTA Business Growth - The core OTA business generated revenue of RMB4.6 billion, accounting for 83.7% of total revenue, with a YoY growth of 14.9% [2] - Revenue growth in transportation ticketing services, accommodation reservation services, and other revenue was 9.0%, 14.7%, and 34.9% YoY, respectively [2] - The accumulated number of travelers served reached 2.0 billion by the end of September, marking a 7.3% YoY increase [2] 4Q25 Outlook - For 4Q25, total revenue is estimated at RMB4.76 billion, representing a 12.4% YoY increase, driven by a 17.4% growth in the core OTA segment [3] - The core OTA business is expected to see revenue growth of 8.3% for transportation ticketing, 14.6% for accommodation reservation, and 48.9% for other business [3] - An incremental revenue contribution of RMB170 million is anticipated from the consolidation of Wanda Hotel Management (WHM) starting October 2025 [3] Operating Profit Margin Expectations - The overall OPM for TC reached 21.1% in 3Q25, up from 19.6% in 3Q24, with the core OTA business OPM improving to 31.2% [4] - A stable OPM of 28.4% is forecasted for the core OTA business in 4Q25, despite increased marketing spend for user acquisition [4] - Non-GAAP net profit is expected to grow by 14.0% YoY to RMB752 million, translating into a non-GAAP net margin of 15.8% [4]