Ctrip (Minutes): The overseas market is vast, with no profit limits set for 25 years

The following is the minutes of Ctrip's Q4 2024 earnings call. For the earnings interpretation, please refer to Ctrip: Can high investment in inbound tourism "turn the tide"?

1. Core Information Review of the Earnings Report

2. Detailed Content of the Earnings Call

2.1 Key Information from Executives

1. Strategic Focus

Artificial Intelligence Innovation: Tools like Trip Genie (voice/text assistant) achieved a 200% increase in traffic, a 100% increase in browsing time, and a 200% increase in conversation volume in 2024.

Personalized recommendations are provided through Trip Trends, Trip Deals, and Trip Events, dynamically adjusted to meet user preferences.

International Expansion: In Q4, international business accounted for 14% of the group's revenue, and 10% for the entire year of 2024; online flight/hotel bookings increased by 70% year-on-year, with bookings in the Asia-Pacific region increasing by 80%; there are a total of 16 call centers globally, covering 28 countries, with customer satisfaction around 90%, and awards received include Best Call Center of the Year, Global Support Service of the Year, and Leading Online Travel Agency in Asia for 2024.

2. Market Trends and Initiatives

Inbound Tourism: Visa applications increased by 20% year-on-year in 2024, and visa-free entries increased by 112%; platform bookings increased by 100%, with bookings from visa-free countries increasing by 150%. The company is offering free city tours in Shanghai in 2024 and in Beijing in December 2024, attracting tourists from over 50 countries.

Silver-haired Group: The Old Friends Club is a program targeting travelers aged 50 and above, accounting for 10% of the user base, with purchasing power 30% higher. The product supply includes over 7,000 products (hotels, cruises, hot springs, etc.), covering more than 50 destinations.

Young Travelers: Integration of live music, festivals, and exhibitions to meet the demand for cultural experiences.

3. Sustainability and Social Responsibility

Rural Revitalization: Rural resorts create job opportunities through renewable energy and environmentally friendly materials, supporting the local economy.

MSCI Rating: Upgraded by two levels to "A"; the United Nations Global Compact has used the resort as a case study.

Employee Benefits: Remote work is provided during the Spring Festival, along with an additional 3 days of paid leave for employees with children under 18.

4. Outlook and Commitment

Market Confidence: Strong demand across all business segments positions the company for sustainable growth in 2025.

Ecosystem Collaboration: Focus on partnerships to promote mutual benefits and economic contributions 2.2 Q&A

Q: Recently, artificial intelligence has developed rapidly. What impact will new AI models and intelligent agents have on online travel platforms (OTAs) like Trip.com?

A: We focus on deploying AI technology throughout our business operations. New AI models have great potential to enhance our services, making travel planning more personalized and efficient. We believe that AI agents will not replace online travel platforms but will serve as a complement. They have the potential to replace traditional search engines and become the main entry point for traffic, opening up new customer acquisition channels for online travel platforms. The value provided by Trip.com is something that AI alone cannot replicate, particularly in two aspects: first, our extensive real-time proprietary travel insights, which are key to providing accurate and personalized travel recommendations; second, our end-to-end service model and open platform approach, which allow us to offer competitive service standards and pricing based on different customer preferences. We recognize the tremendous potential of generative AI in the travel industry and are committed to increasing investment in this area, with plans to launch more user-friendly and valuable features in the future.

Q: How do you view the current demand for leisure and business travel? What is the growth trajectory for 2025? What are the main drivers supporting revenue growth?

A: The travel industry has shown great resilience after the pandemic, with strong search volumes for travel demand. We are primarily focused on several market segments: first, the domestic travel market, where young people are keen on traveling the world and visiting different attractions and activities; the trend of "activities + travel" is popular among the youth; second, the early-retired generation, who are wealthy, energetic, and curious about exploring the world, for whom we offer special travel packages; third, as countries further open their borders, many nations have relaxed visa restrictions for Chinese tourists, bringing us new growth momentum. Additionally, according to official data, by the end of this year, direct flights will recover to about 90-95% of pre-pandemic levels. In the next three to five years, we will invest heavily to provide high-quality services and comprehensive products for global customers. The Asian market has enormous potential, approximately 150% compared to the Chinese market, and our business in other Asian markets has seen a year-on-year growth rate of over 80%. We will continue to increase investment to serve global customers.

Q: With operating profit margins reaching record highs in 2024, how do you expect profit margins to trend in 2025 and beyond?

A: The company never sets specific profit margin targets, but views profit margins as a natural result of the dynamic business portfolio and continuous improvement in operational efficiency across various business units. In the short term, the company will continue to prioritize expanding overseas business, which is crucial for unlocking significant long-term growth opportunities; at the same time, AI-driven solutions have transformative potential and will play a key role in enhancing operational efficiency, streamlining operations, and alleviating cost pressures. From a long-term perspective, the company’s profit margins are not structurally constrained and are expected to be comparable to international peers, supported by innovative strategies, global expansion, and forward-looking investments Q: Can you share the performance of Trip.com during the Spring Festival, post-holiday trends, recent changes in hotel prices (such as Average Daily Rate, ADR) or commission rates, and the outlook for 2025?

A: There are several positive trends during the Spring Festival: first, overall travel demand remains healthy, with many travelers departing early or delaying their return to avoid peak times, resulting in a more balanced demand distribution during and around the official holiday period; second, travelers are expanding their travel radius, heading to farther destinations, with cross-border travel being particularly popular, bookings for outbound travel during the Spring Festival holiday increased by over 20% year-on-year, and inbound tourism continues to grow at double-digit rates. Post-holiday travel activities maintain good momentum. Industry data shows that hotel prices are still below last year's levels but are gradually approaching them. Hotel supply has increased by mid to high single-digit percentages year-on-year, reflecting ongoing market confidence in the tourism industry, and the continuous improvement of tourism infrastructure will further benefit the industry in the long term. Looking ahead to 2025, it is expected that the growing travel demand and normalizing supplier growth will stabilize hotel prices.

Q: What is the outlook for the increase in outbound flight capacity this year? Have recent events in Thailand and changes in exchange rates leading to price increases affected outbound travel demand? Trip.com's outbound travel growth has consistently outperformed the industry; how can this advantage be maintained?

A: Outbound flight capacity reached over 80% of 2019 levels in the fourth quarter, further increasing during the Spring Festival holiday. According to the Civil Aviation Administration of China, by 2025, total international flight capacity is expected to recover to over 90%, achieving double-digit year-on-year growth. Although some major destinations face challenges, Trip.com's total outbound bookings grew by 20% - 30% during the Spring Festival holiday, with some travelers simply changing their destinations. Regarding the impact of exchange rate changes, there is currently no significant correlation between exchange rates and international ticket prices. To maintain outbound travel growth above the industry average, Trip.com will continue to enhance product and service quality, increase investment in Trip.com business, and further enrich international product offerings, which will also promote the growth of outbound business travel to some extent.

Q: Trip.com platform achieved over 70% accelerated growth in the fourth quarter; what is the outlook for 2025, and what initiatives are driving this? Are you starting to see responses from local or global competitors (such as Booking)?

A: Trip.com is experiencing rapid business growth. Trip.com focuses on its internal strengths, providing a one-stop shopping platform to make travel more convenient for travelers; it offers an excellent user experience; provides high-quality customer service to global clients; and invests heavily in artificial intelligence. With these efforts, Trip.com has achieved good growth. It will continue to maintain these initiatives in the future. The travel industry is highly competitive, and Trip.com has faced competition from various players since its establishment, but Trip.com has always focused on enhancing its own strengths to provide the best services and products to customers, and its business footprint will naturally expand.

Q: What is the current contribution of inbound tourism business to the company's operations, what is the expected growth rate for the future, and how should the contribution level of inbound tourism business be assessed in the longer term? A: Inbound tourism has enormous potential globally, with its contribution to GDP ranging from 2% to 10% in countries that attract a large number of inbound tourists. China's inbound tourism is just getting started; the country has granted visa-free access to over 40 countries and extended transit visas from 3 days to 10 days, making inbound tourism very convenient. Last year, we invited over 2,000 global partners to Shanghai for a summit and took them to Zhangjiajie, the filming location of "Avatar," receiving very positive feedback. As long as we work together to promote inbound tourism, the contribution of this industry can reach the trillion-dollar level. Trip.com has an advantage in this regard, with the most comprehensive inventory and excellent service. In the next five to ten years, inbound tourism is a promising investment area.

Q: What is the payment date for the $200 million dividend, and what is the status of the $400 million stock buyback this year? Has the stock been repurchased, and are there any other related plans after 2025?

A: The dividend record date for Hong Kong shareholders is March 27, and for U.S. shareholders, it is April 1. In 2024, the company fully executed a $300 million stock buyback plan, reducing approximately 1% of the outstanding shares. In 2025, the board approved a new capital return plan, including a maximum of $400 million in stock buybacks and a total of approximately $200 million in cash dividends, making the scale of the 2025 capital return plan twice that of 2024. Looking ahead, the company will enhance shareholder returns through sustainable business growth while actively seeking opportunities to further enhance value through the capital return process.

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