Trip.com Group Limited has acknowledged that travelers in China have chosen to spend on travel over other expenses, including one on daily activities, signaling a shift towards experiential travel-related spending.
Speaking during the company’s Q4 2023 Earnings Conference Call, Jane Sun, Trip.com Group Limited’s CEO said the domestic market has hugely benefitted from this tendency, as consumers in China have chosen to “allocate their resources towards exploring new places”.
This was one of the key reasons behind the group posting massive growth in the domestic market. This is reflected in Trip.com Group’s domestic hotel bookings registering a year-over-year growth of over 130% or more than 60% compared to 2019.
“Travel demand showed no signs of slowing down during the winter season. Popular destinations, such as Harbin in the northern part of the country experienced a surge in visitors,” said Jane. She added, “We have continued to expand our user base among the elderly demographics through the deep integration of product integration, content generation and marketing efforts. In Q4, the number of the users over 50 years old increased by more than 90% compared to 2019. And this is just a beginning to capitalize on the market opportunity for retired community, which has spending power and ample time.” Jane also mentioned, “During the recent Chinese New Year holiday, our domestic hotel and air reservations have increased by more than 60% and 50% year-over-year, respectively.”
Jane mentioned that the urge to explore new places among Chinese travelers isn’t restricted to locations in China.
“The interest of our customers to explore different regions in the world has enhanced compared to pre-COVID level,” said Jane. She attributed the same to relaxation in travel-related restrictions, smoothening of the visa application process and gradual recovery in flight capacity to serve the passengers.
Concerns about flight capacity impacting international travel
During the call, it was pointed out that the Civil Aviation Administration of China expects the outbound flight capacity to reach 80% of pre-COVID levels by the end of this year. And this progress seems to be relatively slow considering that the capacity had already reached 70% during the Chinese New Year holiday.
Xiaofan Wang, Trip.com Group’s CFO stated that the “market supplier situation” is recuperating.
“We have noticed a steady recovery in the number of inbound and outbound flights. Additionally, visa policy has become increasingly favorable (referring to other countries' visa-free policies for Chinese travelers).” Wang further added, “…it's important to note that most markets outside of China tend to need 2-3 years to fully recover their international travel (segment). Even the 70% to 80% recovery of outbound passenger volume in 2024 will indicate a year-over-year growth of approximately 65% to 90%. This clearly illustrates the potential for strong growth in outbound travel in the coming year. And with our own data, during the recent Chinese New Year holiday, our group already saw outbound air and hotel reservations fully bounced back and beyond the 2019 level.”
Jane explained that the gradual easing of supply-side constraints, such as increased international flight capacity and certain clearance of visa blocks, did result in a positive trend. “Despite the winter seasonality in Q4, outbound travel from China maintained the same level of recovery as the peak season in Q3,” she said. Thailand, Singapore, Japan, Korea, and Malaysia remained as top outbound travel destinations.
For its international business, Trip.com Group shared that in the last quarter of 2023, GMV of its overseas OTA brand grew by more than 70% year-over-year and increased by more than 100% compared to 2019. The group's global OTA platform currently operates in 39 countries. “Over 60% of our global bookings are made directly through Trip.com,” said Jane.
“We have witnessed steady growth in APAC region,” said Jane.
“In addition, hotel bookings on overseas platform continued to show triple-digit growth. For the full year of 2023, accommodation reservation revenue totaled RMB 17.3 billion, marking a 133% increase from 2022 and 28% increase from 2019,” said Wang.
In 2023, the group’s core OTA business reached a record high, achieving a GMV of approximately RMB 1.1 trillion, or US$ 160 billion, said James Liang, Executive Chairman, Trip.com Group.
“This marked a year-over-year increase of nearly 130% and a growth of about 30% compared to 2019,” said Liang.
Jane also underlined the financial performance. “…our adjusted EBITDA margin in 2023 significantly improved to 31%, reflecting the successful optimization of our cost structure and overall productivity enhancement,” she said.
Inbound travel – an opportunity
China inbound travel is an untapped opportunity, said Jane.
“Inbound tourism plays a vital role in country's economy. For tourism-dependent countries, such as Thailand, inbound travel can contribute to more than 10% of its GDP. For developed nation, inbound travel can contribute to around 1% to 3% of its GDP. China's current level is less than 0.5%,” said Jane.
She added, “If China can reach a global average between 1%-2%, it would unlock a great market potential of another RMB 1.5 trillion to RMB 2 trillion market. Recognizing the importance of inbound travel, China has included in its integral part of its 14th 5-year plan, the government has taken steps to facilitate inbound tourism by granting visa-free access, making travel more convenient for international visitors.”
(Trip.com Group is the member of IMTA)
Editor Ⅰ: Zhang Wenwen
Editor Ⅱ: Wu Dan
Editor Ⅲ: Liu Guosong
