ChinaTravelNews, Ritesh Gupta - Tongcheng Travel Holdings’ ploy of diversifying its business streams is paying off going by how the group continues to expand beyond its main offering in accommodation reservation and transportation ticketing segments.
Sharing its third quarter (Q3) results, Tongcheng Travel stated that the company is witnessing growth in both its core OTA business as well as its tourism offering.
One of the highlights is the rapid expansion of its hotel management platform, according to the company. The number of hotels in operation under its management has gone up to over 2,100, with nearly 1,200 more in the pipeline by the end of Q3. Total signed hotels now tally over 3300. In terms of how Tongcheng has been expanding its operations in this segment, total signed hotels stood at 2400 plus, with opened hotels over 1600 at the end of January-March period. The city coverage has gone up from 270 to 300 in a span of six months. Core competencies in this arena now span across traffic support, market insight, and PMS and technology support (SaaS solutions to individual properties and hotel chains).
Other areas of focus are supply chain and finance and insurance.
Revenue matrix
The company’s revenue increased by 51.3% year-on-year from RMB3,299.3 million in Q3 of 2023 to RMB4,991.5 million in Q3 of this year.
Ma Heping, Executive Director and CEO of Tongcheng Travel said that both revenue and net profit reaching record highs in Q3.
The growth was witnessed in all the segments.
Revenue from the accommodation business increased by 22.2% year-on-year from RMB1,127.4 million to RMB1,377.5 million.
For transportation ticketing services, revenue went up by 20.6% to RMB2,026.8 million. The operating profit margin of core OTA business rose to 31.1%. Tongcheng shared that its air ticketing business “sustained its momentum in gaining market share, with both business volume and revenue reaching historic highs”.
The diversification strategy is proving effective, as segments outside of accommodation and transportation are experiencing faster growth.
At the end of 2023, the company stated that revenue was generated primarily from accommodation reservation business and transportation ticketing business. Its accommodation reservation services contributed 32.8% (going down from 36.7% in 2022) and transportation ticketing services accounted for 50.7% (down from 51.3% in 2022). The remaining divisions contributed 16.5% up from 12% in 2022.
And in this quarter, revenue from others increased by 23.7% to RMB608.5 million over Q3 of 2023. This was led by increase in online packaged tour services and hotel management services.
Tourism revenue was RMB978.7 million. This division represents revenue from businesses acquired in late 2023, including offline travel agency business. The company acquired 100% equity interest in Beijing Tongcheng Tourism Investment Group Ltd. (principally engaged in the provision of offline travel agency and related services in the PRC) and over 57% equity interest in Hainan Yanuoda Yuanrong Tourism Co., Ltd.
User purchase frequency
The company, which intends to focus on enhancing user value, expanding its user base, and strengthening its global presence, asserted that this financial performance underlines its ability to provide valuable services that meet the needs of travellers, thereby enhancing user satisfaction and loyalty via its Black Whale membership program. Accumulated number of travellers served increased by 19.9% to 1,882.5 million, reflecting a growth in user purchase frequency.
For the twelve-month ended September this year, Tongcheng’s APUs or average paying users increased by 3.4% year-to-year and reached 232.4 million.
In 2024 Q3, the average MPUs or monthly paying users (who make purchases on its platforms at least once during a calendar month) increased by 5% year-on-year to 46.4 million, also achieving a record high.
To serve users better, Tongcheng has refined its algorithm-driven Huixing system, with the goal of offering users more feasible and convenient travel options, particularly for those with complex itineraries that lack direct routes, stated the company.
For traffic acquisition, Tongcheng has leveraged the Weixin ecosystem and also focused on interest-based e-commerce, offline services as well as ecosystem-based tools to drive user traffic. In Q3, around 71% of its new paying users on the Weixin platform were from non-first tier cities in China.
Pacts with airports
The company has been leveraging its expertise to partner with different stakeholders across the tourism industry. For instance, working with Changbai Mountain last year to develop an intelligent tourist service platform that consolidates local tourism information. In another instance, Tongcheng chose to capitalise on its digitalization capability to aid numerous airports in digital transformation and transit product development.
Tongcheng shared that in Q3 of this year it entered into strategic collaborations with Hainan Airport Group and Jilin Airport Group. The plan is to help these entities develop big data and marketing solutions. Additionally, Tongcheng developed a customised air-rail combined transport technology for Nanning Airport to enhance its operational capacity and efficiency.
