Tongcheng Travel Holdings Limited (780) Earnings Call Transcript & Summary

Good morning, good afternoon, and good evening, everyone. Welcome to today's conference call, our Chairperson today is Ms. Kylie Yeung. Kylie, please begin your call and I'll be standing by for the question and answer session.

Thank you. Good morning and good evening, everyone. Welcome to Tongcheng Travel's 2022 Fourth Quarter Earning 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. Heping Ma; our CFO, Mr. Julian Fan; and Ms. Joyce Li, VP and Head of Capital Markets. For today's call, our management team will provide a review of the company's performance for the fourth quarter. Heping will brief us on the achievements we accomplished in the past year. 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 as follows. As always, our presentation contains forward-looking statements. Such statements are based on management's current expectations and current market operating conditions and related to events that involve known or unknown risks, 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 metrics. 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, Hep. Hep, please go ahead.

Thank you, Kylie, and good evening, everyone. Welcome to our fourth quarter and annual earnings call. China's travel industry in the past 3 years has gone through tremendous disruptions especially in the year of 2022, which turned out to be extremely difficult and challenging as travel sentiment and demand was down to new lows due to the drastic turn ever travel restrictions imposed nationalized to fight against the highly transmittable Omicron. In the face of drastic fluctuations, our company showed great resilience and proactively sought new growth engines. We persistently pushed ahead with our strategies to penetrate to lower-tier cities and reinforce our market presence there. We continuously optimize our product and services to better serve our users' underlying needs. We stepped up investments in branding to enhance our brand recognition. We also further stepped into the travel supply side to exert more influence in the travel industry. As such, we have risen bigger and stronger from the headwinds caused by COVID. Our user base has grown bigger. Our brand has built a stronger presence in lower-tier cities. More importantly, our core businesses, such as accommodation and transportation ticketing have gained greater market shares, especially in low-tier cities. In addition, our businesses has grown more diversified within the travel industry. Through acquisition, we have entered into hotel management business and packaged tour business. All this, we believe, will inject new vitality into our company. and enable us to have deeper roots in the travel industry. Entering 2023, travel segment in China is improving significantly and pent-up travel demand is being greatness released, thanks to the COVID policy changes in early December 2022 that led to the relaxation of travel restrictions nationwide laying a ground for a strong rebound of China's travel industry in the Year of Rabbit. Turning the path to Chinese New Year holiday, we were delighted to see our businesses grew remarkably over 2019 level. And users -- for travel has continued into the first quarter of 2023. Looking ahead, the road to recovery is definitely rosy, and we were felt with the pace -- that way we will have a rewarding year in 2023. We will stand firm on our core strategy. We will further invest in users as well as in the supply end, but to further reinforce our influence in travel industry, we will always bear in mind our core corporate value, customers' comfort and embrace change and innovation to constantly provide users with supreme travel experience as well as empowering the businesses of our partners. And last but not least, we will spare no efforts to fulfill our social responsibilities and contribute to a better society. And with this, I will hand over the call to Joyce who will share with you our business and operating highlights for the fourth quarter of 2022. Joyce, please go ahead.

Thank you, Hep. The fourth quarter of 2022 remains trying as Omicron continues to spread across the country, leading to affect the travel willingness and demand. In early December, the sudden relaxation of travel restrictions nationwide caused extensive infection across nation, which further weighed on travel willingness and demand. Nevertheless, we held on to our flexible operational strategy and proactively saw opportunities from the reopening. We again withstood the test and delivered better-than-expected performance for the fourth quarter repeatedly demonstrating resilience and permanence of our business and our team. During the quarter under review, the disruptions caused by Omicron was so massive that both our MAUs and MPUs decreased. The efforts we made to keep interaction with the users on our platform. Our average MAUs for the quarter decreased year-over-year by 11.5% to RMB 211.1 million, while our average MPUs declined year-over-year by 21.1% to RMB 24.3 million. Our 12-month paying users also slightly decreased by 5.7% over 2021 to RMB 187.5 million. And in the latter quarter, our accommodation business, which has established a solid presence in low-tier cities continued to show [indiscernible] in the last quarter and we made every endeavor to see opportunities arising from emerging demand from local and short-haul travel. During the quarter, we continue to explore long-tail scenarios for hotel space and more precisely drastic image demand, which, to some extent, added its recovery of the business. Even on the adverse market environment in the last quarter, our domestic room line has been fully recovered to 2019 level with room night growth in low-tier cities, reaching around 10%. On the other hand, value-added product services maintain meaningful contribution to the business, as consistent efforts were made to better serve users' needs with regard to their stays at hotels. Our transportation business, which has built concrete mode in the travel industry remain on the tremendous stress as nationwide mobility was reduced to a lower level due to prolonged travel restrictions in the first 2 months of the quarter and a quick arrival of the infection peak at the ease of the travel ban in December. In spite of the drastic fluctuations in the quarter, our air ticketing business saw reinforced market position in some of the [ advantages ] regions as well as elevated market shares in some underpenetrated high-tier areas. Besides continuous efforts were made to build a more diversified user mix for the business. For train ticketing business, we stayed focused on optimizing operations for fixed user convenience over the turbulence quarter with efforts were made to make better use of our traffic through enhancing algorithms and underlying suppliers of our intelligent [ washing ] system, thus providing users with a more comprehensive travel solutions. As for our bus ticketing business, we shifted our priority from volume growth monetization enhancement to strive for a decent revenue contribution in 2023. In the last quarter, we started to optimize the rollout and operation of our taking many equipment across the country. Also, more efforts were made to serving off-line passengers to online bookings, which is our first step to enhance monetization of the business. Delightfully, we've seen satisfying improvement month by month so far. For the past few years, we've been proactively seeking new opportunities in China's travel industry and have been active in the hotel management sector. Through internal incubation and acquisition our hotel management business has made impressive progress in the past year. We've established a comprehensive portfolio of hotel brands, ranging from medium to high stars. We built footprints in hundreds of cities across countries. At the same time, the [indiscernible] technology and managerial skills to help our franchise hotels run more efficiently. On the other hand, Tencent ecosystem with [indiscernible] in particular, remain as the most stable and best channel for us as we consistently push ahead with cooperation with the Tencent. During the quarter, we continued to launch e-sports events by joining hands with tourist persons in the hotels. In October, we for the first time sponsored the professional e-sports game to have our brand exposed to the younger population. With this innovative effort, we have established entertaining an effective interaction with the younger generation. Besides, our cooperation with handset vendors remain stable and many focus on membership benefit sharing as well as brand exposure, both online, offline. In addition, our offline user acquisition initiative, especially the public transit of intra-city buses and metro continue to contribute meaningfully to our MPUs in the fourth quarter. Furthermore, we do form our brand strategy and aim to build distinct place in the mind of younger population. We closely follow the trend issue and deep tie into the psychology of the younger cohort. During the Football World Cup, we launched creative commercial featuring commercial things when watching games with [indiscernible] language. Meanwhile, we kept investing in advertisements to have our brand consistency exposed among target users. During the quarter, we had our brand not only exposing TV drama but also in movies. Additionally, our Black Whale Membership program maintained up growth momentum even on the deep shadow of high volatility. Over the quarter, we further enriched the core benefit while optimizing the operational program. As of the end of 2022, the cumulative number of Black Whale Members approached 20 million, almost double the size of 2021. At the same time, the purchase frequency of the Black Whale Members were needed twice of the general users. As always, we remain committed to empowering the travel industry with our profound Internet expertise and customer technology solutions aiming to build a highly resilient and efficient travel ecosystem. Over the past years, we have established a structured partnership with a handful of airports across China and assisting them in digitalization, product development and marketing activities. In the past quarter, we further expanded cooperation with airports and joined hands with another key airport group, Guizhou Airports Group. In addition, we have built a brand portfolio of hotel PMS to help enhance operational efficiency and create additional revenue for bright hotels, covering small and medium size chain hotels, individual hotels and alternative combination. We value our users and we spend no effort to provide them with a comfortable and smooth journey. Our intelligent questioning system plays a key role in satisfying users' underlying needs. It provides users with customized and suitable travel solutions. Our self-developed AI system has been applied to more customer service scenarios to further improve customer service efficiency and help enhance customer satisfaction. Meanwhile, we preadequately invite management and search personnel to get our customers at our customer service center through which hundreds of products and workflows have been optimized. As a socially-conscious enterprise, we are entirely aware of the social obligation and are determined contribute to the travel industry as well as to society. In the depth of COVID pandemic, we joined hands with the dozens of local governments to distribute the digital coupon so as help facilitate the recovery of the travel market as well as local economies. To further invigorate the tourism industry, we launched a cultural heritage tourism initiative to build an innovation marketplace that integrates cultural heritage into tourism. With this successful experience, we aim to reinvigorate hundreds of tourism destinations through this initiative in the near future. On the other side, we help our users -- we provided free end-to-end pickup and drop-off service for university and college students in several cities and soon and their winter break started, but to make sure they have safe and a smooth trip home. Also, we offer the preferential air ticket to thousands of graduates to facilitate their job seeking, which is highly commanded by the government, but over, with value sustainability and endeavor to improve our ESG practice. In the past year, our MSCI ESG rating was upgraded from A to AA in recognition of achievements that we attend in the governance and the labor management. Looking forward, we will remain fully devoted to social activities that contribute to better society as well as improving our ESG performance and create more value for our stakeholders. With that, I'll give the call to our CFO, Julian, who will share with you our detailed financial results for the fourth quarter and the year of 2022. Julian, please go ahead.

Thank you, Joyce. Good evening, everyone. The past quarter was unforgettable. The travel industry as well as our business hit the bottom because of the strictest average travel restrictions in the first half of the quarter and extensive infections across the country in the second half following a sudden turn of COVID policy in early December. However, our business performance was still way ahead of the industry in the past quarter, mainly thanks to the demand from migrant workers and leisure travel, which were the cornerstone to support our performance. In the fourth quarter of 2022, we reported a net revenue of RMB 1.5 billion, representing an 18.8% year-over-year decrease from the same period of 2021, although the environment and sentiment was highly volatile in the past quarter, we adhere to our flexible operational strategy while seeking opportunities. On one hand, we strive to control costs as much as we can to maintain profitability. And on the other hand, with no hesitation, we are proactively prepared for the upcoming Chinese New Year of 2023, and invested in marketing campaigns and advertisement in quarter 4. Looking at the bottom line, we achieved RMB 37 million adjusted net profit with 2.5% adjusted net margin. The temporary margin drop was mainly because of the revenue scaling down and the marketing preparation for Chinese New Year. Our accommodation reservation business remained resilient and achieved RMB 509 million for the fourth quarter of 2022, representing a 9% decrease from the same period of 2021. The decrease was mainly due to room nights year-over-year decrease, which was, however, still far better than industry performance. Transportation ticketing revenue for the fourth quarter of 2022 was RMB 756 million, representing a 30% decrease compared with the same period of 2021, resulting from the suspended long-haul travel in the past quarter. Other business for the fourth quarter of 2022, still kept a very strong growth momentum. The revenue achieved RMB 235 million representing a 12% increase from the same period of 2021, mainly benefiting from the strong sales of our Black Whale Membership card. Gross margin in the fourth quarter of 2022 dropped to 70.1% from 74.6% year-over-year, mainly due to scaling down of revenue. Adjusted EBITDA achieved RMB 244 million with a 16.3% margin decreased from 22.8% (sic) [ 22.6% ] year-over-year. Adjusted net profit achieved RMB 37 million with 2.5% margin decreased from 13.6% year-over-year. Adjusted net profit achieved RMB 37 million with 2.5% margin equates from 13.3% year over year. As I mentioned above, the temporary margin drop was mainly due to revenue scaling down and marketing investment for Chinese New Year of 2023. The increased investment in marketing has temporary ROI decreased in the fourth quarter that have brought us greater reward in the first quarter of 2023. As mentioned above, in the past quarter, we strive to maintain profitability through cost control. Service development and administrative expenses in the fourth quarter of 2022 decreased by 7% from the same period of 2021. Excluding share-based compensation charges, service development and administrative expenses in the total accounted for 31% of revenue in the fourth quarter compared with 25.7% of revenue in the same period of 2021 and 21.4% of revenue in previous quarter. Selling and marketing expenses in the fourth quarter of 2022 decreased by 13% from the same period of 2021. Excluding share-based compensation charges, selling and marketing expenses accounting for 42.8% of revenue in the fourth quarter compared with 39.4% of revenue in the same period of 2021 and 45.1% of revenue in previous quarter. As of December 31, 2022, the balance of cash, cash equivalents, restricted cash and short-term investment with RMB 6.8 billion. Now let's move to our results for the fiscal year 2022. As Heping mentioned, the past year was extremely difficult and challenging as the travel sentiment and demand was dampened by COVID. However, we remain optimistic in the darkness and went through all the difficulties last year. In 2022, we further strengthened our operations within the Tencent ecosystem as expanded cooperation with Tencent as multiform. Meanwhile, we continue to diversify our traffic sources and pushed forward with user acquisition initiatives, both online and offline. Through extensive and precise marketing campaigns, we enhanced our brand awareness among younger generations and further increased our market share in target regions. For the past 3 years under the shadow of the COVID, our traffic and users have significantly surpassed at the level of 2019. Our average MAUs for 2022 increased by 14% from 2019 to 234 million, and our average MPUs for the year increased by 11% from 2019 to 30 million. Net revenue in 2022 achieved RMB 6.58 billion, representing a 12.6% decrease year-over-year or an 89% recovery to 2019 level. We held on to the flexible operations strategy during the year to further enhance our back-end and marketing efficiency, but the main focus of the company in the past year was still market penetration and investing for the future and to the post COVID backdrop. Though facing a challenging and volatile environment, our accommodation reservation revenue achieved RMB 2.4 billion in 2022, representing 0.2% increase compared with 2021 and 2.4% increase compared with 2019. Our domestic accommodation room nights for the whole year of 2022 booked almost a 20% increase from 2019. During the past year, we continuously expanded marketing channels, including all entrants in Tencent ecosystem, location-based apps, short-video platforms and various offline scenarios. More importantly, our internal cross-sell initiatives also played a key role in diverting traffic from the transportation segment into accommodation. We deep dived into long-tail demand for hotel space and launch the various feature products such as e-sports hotels and taxi in the hotels. Meanwhile, efforts were also stepped up diversified, value-added products and services to provide pleasant states for users as well as developing marketing tools to help hotels have easier access to users on the platform. Although ADR remained below 2019 levels due to the industry depression, the blended take rate to pass the 2019 level has stayed high for the whole year, mainly due to our disciplined couponing policy and additional contribution from VAS revenue, which increased to more than 16% of total accommodation reservation revenue. Transportation ticketing revenue for 2022 was RMB 3.4 billion, representing a 24% decrease compared with 2021 or a 25% drop from 2019. The decrease was mainly due to eroded demand for long-haul transportation as a result of COVID restriction policies. For short-haul travel, our bus ticketing and car-hailing business maintained impressive growth during 2022 against the backdrop of vast turbulences, thanks to the rising demand for local and short-haul travel. In terms of the bus ticketing business, efforts were stepped up to develop the value-added products and services so as to enhance the monetization capability of this business. In the following year, we will place more emphasis on the monetization and ARPU of the business. Moreover, as a one-stop shop travel platform, we aim to cover all travel scenarios and provide users a seamless and superior experience. To further penetrate local and short-haul travel market, we ramped up efforts in our car-hailing business and introduce more car-hailing service providers to our platform so as to better serve our users. In the past year, the volume of our car-hailing business realized a spectacular increase compared with 2021. Other business revenue for 2022 achieved RMB 791 million, representing 18% increase compared with 2021 and the 53% increase compared with 2019. We achieved great progress in Black Whale Membership Program in the past year. As aforementioned by Joyce, in the past year, Black Whale card revenue achieved RMB 169 million with 64% increase compared with 2021 and 344% increase compared with 2019. Advertisement revenue achieved RMB 260 million with 12% increase compared with 2021 and 46% increase compared with 2019. In terms of profitability, our gross margin in 2022 slightly decreased to 72.6% compared with 74.9% in 2021, mainly due to revenue scaling down. For the full year of 2022, adjusted EBITDA achieved RMB 1.4 billion compared with RMB 1.9 billion in 2021. Adjusted EBITDA margin was 21.8% in 2022, decreased from 25.1% in 2021. Adjusted net profit achieved RMB 646 million in 2022 compared with RMB 1.3 billion in 2021. Adjusted net margin was 9.8%, decreased from 17.2% in 2021. The net margin drop was due to revenue scaling down and increased investments in advertisement and marketing campaigns so as to strengthen user awareness for the long run and to further penetrate target user groups as well as target areas. Entering 2023, life was back to normal overnight. The travel market is fully booming in quarter 1 with the various demands being released, such as long-haul and short-haul leisure travel, business travel, vacation and hometown visits by migrant workers and students. After 3 years of cultivation and preparation, we are now in golden position to capture the travel opportunities in every scenario, enhance further gaining market share. The remarkable rebound in quarter has again demonstrated that travel is an important and essential activity in our daily life, no matter it is for business, leisure, exploration or family friends gathering. By standing firm on our strategic priorities and initiatives, we are quite confident that we will maintain industry-leading growth and profitability. We will continue to generate value for our users, suppliers, employees and shareholders, bearing an ultimate goal of making every travel smart and joyful. With that, operator, we are ready to take questions now. Thank you.

[Operator Instructions]. Our first comes from Brian with Citi.

I have two questions. First is about our latest recovery trend today you just mentioned recovery trend is quite strong. Can you share a little bit more details in the recovery trend in recent weeks, especially comparing to 2019 and 2022 levels. And also, can you share your view regard our recovery for upcoming Ching Ming Festival, Labor Day as well as Full Year 2023. And the second question is about margin. Previously, management mentioned that we will -- we probably will increase marketing dollars this year along with the industry recovery to gain market share, right? So may I know what is our latest plan and how should we look at our margin trend for fourth quarter this year and the full year 2023 as well as long term?

Thank you, Brian, for your questions. In terms of -- I think the first question is in terms of the latest market situation and our business performance trends in latest weeks. So actually, as mentioned in our prepared remarks, we have experienced a very strong recovery since this Chinese New Year holiday. The transportation ticketing business was especially good because of the strong demand for traveling to and from hometowns. For the whole industry, whole industry, the train ticket volume recovered to almost, I think, 85% of 2019 level. And air ticket volume recovered to around 75% of 2019 level. So that is the industry view, but still our performance once again outperformed the industry with several multiples. For the train ticket volume, I think nearly fully recovered to 2019 levels and the air ticket volume increased by over 30% when compared with the 2019. So that is our performance in January and February. After times New Year holiday, actually people continue to demonstrate great enthusiasm to travel around and we successfully capture the recovery opportunities in latest week. Our accommodation room nights in February grew even stronger and increased by more than 100% when compared with the same period in 2019, almost double in 2019 level driven by various travel demand, such as migrant workers and students during, I think, and after Chinese New Year and business travel, the long-haul and short-haul leisure travel, vacation and also the exam rooms. So we believe the travel demand will continue to be very strong in 2023, and we can see that the market recovered significantly in a very short period of time once COVID control measures have been relaxed. Those ones, again, have doubts about the recovery pace of China's travel industry have already been surprised by the faster pace of recovery in the past few weeks. In terms of the -- I think the upcoming quarter 2 and also the rest of the year's expectations, actually, we are very optimistic about the future development of the Chinese travel industry and firmly believe that the growth of the industry is sustainable, just like what we observed in quarter 1. As a leading OTA in China, we have accumulated a huge number of users and extensive industry experience in the past and is well positioned to more aggressively capture future market opportunities. In terms of our confidence on the industry and our performance, I will share your 4 examples to support our confidence. One, as for the supply end, as we have mentioned before, the improvement in infrastructure, construction, such as new airport and new high [ express ] train system will offer more convenience for travel and offer more opportunity for us, which will definitely stimulate the travel demand of people in domestic market. And second, in terms of the demand side, we think that the pandemic has changed people's travel habits and stimulate the more diverse needs. From our business performance, we observed that both long-haul and short-haul travel are growing rapidly. Demand from local or other cities are both very strong. Meanwhile, in the past 3 years, we have enriched our product lines, such as attraction ticketing, bus ticketing, car-hauling, city metro ticketing, alternative lodgings and various value-added products and services to fulfill the long tail needs. These will definitely improve the frequency and monetization in our platform. And three, in terms of our user base, as we'll continue to develop in low-tier cities in the past 4 years, after 3 years, we see the very strong growth and great opportunities of this market and we have successfully enlarged our user base in past 3 years. Our APU enjoyed a noticeable growth even during the pandemic period. Besides, we strive to cultivate the students group because we can see that these young generations have very noticeable consumption power, and the teams show travel enthusiasm. And the fourth example, we will further dive deeply into hotel chain industry and packaged tour industry, leveraging our technology advantages and industry knowledge that we would like to enhance the digitalization and efficiency of the industry and meanwhile, offering superior service and products to our users and offer a more monetization opportunities to our platform. And in terms of your second question, is the margin. I think the margin outlook of the fiscal year 2023, actually, in terms of the bottom line, we believe this year, the gross margin will be better than the situation before COVID or better than the 2019 level due to service automation and operational efficiencies improvement. While as you mentioned, we will still invest in the sales and marketing and advertisement in this year to capture more opportunities and market share post COVID, so the net margin will rebound, of course, will rebound to a decent level, mainly due to scaling effects driven by the revenue growth and operational leverage.

[Operator Instructions] Our next question is come from Alex Poon with Morgan Stanley.

Congrats management on a very strong results and outlook. My first question is regarding our cross-selling ratio as we have expanded a lot our product lines and the demand has come back a lot. How will we spend our sales and marketing expenses to drive the cross-selling ratio. Is there a target cross-selling ratio, we have for the next 1 to 2 years.

Thank you, Eric. During the past quarter, the cross-sell rate was impacted because we have mentioned significant declines in the train and air ticketing volumes and the rate increase of our bus ticketing volume has brought us significant new MPUs which have diluted cross-selling rate, but we should emphasize that cross-selling is one of our strategic priority to enhance the frequency in ARPU of our users. In the future, we will continue to make more process efforts to market our hotel products and services with higher take rate to users from train and air ticketing business in order to better utilize the huge traffic and achieve the better monetization. We will also put more emphasis on cross-selling from short-haul and local transportation business so as to enhance the monetization of our overall business and seek better synergies. We will also try to cross-sell from transportation business with a lower take rate such as our planned bus ticketing to transportation business with a higher take rate. I think with our continuous efforts, we expect the cross-selling rate will continue to improve and the benefit our total revenue and monetizing in the long run.

Yes, just like what Joyce mentioned in this year, the monetization and also the ARPU improvement is what we emphasize the more instead of the -- just the user volume increase in the past 3 years. So actually, we will allocate more of our sales and marketing dollars into this area. So in this year, we will continue to invest in various areas as we did in previously, but in January, general, we were more focused on improving user value, like what I mentioned, instead of striving for user growth as we have already got a huge number of paying users, already above 200 million paying users for one year. So I will give you more color of how we allocate our sales marketing dollars this year. We will first continue to invest in target promotions and enhance our capability to make accurate recommendations to users. So as we enhance cross-selling from transportation business to accommodation business from offline to online, just like Joyce mentioned, which will generate more revenue per order and better take rate for our overall business. And second, we will also try to cultivate more online users whom we previously gained from offline scenarios, we advertise the offline user acquisition in the past 3 years, a lot of times, but this year, we will try more our efforts to cultivate more online behaviors for those offline users that we acquired in the past few years such as hotel QR code scanning and smart bus ticketing machines. So we will optimize our marketing strategies by having promotions to motivate direct online purchase by these users. And third, I think we will also invest more promotions of our VAS products and services, which are suitable to our users and solve their problems during their travel journey. For example, we will continue to promote the use of Huixing system, which provides intelligent travel solution to our users. And at the same time, gives us an opportunity to monetize more. We also launched promotions to -- of our innovative products and services in various new scenarios so as to enhance value for users. And fourth, we will further invest in our membership program, the Black Whale membership, by enriching the service and privileges provided to our users and enhance our membership system so as to improve their loyalty to our platform and boost our overall ARPU and purchase frequency. So of course, we will continue to acquire new valuable users as well. So we will also allocate some kind of sales and marketing dollars for this area. For example, for online, we will still invest in more promotions in targeted areas and targeted groups as scenario so as to acquire more paying users. We also continue to invest in Tencent and deepen our cooperation with various parties in Tencent ecosystem. We will also continue to explore new traffic channels, such as the content platform and location-based apps, for example, the [indiscernible] app and also the short video platform, et cetera. At the same time, we will continue to penetrate market with our offline user acquisition initiatives, but this year, we will allocate less money on this area, also including the smart ticketing equipment for bus and [ traction ] tickets, public transport business, campus campaigns to gain younger generations. And last but not least, we will also invest in brand advertisement, so as to strengthen our brand image and awareness as we think branding is a long-term investment, which we need to do persistently to build up our own brand equity. So thank you. So that is what we want to share. Thank you, Alex.

[Operator Instructions] Next question is from Wei Xiong with UBS.

Two questions from my side. First is I want to follow up on the recovery trends that you guys mentioned. So in addition to very robust release of pent-up demand that we've seen so far. If we dig into a little bit more details, could management maybe share more color on the recovery trend in the next few quarters if we look at different segments, for example, business travel versus leisure travel, long-haul trips versus short-haul trips, et cetera. So how should we think about the different recovery pace and dynamics within these subsectors? And second, we've seen that. It seems like the company has stepped up our efforts around travel agency businesses. So just want to hear management to talk more about the strategic rationale behind that? And what kind of financial implications that we might see for this year? And related to that, do we consider to maybe do more around outbound travel this year?

Thank you, Xiong, and thank you for your questions. For the first question, let me into more about the different user scenarios such as the different contribution by local or short-haul travel. For our platform, we can see that both short-haul and long-haul travels recovered very well in the past 3 months. We can see that the air ticket is mainly representing the long-haul travel and business travel has already surpassed 2019 level by over 40% in terms of volume in February. At the same time, bus ticketing team and car-hailing business which represents short-haul travel has also been experiencing expansion of growth when compared with 2019. While our accommodation room night in January and February have increased very well when compared with the same period in 2019, driven by the [ flight ] travel demand, including long-haul and short-haul travel. The growth trend of local hotel demand in the past 3 years has continued into the first 2 months of 2023. The local hotels now accounted for nearly 15% of our total hotel room nights, implying a significant increase for the same period 2019. We firmly believe that the COVID has changed the fundamental behavior of the travelers, especially the younger users, as they have experienced to enjoy the short-haul travels and vacations which can be more frequent and [indiscernible], instead of only making the relatively long-haul trip once in a while. In addition, we have been more aggressively grabbing the opportunities in different hotel booking scenarios in the past few years. We do hope, as Joyce had mentioned, exam rooms and vacations during specific -- special days of the festivals. On the other hand, with the assumption of the different activities, such as exhibitions, cultural, sports events, music festivals and content, we have successfully captured increasing accommodation demand from cross-city across provincial travel. That we believe that in the long term, both short-haul and long-haul demand will continue to increase. As to the second question concerning our position of the travel agency companies. Actually, the reason that we have noticed that during the pandemic, we have been paying attention to the opportunities of the packaged tour business, which is affected significantly by the COVID. And with the end of the pandemic insight, we think the packaged tour business will gradually resume. The 2 travel agency companies have rich variance in the industry and have established their own brand, supply chain, operational systems and teams, but they were hardly hit by pandemic. We think their operational costs have been greatly reduced in the past 3 years, and we believe now is the best time to start investing in this business. And moreover, we also have been committed to strengthen our layout and supply trend of the tourism industry. I think the packaged tour business is an effective supplement and expansion to the company's existing online business. Through this position, we cannot only strengthen a stronger position on the supply side, but also reach our business and provide our users with more diversified products and services. And also, these 2 travel agency companies had a quite a significant amount of business from the outbound travel before COVID. They have established resources in the international travel market. With these 2 acquisitions, we also could have accelerate our outbound travel business, which already has been mentioned. Before the COVID, the international business have come for around 5% of the revenue before COVID. We believe that the international travel industry needs some time to review supply and to try more stock to fulfill the increasing market demand in the near future. But for us, in the past few years, we have already accumulated a huge user base of around 200 million annual paying users. This will be the foundation of our international business in the future as these users will also have outbound travel demand. We will also be benefited from the recovery of the outbound travel although outbound travel assuming some time to be fully recovered. And we also have already established a relationship with different supply chains for the international market including prior international airlines and different major international OTAs for accommodation business in the past few years. Recently, we are getting more proactively to establish business connection with a different kind of overview PSPs. We will keep -- continue to explore and develop new products and services for our potential of our travel users. As you mentioned, I think it's still early to tell the revenue and product contribution from the corporate agency for [indiscernible] business, especially the acquisition of Beijing Tongcheng Tourism Investment Group has not been fully confirmed, but they will definitely extend our business to provide more products and services to our users and generate additional value to our company in the future. Thank you.

And our next question comes from Simon Cheung with Goldman Sachs.

I got 2 questions. Just wanted to follow up on the recovery pace. Obviously, January and February has been very strong, but we've been hearing some weaknesses that we have seen so far in March. Can you share with us what you have seen and that also one of your competitors, I think, at the result comments mentioning that for the full year, they are generally seeing a bit of uncertainty in relation to the recovery pace towards the end of the year, particularly in the fourth quarter. I'm just wondering how you're thinking maybe 1 or 2 year -- 1 or 2 quarters out in terms of the recovery pace? Is that going to be a straight line? Or do you expect some choppiness in between, that's the first question. And then the second question on your point about monetizations. Just wanted to get a better sense, how would you quantify that monetization? Is that in the format of revenue from the transportation segments? Or is that coming from more active paying users? And also on the marketing dollars, wondering whether you can also share with us maybe some target or anything along that line.

Thank you for the questions. And first, the following -- follow-up questions around -- about the latest recovery trends, especially in March. Actually, the March is not the hot season compared with January and February and compared with the April and May. Actually, for the traveling industry, the half season is the Chinese New Year Spring Festival and the short period holiday for Ching Ming, Labor Day and also the Dragon Boat and also the summer vacation. So the March actually is not a hot season. So compared with the January and February actually, from month-to-month, the performance is slightly dropped. But we -- what we see is compared with the same period in 2019 compared with the -- we don't compare with the 2022 because the 2022 March, April and May is the bottom -- hit the bottom because of the travel restrictions for the Shanghai lockdown. So we don't compare with the March for last year. But compared with the 2019, we see over 30% growth compared with 2019. So we think that is still very strong recovery, strong booming for the traveling industry in March as well, although it's slightly dropped compared with the January and February. And also, we -- because the travel -- just like what I mentioned, there's a hot season and low season for the traveling industry. So actually, we don't compare month-to-month the performance we compare with for this year, we compare with the performance in 2019. And we think the quarter 2, quarter 3 and quarter 4, we'll have a very, very decent growth rate compared with 2019. Just like what we've seen in quarter 1 because like what I mentioned, there's a lot of different scenarios for the new demand for example, the short-haul, the expectation, the micro workers and student groups traveling -- last year traveling and those scenarios actually is not that strong before COVID. So that is the first question in terms of the recovery from March and also the following years. And the second question in terms of the monetization, actually for this year, in terms of the monetization, we separate to 2, I think the products, the one is to increase the frequency and the second, increase the consumption for each frequency. First one, in -- before COVID, actually, for each paying users annually, the frequency rate is like 4.5 to 5x. So each paying users in 1 year will purchase 4 to 5x before COVID. But last year, we have increased this number to 5 to 5.5x because we offer more and more products to our users. So usually, they can only buy accommodation and also the transportation for the air and train, but nowadays, they can buy car-hailing, buy the attraction tickets and also the bus tickets as well. So the frequency increased last year. And this year, we are very confident that the frequency will continue to improve to 5.5x or even 6x per paying users this year. And the second is to stimulate the customer to buying more for one time because we -- now they offered a lot of that the value-added service and product. So for each time when they bought or book an accommodation, book a hotel and book transportation for example, the air and train, they were also bought other via app as well. So that is the second process that will prove the monetization. So that is what we want to share.

And sorry, Kylie, we don't have any questions at this point of time.

Okay. Thank you. We're hosting 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.

Thank you. Thank you, everyone. The conference call has been concluded. Thank you for your participation.