Tongcheng Travl Hldgs Ltd

Thank you for standing by. Welcome to Tongchun Travel 2025 First Quarter Results Announcement. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Ms. Kylie Yeung. Thank you. Please go ahead.

Thank you. Good morning and good evening, everyone. Welcome to Tongchuan Travels' 2025 First Quarter Results Conference Call. I'm Kylie Yeung, Investor Relations Director of the company. Joining us today on the conference call are our Executive Director and CEO, Mr. Ho Ma, our CFO, Mr. Julian Fei, and our Chief Capital Officer, Ms. Joyce Lee. For today's call, our management team will provide a review of the company's performance in the first quarter. Hope will brief us on the company's strategies. Joyce will discuss our business and operational highlights. And then Julian will address the details of financial performance accordingly. We'll take your questions during the Q&A session that follows. As always, our presentation contains forward-looking statements. Such statements are based on management's current expectations and current market operating conditions. and relate to events that involve known or unknown drift, uncertainties, and other factors, which may cause the company's actual results, performance, or achievements to differ from those in the forward-looking statements. This presentation also contains some unaudited non-IFRS financial measures. They should be considered in addition to, but not as a substitute for measures of the company's financial performance prepared in accordance with IFRS. For a detailed discussion of non-IFRS measures, please refer to our disclosure documents in the IR section of our website. Now, let me introduce our CEO, Hope. Hope will be presenting in Mandarin, and our colleague will provide the English translation afterwards. Hope, please go ahead.

Thank you, Karen. Good evening, everyone. Welcome to the first quarter of our phone conference in the same city in 2025. In the first quarter of 2025, China's tourism industry continued to grow steadily. The domestic tourism market is constantly growing hot. Under the leadership of the company's overall strategy, we grasp the golden opportunity of market growth, continue to deepen the domestic market and accelerate the deployment and promotion of business. We actively extend the industry chain in the middle direction and expand the business boundary horizontally, build an ecosystem that covers the entire scene of tourism, further consolidate and expand the market advantage. In the face of the era of rapid market change, we are committed to technology development, and we will integrate technology applications into the industry, constantly improving service quality and efficiency. Based on the company's years of experience in the industry, rich cultural supply chain resources, and deep data base, we will continue to accelerate the upgrade of AI products, and further enhance user experience and assist industry development. Since entering the second quarter, we have noticed that the activity of the entire tourism industry during the holiday period is extremely high, and the needs of all kinds of users continue to rise. At the same time, the Chinese government continues to strongly support the development of tourism, promoting the construction of tourism technology facilities, and improving the quality of clothing, encouraging cultural integration and innovation, assisting tourism to transform and upgrade, and creating a good environment for the development of tourism industry. As the leading platform of the industry, We are in the wave of high-quality development, both grasping the opportunity to upgrade the industry and facing the innovative challenges brought about by the transformation of consumer demand. In terms of user operation, we focus more on increasing the value of users and the competitiveness of technology. At the same time, we expand international business, deeply dig into market needs, and promote the rapid growth of advanced business, and continue to expand the coverage range of overseas markets. We are very optimistic about the long-term development of Chinese tourism industry, By continuing to deepen the layout on the industry chain, we will enhance our own competitive advantage. In mid-April this year, we announced the acquisition of Wanda Hotel Management Company, which is looking forward to the growth potential of the Chinese hotel management market. This acquisition will further enhance our influence on the industry chain and assist the company's long-term development. We will continue to create long-term value for interest-related people, make contributions to the high-quality development of the tourism industry, and achieve sustainable development. Good evening, everyone.

Welcome to our 2025 first quarter earnings call. In the first quarter, China's travel industry has continued to grow steadily, resurgent enthusiasm for domestic travel. Guided by the company's overall strategy, we see the golden market growth opportunities deepen our domestic market presence and accelerate expansion of our outbound travel business. At the same time, we have been actively expanding the industry chain vertically and broadening our business scope horizontally with the goal of establishing a comprehensive ecosystem that covers all travel scenarios, thereby strengthening and expanding our market advantages. In response to the rapidly changing landscape, We remain committed to technological advancements and integrate technological applications into our business operations to continuously enhance service quality and efficiency. Leveraging our extensive industry experience, abundant travel and cultural supply chain resources, and solid data foundation accumulated over the years, we're accelerating the iteration and upgrade of our AI products. This enables us to further elevate user experience and contribute to the development of industry. Since the second quarter, we have observed exceptionally high activity levels in the travel sector during recent holidays, with sustained strong demand across all user segments. Concurrently, the Chinese government continues to support the growth of the travel industry, promoting the development of travel infrastructure and enhanced service quality. The government also encourages the integration of cultural and travel resources. aiding the transformation and upgrading of the industry, and it fosters a favorable environment for the industry's growth. As a leading player in the industry, we're both capitalizing on opportunities arising from industry upgrades while addressing the innovation challenges driven by shifting consumer demands in the era of high-quality development. In terms of user operations, we're placing greater emphasis on enhancing user value and driving technological iteration to further improve service efficiency. On the business front, we're strengthening our competitiveness in the domestic market through a multidimensional business strategy while expanding our global supply chain network and delving deeper into market demand. These initiatives enable the rapid growth of our outbound travel services and the continuous expansion of our reach and overseas market. We remain highly optimistic about the long-term prospects of China's travel industry. By continuously deepening our strategic positioning across industry chains, we seek to amplify our competitive edge. In mid-April this year, we announced plans to acquire Wanda Hotel Management Company, demonstrating our confidence in the growth potential of China's hotel management sector. This acquisition would significantly enhance our influence within the industry chain and support the company's sustainable growth. We will continue to deliver long-term value for stakeholders, contribute to the high-quality development of the travel industry, and achieve sustainable development. Next, I will hand over the call to Joyce. She will share with you our business and operational highlights of the first quarter of 2025. Joyce, please go ahead.

Thank you. China's travel demand maintained a steady growth in the first quarter. with consumers putting more emphasis on diversity and uniqueness. Riding on this tailwind, we continue to expand our footprint across the travel industry, as well as strengthen our market presence. As a result, both our revenue and profits post a satisfying growth in the past quarter, extending the healthy growth trajectory. As a key pillar for the company, our transportation business has consistently demonstrated its competitiveness and resilience among peers, further solidifying its market influence. In terms of editing business, proactive efforts were made to explore opportunities arising from niche travel scenarios, such as ethnic minority festivals, such as to engage a more diverse user base and further enhance our market presence. In the meantime, Our international air ticketing business continues to see rapid expansion in its market share on the backdrop of restrained pricing strategies. During the quarter, its value registered more than 40% growth year over year. In addition, monetization capabilities have been improved further over the past quarters, driven by a continued focus on optimizing the ROI of investments in user subsidies. As for the trend ticketing business, We provide users with seamless experience rather than a single ticket. We offer users with a range of value-added services designed to enhance their travel experience during every stage of their journey. We also provide users with accessible and variable travel solutions by leveraging our algorithm-driven Huixin system. All these have led to higher user royalty and improved monetization capabilities. For the past quarter, we have observed a sustained increase in demand for accommodation business. We continue to capitalize on emerging opportunities, including those driven by entertainment and sports events, as well as growing demand for the short-haul travel. Meanwhile, more efforts were made to improve user experience. We optimized our membership benefits by placing greater emphasis on attracting and retaining high-tier members. which in turn further reinforce user royalty on platforms. Additionally, we also sped up our response to user requests and worked to resolve their inquiries as soon as possible. On the other hand, our international accommodation business concentrated on strengthening supply chain capability to enhance our pricing competitiveness and attract more users. Besides, we started to elevate our efforts in implementing cross-sell strategy by diverting traffic from international air-tigeting business. Over the quarter, our international alumni sold maintains rapid growth momentum and post more than 50% growth year-over-year. To seize upward trend of China's travel industry, we have been strategically investing cross-industry chain to reinforce our influence within the sector. We see significant potential in China's hotel industry given the lower trend rate compared to direct markets which presents a specialist room for us to expand our hotel management business. Since 2021, we've been investing in the hotel management business through internal incubation, investment, and acquisition. As of now, we've established a comprehensive hotel brand portfolio ranging from economy to middle to high-end, with our back-end support systems such as PMS, supply chain platform, and membership program. By the end of March, the number of our hotels in operation totaled over 2,500, with more than 1,400 in pipeline. Back in middle April, we announced to acquire 100% equity in Wanda Hotel Management Company, a company that operates under an asset-line model and specializes in managing middle-upscale and even luxury hotels, as well as providing hotel design and construction consultancy business. Wanda Hotel Management has a vast network of luxury and high-end hotels across China, standing out among domestic peers and showing cases of exceptional scarcity within the industry. As of the end of 2024, it had 204 hotels with over 40,000 rooms in operation. We believe that the addition of Wanda Hotel to our existing portfolio will enhance our brand metrics bring valuable talents and expertise in operation of upscale and luxury hotels. This will substantially improve the profitability of our hotel management business and further strengthen our market presence and influence in China's hotel management sector. Turning to our user side, we see remain our largest and most effective channels as we continuously start to enhance the efficiency and effectiveness within the ecosystem. Our standalone app, now the primary engine for new user acquisition, targets younger generations and has launched innovative market initiatives such as events centered around popular theme parks, such as solidified mindshare among younger cohorts. During the first quarter, its DAUs continue to activate a strong growth momentum, achieving nearly 60% growth year-over-year. Besides, we stepped up efforts in social media to boost user engagement. By fostering long-term user loyalty, we are dedicated to enhancing user value. Over the quarter, we have upgraded our loyalty program to offer more privileges and benefits to users, in particular to high-tier members. We now enjoy an extended range of travel benefits across a variety of scenarios surrounding accommodation and transportation. such as free pickup service, free cancellation, as well as access to VIP ranges and medical assistance. In addition, our members enjoy reciprocal members of several hotel groups, which further enriches the user experience. Meanwhile, our Blackwell members program continue to explore travel scenarios at multi-fronts, including short-haul travel and seasonal outings. As of the end of March, The Syrian number of its members reached more than 100 million at a 30.4% increase from the end of last year. With innovative marketing campaigns and effective user engagement, we have built the most extensive user base in China's OT industry. For the 12 months ending March, our annual paying users once again recorded a historical high and reached 247 million. with the cumulative number of travelers served achieving 1.96 billion. This indicates an average of eight purchases per user annually. In the meantime, our MPUs for the first quarter also hit a new high and achieved 46.5 million, an increase of 9% year over year. On top of that, our annual output continues to grow in momentum and climbed to more than 62 RMB during the quarter, displaying nearly 26% increase year over year. We proactively embrace new technologies and committed to transforming our business with a generative AI. In late March, we upgraded our proprietary tourism-specific large language model, Transcene, and launched an AI agent, DeepTrip. which leveraging the reasoning capability of DeepSeq and the supply chain advantagement of our OT platform. DeepTriven not only assists users in planning complex travels in itineraries, but also enables direct access to booking service. More recently, we've added some social featureings, including visualizing the itineraries that increase readability and shareability. We also seek to integrate DeepTrip into various booking scenarios to increase effectiveness of our cross-sell strategy. Meanwhile, Generative AI has also been applied in our workflows to further enhance internal efficiency. In terms of coding, it has substantially reduced our workload by 20%. As for customer service, Generative AI currently handles 50% of our online inquiries related to accommodation reservation, which will be rolled out to more scenarios in coming quarters. Besides, we've also leveraged DeepSeq's reasoning capabilities to help customer service staff to better understand customers' requests and respond promptly. While fully committed to implementing global best practices in ESG, and have made significant strides in improving our ESG performance over the past years. In May, we were included in S&P Global Sustainability Yearbook China for the third consecutive year. The recognition of our excellence in ESG performance, as well as our consistent efforts in sustainability. More notably, we were also awarded English Remover for our ESG achievement. highlighting our leadership among the global peers. I will stop here and give the call to our CFO, Julian. He will share with you the detailed financials for the first quarter. Julian, it's your turn.

Thank you, Joyce. Good evening, everyone. Over the past quarter, China's travel industry has sustained steady growth marked by a diversification of travel demand. We have observed robust travel enthusiasm across various scenarios and have continued to enrich our products and services to satisfy travelers' involving demand. Our profound comprehension of user needs coupled with effective strategic execution once again enabled us to deliver outstanding performance in this quarter. In the first quarter of 2025, we obtained outstanding results for both top line and bottom line. We reported a net revenue of RMB 4.4 billion, representing a 13.2% year-over-year increase from the same period of 2024. Thanks to our effective marketing investments and enhanced operational efficiency, we achieved a remarkable adjusted net profit of around 788 million, representing a 41.1% year-over-year growth with an adjusted net margin of 18% compared with margin of 14.4% in the same period of 2024. Our core OTA business. Revenue exhibited an excellent growth of 18.4% year-over-year and recorded RMB 3.8 billion, driven by growth across our accommodation reservation, transportation ticketing, and other business segments. Our transportation ticketing revenue for the first quarter was RMB 2.0 billion, representing a 15.2% increase compared with the same period of 2024. On one hand, we continue to optimize our VAS offerings to better meet diverse needs of our users. On the other hand, we place the greater emphasis on the ROI and our sales marketing expenses to further enhance the efficiency of our user subsidy strategies. Meanwhile, our outbound visits continue to deliver strong growth now accounting for more than 5% of our total transportation ticketing revenues, making a year-over-year increase of 3 percentage points, driven by sustained demand for all-bound travel. Our accommodation reservation business achieved RMB $1.2 billion for the first quarter of 2025, representing a 23.3% increase from the same period in 2024. We are continuing to implement our cross-selling strategy by utilizing the vast traffic from the transportation business. In the meanwhile, we proactively explore diverse accommodation scenarios to capture emerging growth opportunities. As such, we saw robust growth in room nights sold in the past quarter. Besides, our international accommodation business also delivered stellar growth further contributing to the overall performance of the business segment. In the first quarter of 2025, our extensive presence in China's mass market enabled us to maintain a resilient RADR. Thanks to our continued implementation of more precise and effective marketing strategies, our blended take rate improved year over year as well. Other visits continue its trajectory of robust performance, with revenue reaching RMB 603 million in the first quarter, representing a growth of 20% year over year. The growth is mainly driven by excellent performance of our hotel management visits and PMS visits. Our tourism visits achieved a revenue of RMB 585 million representing a 11.8% decrease from the same period in 2024. This decline was mainly driven by our optimization of risk management through the reduction of pre-purchase visits, which represents GMV as revenue. Additionally, safety concerns regarding Southeast Asia regions also negatively impacted the performance of our tourism business. In terms of profitability, our gross profit increased by 19.8% year-over-year to RMB 3.0 billion, with gross margin rising to 68.8% for the first quarter of 2025. Our operating profit for the core OCA visits achieved RMB 1.1 billion, with 29.8% 2% margin in the first quarter of 2025, increasing from 22.6% year-over-year, mainly driven by more efficient sales marketing investment and operating leverage. The operating profits for the tourism business achieved RMB 26 million with 4.4% margin. Our adjusted EBITDA increased by 41.3% and reached RMB 1.2 billion, with a 26.5% margin compared to 21.2% margin in the same period last year. Adjusted net profit grew by 41.1% to RMB 788 million with a 18% margin compared to 14.4% margin in the first quarter of 2024. Service development and administrative expenses in the first quarter of 2025 increased by 6.7% from the same period of 2024, excluding share-based compensation charges. Service development and administrative expenses in total accounted for 15.8% of revenue in the first quarter, compared with 17% of revenue in the same period of 2024. Selling and marketing expenses in the first quarter of 2025 increased by 6.2% from the same period of 2024. Excluding share-based compensation charges, selling and marketing expenses accounted for 33.0% of revenue in the first quarter compared with 35.0% of revenue in the same period of last year. As of March 31st, The balance of cash, cash equivalents, restricted cash, and short-term investment was RMB 11 billion. China's travel market maintained its growth momentum in the first quarter of 2025, laying a solid foundation for the promising development of industry for the rest of this year. In April and May, travel demand continued to emerge across diverse market segments. This trend was particularly evident during the recent Labor Day holiday when surging travel activity underscored the enduring significance of travel in consumer priorities. Data released by governmental authorities indicate a decent year-over-year increase in the domestic tourist volume during the holiday period. Within the thriving travel landscape, we once again achieved a solid growth driven by our strategic execution and operational excellence in capitalizing on marketing opportunities. Looking ahead, we maintain a positive outlook for China's travel industry this year, as diverse travel preferences continue to materialize across various travel scenarios. With sustaining strong growth in our domestic business We are also dedicating our effort to expanding our outbound business to establish a stronger foothold in the global travel market. Concurrently, we will continue to delve into the industry chain to strengthen our competitive edge with a particular focus on advancing our hotel management business as a secondary growth driver. Given the solid business foundation we have established, we reaffirm our confidence in maintaining industry-leading position and robust profitability. Additionally, we will continue to place greater emphasis on our ESG performance and are committed to creating more value for society and our stakeholders. With that, operators, we're ready to take questions now. Thank you.

Thank you. We will begin the question and answer session. If you would like to ask a question, please press star 11 and wait for our name to be announced. Kindly remit your questions to two questions at a time. If you have any follow-up, you may rejoin the queue. One moment for the first question. Our first question comes from Brian Gong from CT. Please go ahead.

Thanks, Matt, for taking my question, and congratulations on the solid results. I have two questions. First one is, how does management think about our growth pattern of core OTA business in second, third, and fourth quarters, respectively? After May or June, our hotel take-away base will normalize. What could be drivers to our core OTA business? And the second question is for margin. From marketing perspective, the comps will normalize from second quarter and onwards as well. Will our margin continue to extend ahead? If that's the case, what are drivers? Thank you.

Okay. Thank you, Brian, for the questions. For the first question, actually, I would like to address the latest performance first and then give you more color on the outlook of the rest of the year. The Chinese travel market continued to demonstrate the resilience in the past few months, just like what we mentioned in our prepared remarks. According to the Ministry of Culture and Tourism, tourists travel within China and the tourism revenue increased by around 6% and 8%, respectively, year over year during the labor holiday. Besides, the Ministry of Transport reported an 8% year-over-year growth in national passenger throughput. Both hotel ADR and air ticket price showed positive year-over-year growth in Labor Day holiday and also in April. Our accommodation and transportation ticketing visits continue to record decent growth. with improving monetization and pricing during the Labor Day holiday and also in April. Besides, our targeted and effective marketing initiatives allowed us to engage outbound travelers with improved efficiency, enable us to capture market opportunities, and also strengthen our competitive position in the outbound business segment. For the rest of the year, we remain optimistic about the prospects of China's travel industry. The Chinese government has identified tourism as a vital engine for economic growth, actively supporting the sector with policies aimed at ensuring its sustainable development. Meanwhile, consumer preferences are changing, with travelers seeking more diverse and unique experiences from new destinations. to specialized activities such as concerts, music festivals, and sports events, et cetera. This shift in consumer behavior highlights the growing importance of travel as a lifestyle choice, increasingly prioritized over traditional physical use. All of these factors represent the vast potential within China's travel industry. In the coming quarters, we will keep following our strategy to seizing business opportunities while aiming for steady growth with healthy profitability. We will concentrate on boosting ARPU growth by enhancing cross-out and increasing user purchase frequency. We will also take a more disciplined approach to our sales and marketing investments. ensuring that we allocate resources efficiently and maximize returns. In terms of the growth of our accommodation segment, one thing is that take rates still have some kind of improvement space to improve because we will execute our accuracy sales marketing UMass strategy to make our subsidies more accurate. And also, A good thing is that the ADR has been turned positive growth since April, and we are very optimistic to see a continuous trend of the ADR year-over-year growth in the rest of the year. So I think that is the drivers for our accommodation revenue growth. And for the second quarter, in terms of our margin improvement strategy, Actually, one of our core competencies is our ability to operate with flexibility and efficiency. We always adjust our strategies swiftly according to evolving market dynamics. For the margin side, in the short term, we will continue to strive for market share gain, but we'll carefully monitor the ROI and our sales marketing expenses. We will continue to optimize the efficiency of both our performance-based marketing and also branding efforts according to market conditions. We will make sure every dollar we spend supports the execution of our strategy. As such, we expect that the sales marketing expenses as a percentage of revenue will continually decrease year over year in the coming few quarters. Additionally, we have taken steps to enhance operational efficiency by streamlining processes and optimizing quota structures, leading to reductions in both service development and GMA expenses. Also, for our outbound business, while we remain committed to capturing opportunities by investing in service development as well as selling and marketing spendings, we will place greater emphasis on improving both marketing and operational efficiency this year. Therefore, we expect that the ROI of our outbound business investment will continue to improve, leading to profitability in the segment in 2025. So, as a result, with the above-mentioned efforts, we expect that the margin of our core OTA business will be continuously improve year-over-year in 2025, while we will maintain a decent growth on top-line, as always. Thank you for the questions.

Thank you.

One moment. Thank you.

Thank you. One moment for the next question. Our next question comes from the line of Chu-Ting Wang from CICC. Please go ahead.

Thanks, management, for taking my question. Congratulations on this long quarter. I have two questions. The first question is about outbound business. Taking tariff impacts into account, how do we forecast the growth rate of outbound business for the next quarter and the second half of the year? And what is a better preparation of international business revenue in the total revenue in 2025? And my second question is about AI and large-language models. After Tongcheng launched AI agent DeepTrip in the first quarter, what have been the effects, such as whether it has brought incremental users or higher user conversion rates? And what new features will be introduced in the future? And what are the potential collaborations with general AI agent platforms like Tencent, Huanyuan? Thank you.

Thank you, Trudy, for the question. So, for the first question is the airborne travel business. As I mentioned, our airborne travel segment has demonstrated remarkable growth, consistently surpassing the industry benchmarks. As I mentioned before, in the first quarter, our international room line sold and international air-taking volume maintained a rapid growth momentum and increased by more than 50% and 40% year-over-year, respectively. We continue to solve robust demand in key destinations, including Japan, Korea, Malaysia, and Singapore. Building our strong and established user base, we are now proactively tapping into the growing demand for our bond travel. So our efforts are primarily centered on international air tech teams, where we implement competitive pricing strategies to build our market presence, attract new users, and deepen their connection with our platform. Currently, the revenue from our airborne air ticketing business accounts for over 5% of our total transportation ticketing revenues. We also started to explore the opportunities of cross-selling from airborne air tickets to accommodation, so to drive both revenue and profit growth. Now, with a deeper understanding of the preference and behavior of airborne travelers, we have optimized our resource allocation to enable more precise and efficient promotional strategies. Building on this progress, we have implemented a margin-improved program for our outbound business in 2025, focusing on marketing and promotional efforts with a stronger emphasis on ROI. We will continuously enhance our outbound travel offerings through strategic partnerships with leading global OTs, wholesalers, airlines, and the various overseas TSPs. And additionally, we also increase our investment in research and development to improve service capabilities and provide a seamless booking experience for our outbound travelers. Over the next two to three years, our primary focus will be on increasing business volume and strengthen our mass user base while maintaining a clear emphasis on profitability. We're confident that this segment will involve a key growth driver for the company and deliver higher margins compared to our domestic business in the longer term. And the second question is concerning DeepTrip. We believe that DeepTrip is a cutting-edge multilingual travel planning platform designed to serve both domestic and international tourists. Currently powered by our Chenxin AI and integrated with DeepSeq technology, it offers accurate, actionable, and personalized travel solutions in nine languages, including English, French, Japanese, and more. I believe DeepTrip is still in its early stage of adoption, and the current user patterns reflect the natural process of user behavior evolution. As an advanced AI-driven travel planning tool, DeepTrip introduced innovative features that require time for the user to fully integrate into their decision-making habits. Building user trust and familiarity with AI-generated recommendations, I think it is a gradual process. And additionally, I should mention that DeepTrip is designed as a special vertical application within the travel domain. rather than a standalone product that the user is actively seeking out. Planning is a relatively low-frequency scenario, which means the focus is on embedding DeepTrip into a board and business environment and enhancing its role as part of a seamless travel ecosystem. Recently, we've added some social features, including visualizing the itineraries, such as increased readability and shareability. We will also seek to integrate DeepTree into the various booking scenarios to increase effectiveness of our cross-sell strategy. As we continue to refine the product and integrate it into more user cases, we expect adoption and engagement to grow organically over the time. We will stay at the forefront of AI advancement, continuously strengthen our investments in this area, and introducing innovative user-oriented features to enhance the travel experience of our users. Thank you. Thanks.

Thank you for the questions. Our next question comes from the line of Tom Tang from Morgan Stanley. Please go ahead.

Thanks for the opportunity to ask questions and congratulate the nation on a very strong quarter. I have two questions for the management. The first one is on our standalone APP. So we just want to have an update on the current progress of the standalone APP and how does it contribute to our strong performance in the quarter and probably in the future as well. And the second question is, we noticed that our MPU has reached an all-time high and our output is still growing. So just wondering what has the management done to improve the user transaction frequencies and user values for the quarter and in the future. Thank you.

Thank you for the question in terms of our standalone apps and also how we will improve our ARPU in the rest of this year. So first I would like to address the performance and also the future strategy of our standalone apps, how we would like to develop this business. We have been actively diversifying our traffic sources, I think since 2023, with a strategic focus on growing our standalone apps since last year, especially the second year of 2024. Our APP users tend to have higher purchase frequency and spending, making them a valuable segment Given the distinct user behaviors between WeChat platform and our standalone app-based platforms, there is a very minimal overlap between the two user phases. So the good news is that developing our APP channel enables us to attract purely new incremental users rather than simply shifting existing ones. So in recent quarters, we have expanded collaborations with leading handset vendors to pre-install our app on selected new device models. We also have seen a steady increase in activation rates and encouraging conversion of our new users into paying customers in the first half of this year. Additionally, we have intensified our efforts to acquire users through APP store promotions and social sharing initiatives. Besides, we continue to strengthen brand promotion and marketing efforts to enhance user engagement and loyalty. Through innovative campaigns and tailored offerings, we have successfully attracted substantial numbers of young users As a result, the DAU of our standalone apps in quarter one increased by more than 60% year-over-year. Moreover, our APP achieved a significant milestone during the Labor Day holiday, with DAU surpassing 4 million on average, marking yet another, I think, important milestone in our growth journey. To support this execution expansion, we have strategically allocated our sales marketing budget to prioritize user acquisition for our standalone app while keeping overall sales marketing expenses relatively stable. Although user acquisition costs for app are higher than that for wishing with longer payback period, we believe that higher ARPU and stronger user loyalty will drive long-term returns. For the revenue from our own apps now contributed for around 7% of our whole OTA revenue already. So we remain committed to this strategy and expect the revenue contribution for our APP to continue growing in the rest of this year. And also for ARPU, we think that is a very successful strategy since the second half of last year. The ARPU improvement actually drives a lot of contribution for our total revenue growth of the company. For the ongoing focus is to continue enhancing our user value rather than solely expanding user volume because we have already established a very huge user base, as we always told. We will emphasize on enhancing user engagement and increasing our pursuit of various matters, for example, We will refine our recommendation algorithms and use tailored promotion to encourage crowd-selling within different business segments, aiming to increase revenue per transaction and overall take rate. And also, we will continue to strengthen our outbound and international business, capitalizing on the growing demand for overseas travel. This approach will help drive further improvements in our R2. Also, we will continue to promote our VEF products and services that cater to our users' travel needs. For example, we will further optimize our intelligent travel solution hoisting system so as to improve our monetization. Moreover, we will continue to introduce innovative products and services across all different scenarios to improve user satisfaction. We will continue to expand our product and service offerings on our platform so as to enhance user purchase frequency and user value on our platform. Lastly, we will leverage new technologies, just like Joyce mentioned, our priority tourism-specific AI, Chenxin, to enhance user experience. This will drive higher user engagement and also encourage repeat transactions, ultimately boosting our ARPU in the future. Thank you for the questions.

Thank you for the questions. One moment for the next question. Your next question comes from the of UBS. Please go ahead.

Hi. Good evening, management. Thank you for taking my questions. Firstly, I want to get your thoughts on how the macro uncertainties, given the tariff tension, the continued recovery of , et cetera, will impact the sustainability of travel demand in the second half of this year. Are we seeing any changes in travel spending or travel patterns so far? And second, given our recently announced acquisition of one hotel management business, could you please elaborate your thoughts on the rationale behind the move And how do we plan to drive synergies with our core OTA platform and also our strategic planning and resource allocation for hotel business longer term? Thank you.

Thank you for the question. For the first question, I think we have addressed a lot in previous of this conference. Although the macro has some kind of uncertainty for the whole domestic market, but for industry market, we don't see any drop or any uncertainty in this segment. Because as we talked a lot of times, we find consumer behavior changed since 2023 after the COVID. the consumption power from the traditional physical goods to the experiential consumptions. So actually, we find a lot of additional consumption power released in our industry. So that is why we say that we are very optimistic of the growth for the whole industry, travel industry, for this quarter and the rest of this year. And also, since April, I think there's a lot of signal to show the encouraging of this industry growth. For example, the ADR. The ADR has dropped in the past year, in 2024, because we have a high base in 2003. But since this quarter, the quarter two, we see a clear signal that the ADR has already turned positive. And also, for the ATV, it's also turned positive in labor holiday in the future. So we think the users would like to pay more for the hotels and also for the air tickets and train tickets, and the users would like to pay more for the high-quality accommodations as well. In terms of the 1.0, I think Joyce will give you more color on this question.

Thank you for the question. As we have mentioned before, we think that the hotel chain management market is huge in China, given the low hotel chain rates when compared with the retail markets. So that's why we are very optimistic about the long-term prospects of the hotel management business. We have been focusing on expanding our hotel management business for the past three to four years. And now we have been over 2,500 hotels in operation. So now we have a platform which does not only include 12 major hotel brands, but also have large travel services such as companies, et cetera. So with the investments in hotel chain company, we believe we can better utilize our membership program for higher thickness and retention. Meanwhile, we also share the benefit with the hotels and offers pure service to our users. Besides, HotelChain is a very important offline user acquisition channel for the company to accelerate online penetration in low-tier cities. And in terms of this acquisition, when the hotel management, it has a comprehensive portfolio of luxury and high-end hotel brands with a strong market influence and a significant brand value. especially in tier two or below cities. It has an extensive network of nine major hotel brands across China. The addition of this brand will further enhance our portfolio and secure full hold for us in the luxury and high-end hotel market, which has traditionally been dominated by international players. Besides, it has a management team with extensive industry experience and has already built a well-established talent pool. Through this acquisition, we will also get access to valuable operation talent expertise. Comparing to building a high-end hotel brand from scratch, which requires significant investment in capital, manpower, and time, and comes with a huge uncertainty, we believe acquiring a merchant brand is the optimal choice for us at this stage. As one of the leading OT platforms in China, we have extensive user coverage and deep insights about users and industry. This advantage can be leveraged to support the target company's improved marketing and user acquisition efficiency. Moreover, our existing technology of capabilities in hotel management can further enhance door opening efficiency and accelerate expansion of the target company. In addition, the existing membership program of the target company demonstrates strong customer loyalty. This membership program can be seamlessly integrated with Tongchuan Elon Hotel's existing membership systems, unlocking the potential value. Last but not least, from a financial perspective, Tiger Company has strong profitability. Its consolidation to the company's financial statements will also enhance our profitability of our business. Thank you.

Thank you for the questions. There are no more questions from the line. I'd like to hand the call back to Kylie for closing remarks.

Thank you. I'll be closing the call now. If you wish to check out our presentation and other financial information, please visit the IR section of our company website. Thank you and see you next quarter.

That concludes today's conference call. Thank you for your participation. You may now disconnect your line.