On May 3, international OTA platforms such as Booking and Expedia successively released financial reports for the 2024 Q1 quarter. In terms of performance, both surpassed expectations. Booking's total revenue for the period was 4.4 billion US dollars, and Expedia's total revenue was 2.9 billion US dollars.

In fact, since most European and American countries have continued to relax regulations since 2021, the two major OTA platforms in Europe and the US were able to recover performance ahead of their Asia-Pacific peers. This also made Booking and Expedia become reference targets for investment in the Asia-Pacific OTA platform secondary market after the gradual resumption of cross-border travel in the Asia-Pacific region in 2023.

Similar to the high performance of these two giants after the pandemic, after a “blood recovery” in 2023, the domestic OTA platform TOUR.US (TOUR.US) also ushered in its own highlight in the Q1 quarter of this year.

The logic behind “retaliatory” growth in performance

The Zhitong Finance App learned that in the Q1 quarter of 2024, Tuniu achieved revenue of 108 million yuan, up 70.9% year on year; gross profit was 82 million yuan, up 111.0% year on year; at the same time, the company's current net profit was 21.9 million yuan, and adjusted net profit was 27.7 million yuan, reversing losses year on year. This is also the first time since Tuniu went public that it achieved a single quarter profit in the Q1 quarter.

The reason why Tuniu was able to reverse its performance in the Q1 quarter of this year was due to the gradual recovery of the domestic tourism industry, which is a major source of blood for online travel OTA companies, which is tantamount to “coming back to life” for Tuniu. Before 2020, in order to win the online OTA market share war, Tuniu collaborated with a number of popular variety shows and popular movies, and hit a large amount of advertising expenses. However, due to the impact of the subsequent epidemic, Tuniu's investment did not translate into profit.

This is clearly reflected in Tuniu's financial reports in recent years. According to the Zhitong Finance App, in 2018-2019, Tuniu's marketing expenses accounted for 34.7% and 40.5% of total revenue, respectively. As of 2022, Tuniu has accumulated losses of about 7.7 billion yuan since its listing. Prior to 2020, the company only achieved a single quarter profit in the third quarter of 2018.

But that phenomenon appears to have changed in 2023. In the Q3 quarter of last year, Tuniu successfully turned a year-on-year loss into a profit, and this is the second consecutive quarter of profit since last year's Q2 quarter. Although it failed to maintain profit in last year's annual report, judging from the year-on-year increase in net profit in previous periods, Tuniu's net profit situation has improved markedly since the Q1 quarter of 2022.

On the one hand, this has benefited from Tuniu's fee control strategy, and on the other hand, it has benefited from revenue growth brought about by market recovery. From the chart below, it is easy to see that in 2021-2023, the domestic OTA market was at a low point, and Tuniu adopted a strict fee control strategy. In the Q1 quarter of 2023, its total marketing and management expenses were 42.366 million yuan, a sharp decrease of 47.22% from 80.162 million yuan in the same period in 2021.

While the market recovery trend is driving revenue growth, Tuniu's cost control has also been adjusted in a targeted direction, starting with overall tightening during the pandemic. This trend began in 2023, and there has been a significant increase this year.

The reason for these changes in fee control strategies is ultimately the overall recovery of the Asia-Pacific cross-border tourism industry and domestic tourism industry.

According to IATA statistics, the Asia-Pacific cross-border passenger traffic volume (RPK) has recovered to 73% in the same period in 2019 in 2023, and the degree of recovery is close to 75% and 79% in Europe and the US in 2022. In 2023, cross-border travel between Europe and the US will basically fully resume, with North America recovering from 34% in 2021 to 101% in 2023, and Europe recovering from 32% in 2021 to 93% in 2023. As can be seen, cross-border travel between Europe and the US will resume to 90-100% in 2023. Using this route as a reference, inbound and outbound travel in the Asia-Pacific region can be expected to resume in 2024.

Meanwhile, in the domestic market, due to more complete domestic infrastructure such as mobile payments, the penetration of online travel has increased even more significantly. According to Fastdata's “2023 China Tourism Recovery Trend Report”, in the first quarter of 2023, online travel transactions accounted for more than 60%, and the online travel penetration rate increased from 38.8% in 2019Q1 to 60.6% in 2023Q1, which is higher than the global level overall. As a result, domestic OTA travel RPK data rebounded rapidly as early as the first half of last year, surpassing pre-pandemic highs.

Opportunities brought about by supply-side changes in tourism

Looking at it now, the overall recovery of the industry has clearly reflected Tuniu's current business-side revenue. Financial reports show that in the Q1 quarter of this year, due to the growth of the group tour business, Tuniu's revenue from packaged travel products was 83 million yuan, a sharp increase of 106.7% over the previous year; other revenue was 25 million yuan, an increase of 8.5% over the same period in 2023.

Behind this, new business formats brought about by supply-side changes in tourism are worth paying attention to. According to the Zhitong Finance App, after the public health incident, the supply of domestic tourism products showed a trend of more diversified development. From “going to Zizi to grab a barbecue” and special forces tours on May 1st last year, to Citwwalk, cultural expo tours, and performing arts tours all over the country in recent years, to the Asian Games in Hangzhou and the ice and snow frenzy in Harbin, the Chinese tourism market in 2023 showed completely different development characteristics from before the epidemic.

The platform side has begun to launch a new OTA service in response to the new market demand. The live broadcast of Tuniu Wine Tour, as reflected in the financial report, is one of them.

According to the data, in the Q1 quarter of this year, Tuniu Live streaming transaction volume exceeded 440 million yuan, an increase of 71% year on year; the write-off rate of live streaming products increased dramatically, up 138% year on year; in January-May of this year, Tuniu Live streaming product write-off amount increased by more than 400% year on year. By the end of May this year, Tuniu's live streaming transaction volume and write-off amount had exceeded the full year of 2023.

In addition to supply-side changes in tourism products, the revival of the primary investment and financing market is also further boosting the popularity of the domestic tourism market.

The data shows that in the Q1 quarter of this year, there was a clear trend of recovery in domestic tourism industry financing. In January-March of this year, the number of financing projects in a single month changed by 28.6%, 8.7%, and 18.8%, respectively. The monthly financing amount changed by 40.6%, 72.3%, and 16.4%, respectively. Judging from the scale of financing, they all achieved positive growth. It can be seen that the strong recovery in the domestic travel consumer market and the tourism boom that has appeared in many places have significantly boosted confidence in the capital market.

For Tuniu, the popularity of the consumer market and the primary investment and financing market has boosted the company's expectations about the extent of market recovery. As mentioned above, starting from the Q1 quarter of this year, Tuniu has also gradually liberalized its marketing investment in the market. But it may also raise investors' concerns: in the face of an increasingly recovering market, whether Tuniu will go back to spending a lot of money on marketing before the pandemic, leading to another loss.

It is easy to see from changes in Tuniu's revenue before and after the pandemic and changes in the share of business revenue. Since group tours have always been Tuniu's dominant business, this has also become a differentiator for this online travel company from other leading OTA companies.

From the perspective of the service supply side, the core of outbound and group travel business operations lies in the enterprise's ability to establish a “full chain” from suppliers, to sales, and service implementation. This also means that if you want to be the main business, the company needs to continue to invest a lot of capital resources to operate.

However, from the service demand side, group tours have a long cycle, high customer unit prices, and a relatively low repurchase rate. If they want to expand the demand-side user base, the most direct and effective method for enterprises currently is to increase marketing investment. Judging from this year's Q1 earnings report, Tuniu's marketing expenses have already changed to the fee-control strategy of the previous period and began to increase promotional investment. This year's Q1 showed relatively high input and output, which also confirmed the improvement in its operating efficiency from the side, but it is still unknown whether the company will significantly increase its promotion efforts in the future.

Also, another problem with Tuniu is that it has a single business. As can be seen in this financial report, after the tourism market recovered, Tuniu's share of outbound and group travel revenue increased dramatically, once again becoming the company's core revenue source, and achieved a significant year-on-year increase, while the company's only other business revenue growth was only in single digits. How to continue to expand its business will undoubtedly be one of the highlights of Tuniu's continued growth in the future.

However, Wall Street investors are clearly more happy to see Tuniu's current performance improve. On March 20 of this year, after hitting an intraday low of $0.59, Tuniu's stock price began a counteroffensive trend. Until June 4, the intraday high reached 1.26 US dollars, and the cumulative increase over two months had reached 113.56%.