Tongcheng Travl Hldgs Ltd

Good day and thank you for standing by. Welcome to Tongcheng Travel, 2026 Second Quarter and Interim 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, please press star followed by 11 on your telephone and wait for your name to be announced. Please be advised that today's conference is being recorded. I would now like to hand the call over to your first speaker today, Ms. Kylie Yeung, Investor Relations Director of the company. Please go ahead.

Thank you. Good morning and good evening, everyone. Welcome to Tongcheng Travel's 2026 Second Quarter Results Conference Call. I'm Kylie Yeung, Investor Relations Director of the company. Joining us today on the conference call are our Co-Chairman of the Board, Executive Director and CEO, Mr. Hock Ma, our CFO, Mr. Julian Zhang, our Chief Capital Officer and President of Wonder Hotels and Resorts, Ms. Joyce Li. For today's call, our management team will provide a review of the company's performance in the second quarter. Hope will brief us on the company's strategy. 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 section 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 risks. 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 unordered 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 document in the IR section of our website. Now let me introduce our chairman, Hope. Hope will be presenting in Mandarin, and our colleague will provide the English translation afterwards. Hope, please go ahead.

Thank you, Kylie. Welcome to our second quarter of the year. In the second quarter of the year, the Chinese tourism market is in good shape. The demand for travel during the holiday season and the spring break is still high. However, with the increase in fuel costs, the ticket prices have risen, increasing travel costs, leading to long-term travel needs and gradual pressure. Faced with the short-term pressure from high fuel costs, we actively adjust our operation strategy, implement targeted cost management measures, and continuously improve operation efficiency to respond to external challenges. On the other hand, China's travel consumption quality Thank you. Thank you. We accelerate the expansion of international business and deepen cooperation with international suppliers. We continue to enrich products and services to better meet the needs of users. In this period, international hotels and international flight tickets have achieved long-term growth. The number of Japanese hotels in the international hotel industry has increased significantly. In addition, as the company's second growth engine, our hotel management business focuses on the rapid expansion of scale. With the perfect brand correction and advanced technical capabilities, are the leading hotel management groups in China. According to the China Hotel Association's 2025 China Hotel Group size list, the number of hotel rooms in Yilong Hotel Technology and Wanda Hotel & Resort is ranked 7th and 22nd in the list. With a clear strategic layout, outstanding operating capabilities and flexible and efficient management capabilities, the company's income and profits continue to grow steadily in the second quarter. In the new stage of industry high-quality development, We have always focused on increasing the value of users and deepening the diversification needs of consumers in order to integrate the products and services of the general public to enhance the user travel experience. On August 21, we completed the cash invoices for low-cost travel and realized the control of low-cost travel. This time, SoGo is an important step in the strategic layout of the company's travel field, which helps the company to quickly enter the windmill market and complete the industrial chain layout. We look forward to the short-term pressure facing the tourism industry in the future. But the 15-5 plan for strong tourism construction will further highlight tourism industry as the position of the national economic strategic investment industry. The policy of the first stage is expected to provide support for the long-term stable development of the industry. At the same time, we see that digital technology, such as artificial intelligence and big data, will accelerate the integration of tourism industries and drive the transformation of industries. We believe that the growth opportunity brought by the AI era is greater than the challenge. We actively embrace the technological changes brought by AI, trying to integrate AI into business scenarios, promote business model upgrade and optimize business processes, and thus promote long-term sustainable development of companies. We are confident that in the AI era, through clear strategic layout and efficient strategic execution capabilities, we will first seize the opportunity to grow and create long-term value for stakeholders.

Thank you Kylie and welcome to our 2026 second quarter earnings call. China's travel industry was off to a solid start in the second quarter of 2026. With resilient travel demand during Qingming holiday and spring break, However, this positive momentum was later tempered by higher fuel surcharges, which drove our airfares and travel costs, resulting in temporary pressure on long-haul travel demands. Facing short-term headwinds arising from higher fuel surcharges, we proactively adjusted operating strategies, implemented targeted cost management initiatives, and continuously enhanced operational efficiency to navigate the challenging market environment. On the other hand, the growing trend towards quality-oriented and experience-driven travel consumption remained intact, characterized by increasing consumer demand for immersive experiences. In light of this structural shift, we remained committed to our long-term strategy, continuously strengthen our competitive advantages while maintaining the organizational agility and flexibility needed to respond swiftly to evolving market conditions. We stayed focused on our core OTA business, further strengthening our market position in China's mass market through continuous innovation in travel products, enhancing service quality, and improving operational efficiency. Meanwhile, we accelerated the expansion of our international business, deepened our partnerships with global suppliers, and continued to enrich our outbound product and service offerings to better address users' evolving travel needs during the quarter. Both our international accommodation and international air ticketing business demonstrated impressive growth, with international room night sold reaching a record high. In addition, our hotel management business, positioned as the company's second growth engine, continued to focus on its rapid network expansion. Supported by a comprehensive brand portfolio and advanced technological capabilities, it has rapidly grown into one of China's leading hotel management groups. According to the 2025 ranking of the China top hotel groups released by the China Hospitality Association, Yilong Hotel Technology Platform and Wanda Hotels and Resorts ranked number 7 and number 22 respectively in terms of room count, underpinned by our clear strategic positioning, strong operational capabilities, and organizational agility. We continue to achieve solid growth in both revenue and profit during the second quarter. As the travel industry enters a new phase of high-quality growth, we remain unwaveringly focused on enhancing user value. We deep dive into evolving user needs and deliver products and services that better meet the needs of the mass market, thereby enhancing the overall travel experience. On August 21st, we completed the general cash offer for all issued shares of DiDa Inc. and as a result have become the controlling shareholder of DiDa. This move represents an important step in our strategic expansion within the mobility sector, enabling us to rapidly enter the carpooling market and deepening our value chain integration. Looking ahead, while the travel industry continues to face near-term challenges, the approval of the 15th Five-Year Plan for building China into a strong tourism nation further underscores the role of the tourism industry as a strategic pillar of the national economy We expect this policy framework will provide a solid foundation for the industry's long-term sustainable development. Meanwhile, the rapid integration of AI technologies, including artificial intelligence and big data, is accelerating the transformation and upgrading of the travel industry. We believe the AI era presents more opportunities than challenges. We are proactively embracing AI-driven technological transformation. and are committed to deeply integrating AI into our business scenario to further optimize our business model and operational efficiency, thereby fostering the company's long-term sustainable growth. Amidst the AI era, we are confident that with our clear strategy and outstanding execution capabilities, we are well positioned to capture the emerging growth opportunity and create long-term value for all our shareholders. Next, I will hand over the call to Joyce. She will share with you our business and operational highlights of the second quarter of 2026. Joyce, please go ahead.

Thank you, Ho. China's travel market was marked by a challenging macro environment in the second quarter as elevated airfares, mainly driven by higher fuel surcharges, weighed on long-haul travel demand against this backdrop. We remained disciplined in our execution and delivered solid operational results across all business lines. In the second quarter, our accommodation business sustained its underlying demand resilience. Although higher airfare dampened long-haul travel, local and short-distance travel demand maintained a growth trajectory, underpinning steady hotel bookings. We continue to observe a structural shift in consumer preferences toward higher quality hotels. The proportion of higher-star hotel room nights sold on our platform increased further during the quarter by approximately 3 percentage points, leading to a decent year-over-year increase in our ADR. To capitalize on users' growing appetite for experience-driven travel, we curated destinations with strong experiential appeal and launched differentiated interactive marketing campaigns. These efforts drove room night growth in these regions. at a pace faster than the overall platform. During the quarter, we continue to enhance our engagement programs for high-value members by offering more exclusive benefits and elevating service quality. These efforts further increased repeat purchases and strengthened user loyalty. As for our international accommodation business, we continue to enrich our global hotel supply, particularly by deepening partnerships with local suppliers in Southeast Asia and South Korea to secure more high-quality hotel supplies with competitive pricing. At the same time, we stepped up cross-selling with our international air-tipsing business by executing more precise marketing campaigns aimed at outbound travelers. In addition, We refined our international hotel products and services to better address users' travel needs and pain points. As a result, our international room nights sold delivered exceptional growth of more than 50% in the second quarter. Our transportation business faced significant headwinds in the second quarter. The sharp rise in fuel surcharges translated into elevated airfares, which materially suppressed users' travel demands. We responded swiftly, reducing marketing expenses and streamlining our organizational structure. These decisive actions demonstrated the resilience of our transportation business amid market turbulence. Throughout the quarter, we remained unwavering in our commitment to user experience. Our algorithm-powered hoisting system continued to deliver diverse, reliable end-to-end travel solutions. We further integrated more intra-city and short-distance transportation options into our travel itineraries, making journeys more seamless and convenient for our users. On the marketing front, we continued to innovate. In response to the fuel surcharge burden, we launched the Fuel Free Wednesdays campaign for first-time international travelers. We introduced a regret-free card that addressed users' concerns over cancellation fees, substantially lifting conversion rates. Additionally, we leveraged AI to assist users in identifying the best value flight options that match their budgets and schedule preferences, thereby facilitating more informed booking decisions. In terms of our international air ticketing business, we stayed true to our differentiated strategies of competitive pricing plus high-quality service, a proposition that has firmly established itself in the minds of our users. During the second quarter, We collaborated with local partners across key overseas markets and rolled out targeted marketing campaigns around popular overseas destinations. As a result, our international air ticketing revenue maintained a strong growth momentum in the second quarter. Our hotel management business remains a cornerstone of our growth strategy and is positioned as the company's second growth engine. In the first half of 2026, our Elon Hotel technology platform sustained its rapid expansion trajectory with a strategic focus on well-recognized hotel brands. The platform continued to enhance hotel operational efficiency and revenue performance through a comprehensive suite of technology solutions. Meanwhile, we further optimized our membership operations by upgrading the member checking experience through smart hardware integration. Following its consolidation in October 2025, Wanda Hotels and Resorts completed its smooth and effective integration process, revitalizing its organization and strengthening its core operational capabilities. Leveraging post-merger synergies, Wanda Hotels and Resorts has sped up its expansion strategy, strengthened its brand presence, and increased its market share in China's high-end hotel segment. In the first half of 2026, It pursued a refined geographic expansion, concentrating on core cities and popular tourist destinations to accelerate new hotel openings. Beyond China, it quickened its pace of international expansion, deepening its presence in overseas markets and bringing homegrown Chinese hotel brands onto the global stage. With more than 300 hotels, resorts and commercial complexes in operation as of June, The business has reached a key strategic milestone in its development. As of June 30, the total number of hotels in operation exceeded 3,500 with over 2,000 in the pipeline, underscoring the strong growth momentum of our hotel management business and our steadfast dedication to becoming the industry leader in China's hotel management sector. In August, we completed the voluntary conditional general cash offer for all issued shares of Didac and obtained control of the company. This transaction marked a strategic step in expanding our transportation business and strengthening our market position. By leveraging the complementary strengths of the two companies, we aim to better serve users with a broader range of mobility options, particularly in short and medium haul transportation. At the same time, CEDA is expected to benefit from our extensive user base and advanced technology capabilities, supporting its return to a growth trajectory. We are confident that these strategic transactions will create meaningful synergies and long-term value for both companies and our stakeholders. In the second quarter, the Wacom ecosystem remains an important traffic source for us. We continue to optimize our operational efficiency within the ecosystem during the period. Our standalone application, a key vehicle for new user acquisition, sustained solid growth in the second quarter, with DAUs reaching an all-time high of more than 5 million ahead of the May Day holiday. Tapping into users' evolving preferences for a sense of ritual and relaxation, we launched weekend marketing campaigns centered around the weekend getaway theme, deepening interaction with the younger user cohort. Furthermore, We continuously deepened our penetration among younger demographics and enhanced brand awareness. For the 12 months ended June, our cumulative travelers served exceeded 2 billion, with annual paying users reaching 254 million, indicating per user purchase frequency surpassing 8 times. In the meantime, our 12-month hour pool reached R&D 80, representing a year-over-year increase of approximately 10%. We are committed to harnessing AI to deliver superior services while enhancing the company's overall operational efficiency. We proactively pursue strategic collaborations with leading third-party AI platforms to seize first-mover advantages in the AI era. For the second quarter, we further deepened our partnership with the Wacom ecosystem. As one of the first OTAs to integrate with the Wacom AI Assistant, We are actively contributing to the development of the WeThink AI ecosystem. In the near term, our focus is on building and validating our capabilities within this ecosystem, spanning user intent understanding, content search, service invocation, and end-to-end transaction loop. Our proprietary AI trip planner, DeepTrip, continues to iterate on its capabilities to better understand user needs and deliver customized travel itineraries. During the second quarter, we strengthened DeepTrip's memory capabilities, enabling it to incorporate users' historical preferences and deliver more precise, personalized services while enhancing both information, discovery, efficiency and the decision-making experience. In customer service, with further advanced automation functions powered by AI, Beyond the high degree of automation already achieved for routine ticketing and hotel booking modifications and cancellations, we extended AI applications to scenarios such as compensation claim tracking and abnormal order detection, which has significantly boosted both customer service efficiency and user experience. Moreover, we've deepened AI integration into every manual process. Equipping our customer service staff with a diverse set of AI tools that help them understand user inquiries rapidly and accurately, and thus resolving issues promptly. Looking ahead, we will continue to invest in AI across our customer service operations, systematically building up service workflows and user data to serve users with ever greater efficiency. I'll stop here and turn the call over to our CFO, Julian. who will walk you through our detailed financial results for the second quarter. Julian, over to you.

Thank you, Joyce. Good evening, everyone. While travel demand in early April this year remained resilient, China's travel markets have faced headwinds since May, as a significant increase in fuel costs pushed up airfares. The higher airfares have weighed on demand for long-haul travel. creating near-term pressure on China's travel industry. Despite the short-term challenges, we proactively adjusted our marketing strategy and optimized our cost structure while taking steps to improve operational efficiency over the long term, enabling us to once again deliver solid performance across our businesses. During the quarter, both our top line and bottom line achieved steady growth amidst the challenging macro environment. Our total revenue reached RMB 5.0 billion, representing a 6.8% year-over-year growth from the same period of 2025. Through enhanced operational efficiency and precise marketing investments, our adjusted net profit reached RMB 851 million, representing a 9.8% year-over-year growth. Our core OTA business recorded a solid growth with revenue increasing 8.4% year-over-year to RMB 4.3 billion for the quarter. The revenue of our accommodation reservation business reached RMB 1.5 billion in the second quarter of 2026, representing an 8.0% increase from the same period of 2025. The increase was mainly driven by the continued growth in our ADR, along with a modest increase in hotel room night sales. Our blended take rate for the accommodation business remained stable through streamlined marketing strategies. Our international accommodation segments maintained strong growth momentum, driven by the successful execution of our cross-selling strategies, as well as more targeted marketing initiatives. Meanwhile, we further optimized our product offerings and deepened our partnerships with global suppliers, supported by these initiatives. Our international accommodation revenue increased to 4% of our total accommodation reservation revenue in the second quarter, compared with a 2.8% in the same period last year. Our transportation ticketing revenue for the second quarter was RMB $1.8 billion, representing a slight decrease of 2.3% compared with the same period of 2025. Short-term headwinds arising from higher fuel prices and the resulting increase in airfares weighed on long-haul travel demand. To address these challenges, we proactively adjusted our marketing strategies and streamlined our organizational structure. During the quarter, we continued to enhance our monetization capabilities by refining our BAS offerings and strengthening cross-selling across short-distance transportation services, such as carpooling and airport transfers. In our international air ticketing business, We maintained competitive pricing strategy while further improving our service quality. As a result, our international air ticketing business continued to deliver robust revenue growth and accounted for 8.6% of the total transportation ticketing revenue, rising by 2.3 percentage points year over year. Our other business continued to perform decently, with revenue reached RMB 1.0 billion in the second quarter, representing a year-over-year increase of 35.7%. The remarkable growth was mainly attributable to excellent performance of our hotel management business. Our tourism business recorded a revenue of RMB $643 million representing a year-over-year decrease of 2.9%. In the second quarter of 2026, our outbound package tour business underwent a consistent pressure. and many more. In terms of profitability, our gross profit increased by 9.6% year over year to RMB 3.3 billion, with gross margin rising to 66.7% for the second quarter of 2026. In the second quarter, the operating profit of our core OTA business achieved RMB 1.1 billion, with 26.4% margin Our adjusted EBITDA increased by 7.3% year-over-year and reached RMB 1.3 billion. Adjusted net profit grew by 9.8% to RMB 851 million, with a 17.1% margin, up from 16.6% in the second quarter of 2025. Adjusted basic EPS for the second quarter was RMB 0.36, with a year-over-year growth of 5.9%. Service development and administrative expenses in the second quarter of 2026 increased by 16.8% from the same period of 2025 due to the one-off expenses caused by organizational restructuring, excluding share-based compensation charges. Service development and administrative expenses in total accounted for 17.5% of revenue in the second quarter, compared with 15.4% of revenue in the same period of 2025. Selling and marketing expenses in the second quarter of 2026 increased by 5.8% in the same period of 2025, excluding share-based compensation charges. Selling and marketing expenses accounted for 32.6% of revenue in the second quarter, compared with 32.8% of revenue in the same period of 2025. As of June 30, 2026, the balance of cash and cash equivalents, restricted cash and short-term investment was RMB 1.5 billion. For the second quarter, the Chinese travel industry was grappling with challenges of heightened airfares caused by rising fuel costs amid the ongoing conflict in the Middle East, which continuously exerted pressure on the travel industry. Turning to the second half of this year, We expect summer travel demands to be somewhat softer, reflecting the impact of frequent extreme weather. In addition, the fuel prices remain an area of uncertainty for the second half of the year. We will continue to closely monitor external developments and respond swiftly to changing market conditions. Overall, we remain optimistic about the future prospects of the Chinese travel market. With a clear strategy and strong execution capabilities, We are well positioned to navigate market uncertainties and capture long-term growth opportunities. We will remain committed to focusing on our core OTA business, reinforcing our leadership in the mass market, while proactively expanding our international business. With respect to our hotel management business, we will focus on network expansion, while placing greater emphasis on improving operational efficiency. Furthermore, We will continue to embrace the opportunities presented by technological revolution and accelerate the integration of AI across our business operations to further enhance operational efficiency. Finally, as an industry-leading ESG advocate, we remain committed to continuously improving ESG performance and delivering sustainable long-term value to all stakeholders. With that, Operator, we are ready to take questions now. Thank you.

We will now begin the question and answer session. If you would like to ask questions, please press star 11 and wait for a name to be announced. One moment for the first question. The first question comes from the line of Qiu-Ting Wang of CICC. Please go ahead.

Hi. Thanks, Minister, for taking my question. and congratulations on the solid results. And my first question is about the travel demand. How was service performance over the summer vacation and what is the status of advance booking for Mid-Autumn Festival and National Day holidays? And what is your outlook for these holidays? And excluding the impact of higher fuel and air ticket prices, how is underlying travel demand trending? My second question is on the competition. How would you assess the recent competitive landscape and have new observed intensifying competition from AI chat boards and other contact platforms? Thanks.

Okay. Thank you for the question, Xiuqing. Yeah, the start of the summer travel season was somewhat softer than expected, like what we mentioned in prepared remarks, mainly due to the extreme weather conditions at major tourism destinations, especially during the middle of July, 2026. As the summer holiday progressed, the demand showed signs of improvement in the first week of August. supported by lower airfares following the reduction in fuels to targets. However, adverse weather conditions in the second week of August resulted in widespread flight cancellations, which temporarily disrupted the travel demand. And looking ahead, we will closely monitor travel demand trends through the upcoming National Day holiday which will provide a useful indicator of how demand is evolving. Our focus remains on enhancing user value through better production and services, more seamless and personalized travel experiences, and stronger cross-selling and value-added service capabilities to drive user value and our R2 growth. We will also place greater emphasis on improving internal efficiency which we believe will further optimize our long-term cost structure and enhance operational resilience while maintaining healthy profitability. So looking beyond the near term, we continue to believe the long-term fundamentals of China's travel industry remain solid. Structural growth drivers, including the increasing popularity of experiential travel and nearby shop hall gateways, together with continued government initiatives to stimulate tourism consumption should continue to support the industry's long-term development. So with our differentiated positioning, disciplined execution, and efficient operating model, we are confident in our ability to navigate different market environments and deliver long-term value for both our users and our shareholders. In terms of the Composition landscape, Joyce may have her voice.

Sure. We do have observed that some of the platforms are enhancing the visibility of travel-related service. But in our view, this reflects the continued growth potential of the travel sector rather than a fundamental change in the industry structure. In the travel industry, user acquisition is only one part of the operations More importantly, long-term competitiveness depends on comprehensive supply capabilities, pricing and inventory management, procurement quality, and post-booking customer service. These capabilities require significant operational experience, system infrastructure, and industry know-how, which cannot be viewed easily. In addition, travel consumption is typically low or middle frequency. and scenario driven and the users tended to prioritize reliability, service quality and overall experience when they're making the booking decisions. As a result, user retention and repeat purchase are more closely tied to service capability than to traffic exposure alone. Competition in China's OT market has always been dynamic and we have successfully navigated different competitive cycles over the years. We believe our competitive strength lies in our strong operational capabilities, comprehensive supply of products and services, and a long-standing understanding of user needs and our reliable service delivery. So now our priority remains unchanged, continuously enhancing our user experience, enriching our product and service offerings, and improving operational efficiency. We believe these capabilities will continue to strengthen our competitive position and support sustainable long-term growth.

Thank you. Next question, please.

Thank you for the questions. As a reminder, please press star 11 and wait for our name to be announced. Once again, as a reminder, please press star 11 and wait for a name to be announced. One moment for our next question. The next question comes from the line of Brian Kung of City. Your line is open. Please go ahead. Brian, your line is open. You may unmute locally.

Oh, sorry. Hi. Yeah. Thanks, management, for taking my question. And congratulations on decent results. I have two questions. First is that, you know, following the reduction in airline fuel surcharges on 5th August, have you seen any improvement in travel demand or booking trends? And could you give us more color on the performance for each segment on the core OTA in the third quarter and the full year of 2026? And what are the pricing and the tick rates trends? And secondly, it's about cost. What will be the trend of cost structure, including selling and marketing talks on the J&A of the third quarter and second half this year? What will be the modern trend of the cold OTA ahead? Thank you.

Thank you for the question, Brian. The first question, as we mentioned earlier, the travel industry experienced some demand softness during the summer holiday, mainly due to the extreme weather conditions. So taking into account the current environment, we expect that the growth of our quality visits in quarter three to moderate from quarter two. For accommodation visits, we expect the room-night sold to face some near-term pressure year-over-year, mainly due to the impact of extreme weather on travel demand. However, the ADR is expected to be supported by a favorable shift in hotel mix, with room-night sold for three-star or above hotels continue to grow. Our blended tick rate is also expected to benefit from further optimization of our marketing strategies and more efficient user subsidy allocations. For our transportation visits, we expect the revenue continue to see some near-term half-wins year-over-year, primarily due to compliance-related adjustments to our train ticketing visits. And air ticket volume is expected to recover in quarter three, and our blended take rate is expected to trend positively, supported by deeper cross-selling of short and medium-haul transportation services. For our other business, we expect the revenue in quarter three to grow at a similar pace to quarter two, mainly driven by the strong growth momentum of our hotel management business. As for the fourth quarter, it is still toward to already avoid to have clear visibility. However, given the softer travel demand during the summer holiday due to extreme weather conditions, we see potential for some of the deferred travel demand to be released during the upcoming National Day holiday. And in terms of the cost structure and the profitability trends, in the second quarter, against the more challenging marketing backdrop, We responded proactively by implementing an organizational restructuring to further streamline our operations and improve execution efficiency. While this resulted in the one-off expenses of approximately RMB 58 million, which temporarily increased the combined ratio of our service development and general administrative expenses to revenue rate to 17.5% in Q2. Our underlying cost structure continues to improve. Excluding these one-off expenses, the combined ratio of service development and GMA expenses would have been 16.4%, so our adjusted net profit in Q2 would have been 18.2%. As these restructuring costs are non-recurring, We expect that the combined ratio of service development and general and administrative expenses to benefit from the absence of these costs from Q3 onwards. However, we will continue to make disciplined marketing investments to support the business growth. So for the second half of 2026, we will continue to optimize operating efficiency depending Thank you for the question.

Thank you. Once again, if you'd like to ask questions, please press star 11 and wait for a name to be announced. One moment for our next question. The next question comes from the line of Wei Xiong of UBS. Please ask your question.

I'm sure. Hi, good evening, management. Thank you for my questions. First, I want to follow up on the easing of fuel surcharges in early August. So after that change, how do you the outlook for outbound travel demand for the rest of the year? And has this changed your outbound strategy in any way? And second, this year, the OTA industry has experienced some Thank you for your questions. In terms of Haldong Travel,

While higher funeral surcharges create the headwinds for overall travel demand as we mentioned during the second quarter, our international business remains resilient, with users generally adjusting their destination choices rather than canceling their trips altogether. So we continue to see healthy demand across short and medium-haul destinations including South Korea, Malaysia, Thailand, Singapore, Hong Kong and Macau. Our international afflicting business continued to deliver strong revenue growth, supported by our differentiated value proposition of competitive pricing and high quality service, as well as target destination market campaigns. And meanwhile, as we mentioned in the prepared remarks, our international accommodation business remained exceptional growth, with our international room line sold increasing by more than 50% year-over-year, thanks to our successful execution of cross-selling strategy. Looking into the second half of this year, we are encouraged by the easing of business charges since early August. While it is still early to assess the full impact, we believe the lower airfare should help gradually improve our bond travel demand. So in terms of strategy, I should say there has been no change. We will continue to optimize our product offerings and marketing initiatives in line with the evolving travel demand while further strengthening cross-selling between the outbound transportation and accommodation projects. At the same time, we remain focused on enhancing the quality of our growth through disciplined market investments and a strong operational efficiency. The contribution from outbound business to our co-operative revenue continues to increase steadily. We expect that the outbound revenue contribution to increase to around 9% at the end of this year supported by growing business volumes and expanding user base and improving operational leverage. Overall, we expect the international business to continue expanding in scale and become an increasingly meaningful contributor to our revenues. And in terms of question about regulatory environment, while we believe the regulatory compliance will always remain an important focus for us and other market players,

We do not see any material change to our base strategy or day-to-day operations.

Tongten has always been committed to operating in full compliance with applicable rules and regulations. We will continue to strengthen our platform governance, enhance consumer protection, and maintain a fair and healthy marketplace for users and business partners. Looking ahead, we believe the industry will increasingly compete on service quality, Our next question comes from the line of Yang Liu of Morgan Stanley. Please ask your question.

Thanks for the opportunity and congratulations on the solid results. I have two questions all regarding the accommodation business. The first one is that we observe that Tongcheng's ADR has outperformed a broader industry of several conservative quarters. How do you view the industry ADR outlook for the second half of this year? And do you expect Tongcheng to continue outperforming the market? My second question is that we noticed that some OTA industry peers are adjusting their hotel traffic distribution system. Will this kind of adjustment bring any changes to Tongcheng's hotel take rate? And whether it will change Tongcheng's future Hotel Supply Chain Partner Strategy. Thank you.

Thank you for the question, Liu Yang. First, let's talk about the ADR. The industry ADR started the second quarter on a very solid footing, supported by a very resilient travel demand in April. However, as we mentioned, following the sharp increase in fuel surcharges from May onwards, Higher airfares weighed on long-haul travel demand, resulting in a noticeable moderation in industry ADR growth during May and June. While on our platform, the ADR continued to outperform the broader industry primarily driven by ongoing improvements in our hotel mix and continued user upgrades toward high-quality accommodations. The proportion of three-star and above hotel room nights on our platform increased by approximately three percentage points year-over-year in the second quarter, the same pace as the first quarter, supporting continued healthy growth in our ADR. In addition, we remain disciplined in our marketing investments and continue to optimize our operations. These initiatives have enabled us to maintain healthy take rates while driving sustainable business growth in accommodation segments. So overall, we believe our differentiated positioning and the disciplined execution and continued consumer upgrades will enable us to sustain ADR outperformance versus the broader industry. Based on these trends, we expect the ADR improvement to remain a supportive factor for our accommodation revenue growth over the coming quarter. And in terms of the tick rates, actually based on our current assessment, we have not observed any material impact from the new traffic distribution system and the commission mechanism on our hotel operations and user traffic or financial performance. Our cooperation with the strategic partners remain stable. We have always been committed to complying and fair cooperation and continue to work closely with our hotel planners to create long-term value and supported sustainable growth for all partners, all parties. So we will continue to monitor the implementation and any broader industry development. But based on what we have seen to date, we do not expect that the change to have a meaningful impact on our business and the tick rate from our commendation business. Thank you for the questions.

Thank you. Thank you for the questions. Please hold for our next question. The next question comes from the line of Jason Zhang of Macquarie. Your line is open. Please go ahead.

Hi, good evening management. Congrats on the solid setup result and thank you for the question opportunity. So I just got one question here. Could you share the latest progress of your collaboration with Weixin's AI Assistant? What are your expectations for the partnership and its potential contribution over the longer term? Thank you.

Thank you for the question. Our collaboration with Weixin's AI Assistant is progressing well. As one of the first online travel platforms to participate in the pilot program, we completed the initial integration during the second quarter and have now entered the testing and continuous optimization phase. At this stage, Xiaowei itself remains in the pilot phase. Our current focus is therefore not on driving near-term traffic, but on working closely with Tencent to explore how AI can better understand users' travel intentions. The tool's relevant content facilitate service invocation and ultimately support transaction completion within the WeChat ecosystem. So looking ahead, we believe AI assistance has the potential to become an important intelligent traffic entry point within the WeChat ecosystem as it involves from the information retrieval to task execution. But by our long-standing strategic partnership with Tencent, we believe Tongcheng is well-positioned to participate in this involving AI ecosystem. As technology and user adoption continue to mature, we expect this collaboration to create new opportunities for user acquisition, user engagement, and transaction conversions over the long term. Thank you.

Next question. Thank you for the questions. Our last questions will come from the line of Simon Cheung of Goldman Sachs. Your line is open. Please go ahead.

Hi, thanks for taking my questions.

I just have one small question. In relation to your hotel management business, you have gave some hotel numbers on the pipeline, etc. Can you perhaps further elaborate a bit more on the revenue and the profitability of the business, your expectation going forward? And I also remember you mentioned briefly about your office expenses for this hotel management business. Can you perhaps share a bit more, Carla, on that front as well? Thank you.

Thank you for the question. In terms of the hotel management business, our hotel management business remains one of the companies to keep those drivers. And going forward, our strategy will focus on complementary development of Elon Hotel technology and the Wanda Hotels and Resorts. For Yilong Hotel technology, we'll continue to prioritize high quality network expansion with a strategic focus on well-organized test beds. At the same time, we will further strengthen our technology capabilities by providing a comprehensive use of AI-enabled digital solutions to improve the hotel operating efficiency and enhance hotel performance. We'll also continue to optimize our membership ecosystem and elevate the guest experience There are smart technologies for enhancing customer loyalty and hotel operating efficiency. For Wanda Hotels and Resorts, our focus is on strengthening our leadership in the upscale and luxury hotel sector. Building our recent milestone of 300 opened hotels will continue to accelerate our expansion in China while broadening the international growth opportunity. Besides, we are also replicating our successful integrated results modules, such as our flagship Changbai Mountain Resort, across new destinations to drive high-quality growth. Internationally, following our recent additions in South Asia and our departing Africa, we are building a strategic network in many global markets. And on the digital front, our strategic integration with Tongchun has resharpened our technology foundation positioning us to further drive efficiency and enhance gas experience. By consistently delivering high-quality products and services, we aim to expand our market presence, strengthen our brand influence, and build Wanda into a leading Chinese premium high-end hotel brand with growing global recognition. Another strategic priority is to further strengthen our membership ecosystem. Supported by more than 35 million Yilong Club members, and approximately 24 million Wenda Club members, we have built a strong membership foundation spanning both mass and premium segments. Going forward, we will continue to leverage both loyalty programs alongside our OT platform to drive higher direct booking penetration, strengthen customer loyalty, and improve traffic convention across our hotel network. Looking ahead, Elon Hotel Technology and Wenda Hotel Resorts will enable us to offer a comprehensive hotel management platform that creates great value for hotel owners and strengthens our long-term competitiveness.

Thank you. Thank you for the questions. With that, I would like to hand the call back to the management.

Thank you. We have received 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.