Trip.com Group Highlights Signs of a China Travel Rebound Despite a Sobering Outlook

Optimists will hang onto hopeful signs — a China domestic travel recovery in short-haul trips and high-end stays, as well as South Korea hotel booking trending positive — but realists will point to Trip.com Group's downbeat second quarter forecast showing that a potential travel rebound will be protracted.

In its first quarter earnings call Friday morning local time in Shanghai, Trip.com Group's second quarter forecast was for a net revenue decrease of 67 to 77 percent year over year, and an operating loss, excluding share-based compensation, of RMB 1.1 billion to RMB 1.3 billion ($153.9 million to $181.9 million).

The heavy losses come despite China's travel recovery getting off the mat in March, and being fueled by a fairly robust 5-day Labor Day holiday period that began May 1.

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Jane Jie Sun, the Trip.com Group CEO, said tourist numbers for the Labor Holiday in China doubled compared with the Qingming Festival in April.

Among other bright spots, according to the online travel company's executives:

• Hotel bookings from travelers who live in that city or province, as well as attraction tickets and car rentals are nearing a full recovery;
• Domestic travel is picking up in certain international markets such as South Korea;
• After the Labor Day holiday period,  high-end hotels domestically in China are showing strength.

While business travel is resilient and generally tracks with market conditions, Chairman Jianzhang Lang said leisure travel will strongly rebound because it answers a basic human need.

"For leisure travel demand, as I shared many times, the only ever-green and ever-growing industries are the ones that fulfill people's spiritual needs rather than their materialistic needs," he said. "In many parts of the world, including China, tourism is one of the most resilient industry. We believe the disruption caused by the pandemic will eventually disappear and the travel demand will come back stronger after the pandemic."

Trip.com Group is focusing on the domestic market in the near-term, and trying to convert customers who traditionally traveled internationally into high-end domestic travelers.

The company said it has plenty of cash and liquidity to cope with almost any scenario.

In the first quarter, Trip.com Group handed out more than $167 million in refunds.

The company notched an operating loss of $211 million in the first quarter of 2020, compared with a $123.7 million profit a year earlier, on revenue of $163 million. That revenue number represented a 61 percent decline year over year.