Trip.com Group Expects 50 Percent Drop in First Quarter Revenue But Sees Some Local China Recovery

The prospect of decelerating growth that Trip.com Group projected at its last earnings call has significantly paled in comparison with the sharp revenue decline of up to 50 percent that the Chinese online travel giant in now expecting for the first quarter of 2020.

While the Shanghai-based group began the year with strong expectations, the impacts arising from the coronavirus outbreak swiftly became “challenging” for the travel industry and led the company to lower expectations for growth in the first quarter, Trip.com’s top executives revealed during its fourth-quarter earnings call on Thursday.

However, Trip.com Group Chairman James Liang and CEO Jane Sun expressed their belief in the “long-term prospects of tourism,” calling the coronavirus crisis a “one-off.”

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Both bosses have slashed their pay to zero while senior executives will reduce their salary by as much as half until the crisis is over, but Trip.com remains on firm ground with the “strong financial resources built over the years,” said Sun.

Despite macro challenges in certain regions like Hong Kong, Trip.com reported strong financial results from the fourth quarter and full year of 2019.

The Nasdaq-listed travel platform delivered a full-year profit of RMB7 billion ($1 billion) in 2019, a massive surge of 536 percent from its net income of RMB1.1 billion ($155 million) in 2018. The Trip.com Group also reported a profit of RMB2 billion ($289 million) for the last quarter, a vast improvement from the RMB1.2 billion ($169 million) loss incurred during the same period in 2018.

Robust growth in its international business was maintained, with hotels outside of mainland China reaching a year-on-year revenue growth of 51 percent during the fourth quarter while Trip.com delivered its 13^th consecutive triple-digit growth for international air ticketing volume.

On the domestic front, Trip.com accelerated its expansion in China’s lower-tier cities. Ctrip-branded hotel room nights in the low-star segment increased around 50 percent year-on-year in the fourth quarter, and the group rounded 2019 with nearly 8,000 offline stores in operation and in pipeline across the country.

Domestic Market Recovery

“Early signs of recovery” in China are now prompting Trip.com to prepare for a domestic market rebound, said Sun.

Life in China is slowly returning to normal as major cities like Shanghai are lifting restrictions on residents’ movements and the Chinese government moves into the next phase to accelerate the recovery of the economy.

With pent-up demand building up in China, Sun believes that Chinese citizens in the metropolises would soon begin to take day or weekend trips to nearby cities, before booking trips further afield to beach destinations like Sanya in the country’s south.

She said that the Tourism Revival V Plan, a $141 million campaign launched in early March, is already seeing positive reception from more than 100 local tourist bureaus and organizations keen to work with Ctrip on post-coronavirus travel promotion in China.

Chinese airlines have resumed some of their domestic flights and ticket prices, even if they still remain below usual levels. Liang said he is also starting to make business trips in the country to meet with partners about tourism promotion.

There are other positive takeaways from the crisis, Trip.com executives stated. For example, the deluge of cancellations — 10 times the usual volume — when the outbreak began during Chinese New Year accelerated the group’s development of tech products such as self-cancellation tools, which improved operational efficiency as well as customer satisfaction.

Trip.com’s safeguard cancellation guarantee initiative, which offers penalty-free cancellations for customers affected by the crisis, also earned the company “goodwill” from travelers and partners, executives said.

“Unless there is another outbreak or something unexpected, given the general trends today, we expect strong and quick recovery of the domestic travel market,” said Liang. “The virus has not dented the healthy travel fundamentals of the Chinese market.”