Trip.com Group Limited (NASDAQ:TCOM) Q4 2023 Earnings Call Transcript

Trip.com Group Limited (NASDAQ:TCOM) Q4 2023 Earnings Call Transcript February 21, 2024

Trip.com Group Limited beats earnings expectations. Reported EPS is $2.74, expectations were $0.34. TCOM isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day and thank you for standing by. Welcome to the Trip.com Group 2023 Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I’ll now like to hand the conference over to your first speaker today, Michelle Qi, Senior IR Director. Please go ahead.

Michelle Qi: Thank you. Good morning, and welcome to Trip.com group’s fourth quarter and full year of 2023 earnings conference call. Joining me today on the call are Mr. James Liang, Executive Chairman of the Board; Ms. Jane Sun, Chief Executive Officer; and Ms. Cindy Wang, Chief Financial Officer. During this call, we will discuss our future outlook and performance, which are forward-looking statements made under the safe harbor provisions of the U.S. Private Security Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the views expressed today. A number of potential risks and uncertainties are outlined in Trip.com Group’s public filings with the Securities and Exchange Commission.

Trip.com Group does not undertake any obligation to update any forward-looking statements, except as required under applicable law. James, Jane and Cindy will share our strategy and business updates, operating highlights, and financial performance for the fourth quarter of 2023, and the full year for 2023, as well as outlook for the first quarter of 2024. And then we will have a Q&A session, after the prepared remarks. With that, I will turn the call over to James. James, please.

James Liang: Thank you, Michelle. And thanks everyone for joining us on the call today. China’s border reopening in 2003 has ignited a global travel search. Our enhanced leadership in product and service has empowered us to significantly outperform the market. In 2023, our total OTA business reached a record high achieving a GMV of approximately RMB1.1 trillion or USD $160 billion [ph]. This marks the year-over-year increase of 130% and growth about 30% compared to 2019. Currently, our total net revenue also grew by 122% year-over-year, and a 25% compared to 2019. We significantly improved our adjusted EBITDA margin to 31% in 2023, which is the highest level over the past decade. In September 2023 we begin buying back our own stock using the existing quota.

Additionally, the Board has approved the 2024 capital return program, further increasing our overall quota to a total of USD $581 million. This decision demonstrates our strong confidence in the long term value potential of the company. The China town market has been growing significantly, with outbound travel playing an increasingly large role due to easier visa access and the gradual resumption of international flights. Our global business is also thriving, particularly in the APAC region, reflecting a strengthened market presence and improve the product competitiveness. Expanding our international operations with diversified products worldwide remains a key priority for us. As travel demand rises, we also recognized the increasing importance of enhancing our service.

Through exceptional customer service, AI technology and the reliable content, we continue to invest in improving user experience. Our commitment to globalization and great quality collectively now as our digital strategy drives us to continuously innovate and improve. The year 2023 mark the China’s reopening to the world, and 2024 will be a year of consolidating and expanding global tourism. I’m holding our digital strategy we aim to become a leading player in Asia market and a global market in a three to five years. With that I’ll turn the call over to Jane, for operational highlights.

Jane Sun: Thank you, James. Good morning, everyone. As a quick overview, our net revenue in Q4 grew by 104% year-over-year and increased by 24% compared to 2019. During this period, the travel industry witnessed a strong momentum. As rising travel sentiment drove growth and supply side constraints continued to ease. Both, our hotel and air reservations grew by approximately 130% year-over-year. For the full year of 2023, our total net revenue achieved year-over-year growth of 122% and 25% compared to 2019. This outstanding result was due to the robust release of travel demand and the exceptional performance across all of our business segments. Additionally, our adjusted EBITDA margin in 2023 significantly improved to 31%, reflecting the successful optimization of our cost structure and overall productivity enhancement.

Now let me walk you through different market performance. First, China Domestic. In Q4, the China domestic market continued to exhibit robust growth. Our domestic hotel bookings witnessed a year-over-year growth of over 130% or more than 60% compared to 2019. Demand for travel showed no signs of slowing down during the winter season. Popular destinations such as Harbin in the northern part of the country, experienced a surge in visitors. Notably, individuals have been prioritizing travel expenditures over other daily expenses, indicating a shift towards experiential spending. This change in consumer behavior has significantly favored travel industry as more people allocate their resources towards exploring new places and creating memorable experiences.

We have continued to expand our user base among the elderly demographics through the deep integration of product integration, content generation and marketing efforts. In Q4, the number of the users over 50 years old, increased by more than 90% compared to 2019. And this is just a beginning to capitalize on the market opportunity for retired community, which has been in power and ample time. Second, outbound market. Despite the winter seasonality in Q4, outbound travel from China, maintain the same level of the recovery as the peak season in Q3. The gradual easing of supply side constraints, such as increased international flight capacity, and certain clearance of the Visa block, played a significant role in facilitating this positive trend.

Chinese travelers continue to exhibit high demand for travel to overseas destinations. Moreover, many countries implemented visa free policies, specifically targeting at Chinese travelers, further enhancing the appeal of these destinations and securing their popularities. In Q4, Trip.com Group’s outbound air ticket and hotel bookings recovered to more than 80% of pre-pandemic level, surpassing the market overall recovery rate of 60%. Thailand, Singapore, Japan, Korea, Malaysia remain as the top outbound travel destination on our platform. Third, global markets. On the international front, we actively enhance our global market presence. Through the strong synergy of improved products, enhance the services and targeted marketing efforts, we have witnessed a steady growth in APAC region.

In Q4, total GMV of our overseas OTA brand grew by more than 70% year-over-year, and increased by more than one 100% compared to 2019. Now, let me walk you through a few strategic highlights. First, globalization. As 2023 was about a return to travel, then 2024 will be the year when people go further than ever before. The travelers become more comfortable and confident then touring around the world. They are taking to the skies, rails, roads and the seas to experience unforgettable adventures. From music festivals to exotic adventures, travelers are increasingly seeking more than just a typical gateway. They are craving for immersive cultural experiences thrilling adventures, and the music, euphoria. All value a meaningful connections and quality time with their families and friends.

In light of this evolving travel preference, Trip.com Group is providing comprehensive travel information and insights as well as expanding our global offering in products and services. Recognizing that the total addressable market in the major Asia regions is larger than that of China. Our goal is to further extend our business skills by establishing ourselves as the leading player in Asian market and global market with the next three to five years. Our global OTA platform currently operates in 39 countries and regions across Asia, Europe, and the rest of the world. We offer users a wide range of travel options through our one stop model. With our exceptional 24/7 multilingual in-house customer service, and global SOS support, our global users can receive immediate assistance through our AI Chatbot, or connect with live representatives within an average time of 30 seconds only.

Over 60% of our global bookings are made directly through Trip.com. We have been successful in gaining mindshare and market share in the key Asia regions, including Hong Kong, Singapore, Korea, Japan, Thailand and Malaysia. Second, inbound markets. China inbound travel is an untapped opportunity. Inbound tourism plays a vital role in country’s economy. For tourism dependent countries, such as Thailand, inbound travel can contribute to more than 10% of its GDP. For developed nation, inbound travel can contribute to around 1% to 3% of its GDP. China’s current level is less than 0.5%. If China can reach a global average, between 1% to 2%, it would unlock a great market potential of another RMB1.5 trillion to RMB2 trillion market. Recognizing the importance of inbound travel, China has included its integral part of its 14th five-year plan.

The government has taken steps to facilitate inbound tourism by granting visa free access, making travel more convenient for international visitors. China has extended its visa free policies to citizens from 10 countries so far, including France, Germany, Italy, Netherlands, Spain, Ireland, Switzerland, Singapore, and Malaysia and Thailand. Since the implementation of this visa free policy, there have been a remarkable increase in inbound travel to China from these countries, with a rising of nearly 30% in December when compared to November, as reported by Chinese National Immigration administration. In 2023, Trip.com, has already observed a significant surge in visitor numbers, with a four-digit increase compared to 2022. Moreover, government is making progress in many areas, such as simplifying visa application process, facilitating foreign credit card payments, and enabling online travel reservations with foreign passports.

We anticipate that the forthcoming inbound tourism policy will bring about favorable changes, creating new opportunities for the industry. With Trip.com Groups, extensive customer reach and a robust supply chain, we are well prepared to capitalize on the future growth of inbound travel. Third, AI, the integration of artificial intelligence has emerged as a transformational force, revolutionizing the way we experience and navigate the world. Since the emergence of the large language models in early 2023, we have been actively exploring the potential of these new technologies to make travel more convenient, personalized, and memorable for everyone. Our AI assistants, TripGenie is revolutionizing trip planning, with personalized itineraries, instant bookings, and the rapid response to queries.

Utilizing natural language processing in our extensive travel data, we aim to simplify the travel planning and reservation process. Our focus is on the constant enhancement of our model to align with users’ behavior and data, providing seamless and hassle free travel experience. Additionally, Trip.com offers AI driven travel recommendation lists, to improve booking experiences. These dynamic lists aim to meet diverse needs of users, utilizing the latest travel trends, real time pricing information and top rated options. This not only enable our partners to showcase their offering, but also provides user with reliable insights for informed decision making. We remain dedicated to enhancing our capability alongside the advancements in the AI technology, as we firmly believe, it is potential to drive exponential growth.

Fourth, corporate responsibility. Our travel industry has shown remarkable resilience in the phase of pandemic, as we navigate this recovery, our commitment to delivering high end, high quality customer experiences remain crucial. Equally important is our dedication to contributing to the growth of our partners in the industry as a whole. We recognize the significance of our role in not only providing exceptional services, but also in bolstering economic growth and achieving common prosperity. By creating more job opportunities, and actively contributing to economic development, we strive to make a positive impact on the communities we serve. Therefore, we are firmly committed to embracing sustainability as a fundamental component of our long term growth strategy.

At Trip.com Group, we developed a sustainability strategy that prioritizes customer service quality, aiming to promote the sustainable development of our industry through community friendly, environmental friendly, family friendly, and stakeholder friendly guidelines. First on community friendly, we firmly recognize the sustainable tourism is a driving force of economic growth and job creation. According to Award Travel and Tourism Council’s forecast, the sector will contribute to $15.5 trillion USD to GDP by 2033, representing 11% — 11.6% of the global economy. Moreover, it will employ approximately 430 million people around the world with nearly 12% of the global workforce. Trip.com Group, takes a comprehensive approach to bolster sustainable development within the travel industry.

As part of our commitment to support the driving growth in the local communities, we have made sustainable investment in our rural revitalization strategy. This strategy focuses, to bolstering tourism by constructing high end accommodation and providing training for tourism professionals, thereby stimulating economic growth and development in remote areas. Notably, a number of Trip.com Group country retreats, has increased from 8 to 27 over the past year. The annual per capita income of the local residents involved in the country retreats have risen by over RMB40,000. This economic growth contributes to achievement of the common prosperity enable more individuals to start their own business and secure employment opportunity within their community, ultimately contributing to an improved quality of life.

Second, environmental friendly. To show our commitment to environmental preservation, we have introduced to our carbon hotel standard in 2023. This industry framework collaborates with our hotel partners to enhance accommodation, sustainability, and promote environmental protection. That initiative has yield promising results with over 1500 partners being recognized as low carbon hotels. Furthermore, we have made significant strides towards providing sustainable travel choices across all of our business lines. In addition to Green Hotel initiatives, we have also introduced Green Flights program, which enables travelers to qualify and offset carbon footprint of the air travels and provide eco-friendly travel options to help reduce environmental impacts.

Through green vehicle initiatives, we advocate for the use of electric vehicles or EVs to reduce carbon emission in ground transportation, we also launched an innovative Green Corporate Travel initiative, which includes low carbon labels for flights, cars, trains, and hotel supported by robust system for precise carbon emission calculation. In the previous year alone, over 16 million customers of Trip.com Group chose to use green products. Third, family friendly. Trip.com Group placed great importance on family friendly initiatives, to strive to create a gender inclusive and diverse workforce. Currently, female employees make up more than 50% of our workforce, reflecting our commitment to fostering a balanced environment. We have implemented policies to support pregnant employees starting from 2023.

Employees who have been with our company for three years plus can receive a child care subsidy of RMB50,000 for each child. Furthermore, Trip.com Group is proud to be the first company in China to adopt hybrid work model. Vis-a-vis, this approach not only enhance employee satisfaction, but also promote productivity and creativity within our organization. Fourth, stakeholder friendly. We strive to put our customer first, providing exceptional services and value, meeting their needs and ensuring their satisfaction. Second, we’re committed to delivering great value to our partners, contributing to the growth of our industry and collectively creating more job opportunities for the society. And certainly, we work hard to create value for our employees and shareholders fostering a positive and rewarding environment to allowing them to thrive and benefit from our success.

In conclusion, the travel industry has been thriving since the start of 2023. Driven by strong demand, we expect the industry to continue flourishing, faster economic growth and cross cultural connection. In light of this positive outlook, we are committed to innovating and strengthening our global offering to capitalize on these trends. We are confident in our ability to contribute to the growth and success of the travel industry in many years to come. With that. I will now turn the call to Cindy.

Cindy Wang: Thanks, Jane. Good morning, everyone. For the fourth quarter of 2023 Trip.com Group, reported a net revenue of RMB10.3 billion, representing a 105% increase year-over-year and a 25% decrease quarter-over-quarter. Despite this sequential decrease, which was mainly due to normal seasonality, the revenue was still 24% higher than the 2019 level. For the full year of 2023, net revenue reached RMB 44.5 billion, representing a 122% increase year-over-year and a 25% increase from 2019. This growth was mainly driven by the strong release of travel demand, following China’s reopening at the beginning of the year. Accommodation reservation revenue for the fourth quarter reached RMB3.9 billion, representing a 131% increase year-over-year and a 32% growth compared to the 2019 level.

In the fourth quarter, China market continue to demonstrate robust growth. Domestic hotel booking grew over 60% above the pre-pandemic level. And outbound hotel booking remained at more than 80% of the pre-pandemic level. In addition, hotel bookings, our overseas platform continued to show triple digit growth. For the full year of 2023, accommodation reservation revenue totaled to RMB17.3 billion, marking a 133% increase from 2022, and a 28% increase from 2019. Transportation ticketing revenue for the fourth quarter was RMB4.1 billion, representing an 86% increase year-over-year and an 18% growth compared to 2019. For the full year of 202, transportation ticketing revenue was RMB18.4 billion, representing a 123% increase from 2022 and a 32% increase from 2019.

The growth was mainly due to the strong growth in our domestic and global air ticketing business and robust recovery in outbound — of outbound air ticketing bookings. Package tour revenue for the fourth quarter was RMB 704 million, representing a 329% increase year-over-year and recovering to 88% of the 2019 level. In the fourth quarter, domestic package tour continues to outgrow the 2019 level. On the other hand, that recovery in outbound package tour is still lagging behind, but that gap has been significantly narrowing. For the full year of 2023, package tour revenue is RMB 3.1 billion, representing 294% increase from 2022 and the recovery to 69% of the 2019 level. Corporate travel revenue for the fourth quarter was RMB 634 million, representing a 129% increase year-over-year, which is 70% higher than the 2019 level.

Air ticket bookings has increased by double digit compared to the 2019 level, while hotel bookings have more than tripled the 2019 level. For the full year of 2023, corporate travel revenue was RMB 2.3 billion, representing a 109% increase from 2022 and an 80% increase from 2019. Excluding share based compensation charges, our total adjusted operating expenses were 17% lower than the previous quarter and 1.6% higher than the same period in 2019. For the full year of 2023, total adjusted operating expenses were 8% higher than the 2019 level. Adjusted product development expenses for the fourth quarter decreased by 19% from the previous quarter, and increased by 10%, compared with the same period in 2019. Adjusted G&A expenses for the fourth quarter decreased by 16% from the previous quarter, and decreased by 1% from the same period in 2019.

For the full year of 2023. The combined total of adjusted product development expenses, and adjusted G&A expenses were 15%, higher than the 2019 level. The total headcount of our product development, and G&A teams remained significantly lower than during the same period in 2019. Adjusted sales and marketing expenses for the fourth quarter decreased by 15% from the previous quarter, and decreased by 6%, compared with the same period of 2019. For the full year of 2023, adjusted sales and marketing expenses as percentage of net revenue was 20%, compared to 26%, during the same period in 2019. This was mainly due to improve the marketing efficiencies and a strong release of pent up demand from beginning of the year. Adjusted EBITDA for the fourth quarter was RMB 2.9 billion, representing a growth of 899% year-over-year, and a 117% compared to 2019.

Adjusted EBITDA margin for the fourth quarter was 28% in comparison to 6%, in the same period of 2022 and 16%, during the same period of 2019. For the full year of 2023, adjusted EBITDA was RMB 14 billion, representing a growth of 550% year-over-year and an increase of 78% compared to 2019. Adjusted EBITDA margin for the full year over 2023 was 31%, compared to 11% in 2022 and 22% in 2019. Diluted earnings per ordinary share and per ADS were RMB 1.94, or US dollar $0.27. For the fourth quarter of 2023, excluding share-based compensation charges and fair value changes of equity security investments and exchangeable senior notes. Non-GAAP diluted earnings per ordinary share and per ADS were RMB 4, or U.S. $0.56 for the fourth quarter. For the full year of 2023, diluted earnings per ordinary share and per ADS, were RMB 14.78 or US dollar $2.08.

Excluding share-based compensation charges and fair value changes of equity security investments and exchangeable senior notes, non-GAAP diluted earnings per ordinary share and per ADS, were RMB 19.48 or U.S. dollar $2.74. As of December 31 2023, the balance of cash and cash equivalents restricted cash, short term investments held to maturity time deposits, and financial product was RMB 77 billion, or U.S. dollar $10.9 billion. Given that the rapid business growth this year has significantly strengthened the group’s cash flow. And we strongly believe that the company share price is undervalued. As of February 22 2024, we’ve repurchased U.S. dollar 224 million of our shares and reduced our share count by approximately 1% versus 2022. According to the regular capital return policy, the Board of Directors has recently granted authorization for the company to implement strategic capital return initiatives.

These initiatives may encompass discretional annual share repurchase, discretional annual cash dividend, or a combination of both. This reflects our dedication to our shareholders investment and our belief in the strong long-term prospects of our business and the travel industry. To conclude, we are delighted that the travel market has been recovering significantly. Our performance has effectively reflect the rising consumer confidence and demand for travel. We are committed to drive strong growth in 2024 along with the continued upward trajectory in the travel market, and, most importantly, to create value for our long term shareholders. With that operator, please open the line for questions.

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Q&A Session

Operator: [Operator Instructions] Our first question comes from the line of Joyce Ju, from Bank of America. Your line is open.

Joyce Ju: Good morning James, Jane and Cindy, congrats on those strong results and thanks for taking my question. This quarter, the company’s international platform Trip.com actually saw another robust quarter and the management also mentioned a lot in your opening remarks, that the globalization is actually our important, like, long term goal. Could you kindly elaborate a little bit more on this front? What’s the Trip.com’s current achievement, more details any color what we find? And the near term midterm even longer term goals and also their consequence, like, strategies to achieve that. How would your digital strategy help to reach this goal? Thanks a lot.

James Liang: Thank you very much for the question. Our digital strategy focuses on globalization and a great quality. We believe our long term growth relies on the progression of our globalization strategy, which aims to build global products supply chains, services and technology for our worldwide users. Asia is a top travel destination for travelers from China and other parts of the region. By leveraging our strong supply chain, diverse product offering an industry leading service and technology, we strive to provide exceptional service for users in Asia and subsequently around the world. With respect to great quality, our mission is to provide the best travel experience with the best technology. For example, we have introduced TripGenie, an AI based travel assistant, to enhance the travel planning experience. We’re also using AI to improve the efficiency of our customer service, content generation and IT operations. Thank you

Operator: Thank you. One moment for our next question. And our next question comes from line of Alex Poon from Morgan Stanley. Your line is open.

Alex Poon : Good morning. Congratulation management for very strong quarter. My question is regarding our recent business performance, particularly around Chinese New Year, and after four different segments, including domestic, outbound and Trip.com. And how should we elaborate or extrapolate from this strong CMI [ph] performance into Q1 and the rest of the year? Thank you so much.

Jane Sun : Thank you, Alex. As of 2023, our business has fully rebounded to pre-COVID levels. From this year forward, we will stop using 2019 as a benchmark, I would say except for our outbound travel segment. With regard to the recent performance, let me starting with the market performance. The China travel market has shown strong momentum, quarter-to-date, especially during the Chinese New Year. Number of domestic tourists grow by 34% year-over-year, or 19% above the 2019 level. And outbound travel continues to recover with flight capacity during the Chinese New Year holiday, reaching around 70% of the 2019 level. And we are very happy to see that the several — see that several countries have not offering Visa free entry for Chinese travelers.

With regard to our own performance, our company continues to outpace the market growth, solidify our position and gaining a significant market share. During the recent Chinese New Year holiday, our domestic hotel and air reservations have increased by more than 60% and 50% year-over-year respectively. And our outbound hotel and air reservation have both surpassed the 2019 level. At January of 2023, including the Chinese New Year holiday was a low base for travel activities and the travel momentum only started to pick up after the Chinese New Year. Therefore, we anticipate stronger year-over-year growth in the first half of Q1 this year and followed by a comparatively softer second half just because of the [indiscernible]. And with regard to the international market, our Trip.com business has maintained a mid to high double digit year-over-year growth.

Therefore, we continuously to see a very strong growth in the travel market. Thank you.

Operator: Thank you. One moment for our next question. And our next question will come from Alex Yao from JP Morgan, your line is open.

Alex Yao : Thank you, management, for taking my question. So the Civil Aviation Administration of China, I see, it has projected that the outbound flight capacity will reach 80% of pre COVID levels by the end of 2024. This seems relatively slow considering the capacity has already reached 70% during the Chinese New Year holiday. From your perspective, what factors might contribute to this slow recovery? When does management anticipate a full recovery in the outbound travel sector? Thank you.

Jane Sun: Thank you, Alex. We hold a very strong confidence in the full recovery of outbound travel. Firstly, our platform has observed a significant surge interest in the outbound travel, which indicates a robust demand for our users. Furthermore, China is becoming increasingly open to attract inbound tourism, which forms a part of the demand for travel related international travel. Secondly, the market supplier situation is improving, we have noticed a steady recovery in the number of inbound and outbound flights. Additionally, visa policy has become increasingly favorable. For instance, we observed that the markets offering visa free policies to Chinese travelers showed much better recovery during the Chinese New Year period, compared to other destinations.

Lastly, it’s important to know that the most markets outside of China, are project to require two to three years to fully recover their international travel. Even the 70% to 80% recovery of outbound passenger volume in 2024, will indicate a year-over-year growth of approximately 65% to 90%. This clearly illustrates the potential for the strong growth in outbound travel in the coming year. And with our own data, during the recent Chinese New Year holiday, our group already saw our air and hotel reservations fully bounced back and beyond the 2019 level. Thank you.

Operator: Thank you. One moment for our next question. And our next question comes from the line of Jiong Shao from Barclays. Your line is open.

Jiong Shao : Thank you very much for taking my question. And firstly, Happy New Year to you all.

Jane Sun: Thank you.

Jiong Shao: Yeah. So there are a lot of cross currency in the Chinese economy today, as you know, I mean, the property market, the stock market are doing terribly. People’s confidence is very low. Economy is kind of soft. You have put up very, very strong results and congrats on that. I was just wondering, in Q4, and so far in Q1, what have you seen in terms your travelers spending behavior, leisure travel, or business travel, are they spending less, spending the same? Or in terms of changes in destination? Anything you can share will be great.

Jane Sun: Thank you for your question. China is a very big country, there are a lot of different segments. We have seen that certain segments, such as entertainment, music festivals, wellness, and travel, these segments are doing very well. We have seen customers have increased their travel demand based on our search volume on our platform. Many customers are going to different places, both domestically and to the rest of the world. The interests for our customers to explore different regions in the world has been enhanced compared to pre-COVID level. With the easiness of travel restrictions, and also gradual recovery for the visa applications and flight capacity, we’re hoping 2024 will be the year that we can take more customers to travel within China and to the rest of the world. So the travel demand is very strong and we are very committed to provide the best service and products to our customers. Thank you.

Operator: Thank you. One moment for our next question. And our next question comes from Simon Cheung from Goldman Sachs. Your line is open.

Simon Cheung : Hi, happy new year everyone. Thanks for taking my questions. I just have one quick question in relation to the margins. I think if you look in the prior several years, on a sequential basis, obviously fourth quarter seasonally weaker, we see some solid margin contraction and we have seen that as well in your fourth quarter result. However, I think the magnitude of correction like when I look at quarter-on-quarter the EBIT margins fallen by roughly about 6% to 7% compared to historically, maybe almost like mid-teens. It’s seemingly attracting a bit better than anticipated. So I guess the question I have is, we have seen quite a few quarters of sales and marketing expenses, tracking well below the 2019 level. And I just wanted to question how you’re thinking about the trend, especially given incrementally there might be more spending to be incurred, maybe in the oversea market, now that you have a more aggressive globalization strategy. Thank you.

Jane Sun: Thank you, Simon. With regard to the sales and marketing expenses in the fourth quarter, last year, we have seen a significant improvement in our marketing efficiencies, primarily due to our enhanced conversion, as well as the internal cross selling initiatives. And on top of that, we also make a lot of investment in for example, the content generation, which also significantly help us to improve the marketing efficiency. And our long term goal is to further enhance the marketing efficiencies in both the China as well as our international market by focusing on increasing our direct traffic — increasing our direct traffic, as well as to improving our cross selling within our platform. But of course, that in the — for the International Trip.com business, we are also looking at the opportunity to further enhance our brand awareness outside of China market. Thank you.

Operator: Thank you. One moment for our next question. And our next question will come from the line of Brian Gong from Citi. Your line is open.

Brian Gong : Good morning, James, Jane, Cindy and Michelle, Happy New Year. And thanks for taking my question. My question is also regarding our international platform trip.com, which has recorded strong growth. Could you provide a bit more details of Trip.com’s, like global footprint, GMV and the revenue contribution as well as profitability? Also, what our primary markets that Trip.com focus on and what our Trip.com’s key competitive advantages in those markets versus its competitors? Thank you.

Jane Sun: Thank you. We anticipate at the Trip.com will contribute 15% to 20% of the group’s total revenue over the next two or three to five years, with the mid to high double digit CAGR growth. And we believe that the Trip.com growth is built upon our robust product logistics, supply chain service standard, as well as the technologies that we applied across various to our specific core regions. Our Trip.com, primarily focusing on the Asian market, which is the top outbound destinations for travelers from both China and other parts within the region. It’s worth noting that the combined size of the top Asia market, excluding China surpasses that of the mainland China in terms of the growth bookings. Our growth strategy with Trip.com starts with leveraging the strong air traffic from Skyscanner, and then progresses from many search to the mobile app, broadening our offering from air travel to the hotel bookings extends our reach from Asia, hopefully to the rest of the global travel.

Meanwhile, and we anticipate that the Trip.com were to be profitable within the same time frame. This will be driven by the scalability, increase the marketing efficiencies through a strong mobile presence and brand name as well as the shift in the revenue mix favorably hotel bookings. With regard to the competitive advantage off our Trip.com platform, I think firstly, Trip.com’s mobile app offers a smooth and user friendly search and booking experience. We also utilize our AI tools to provide personalized recommendations and special offers, which enhancing our user engagement Secondly, our comprehensive one stop mobile remote model covers nearly all travel needs, making it especially attractive to mobile app users. Our extensive experience in China has further solidify our expertise in this area.

Thirdly, we offer 24 hours seven days’ customer services, through our mobile calls on our chats or emails, ensuring users have a dependable content points for any issues that they encounter. Lastly, Trip.com provides highly competitive product offering, best to our group strong market presence and well established supplier relationships. Thank you.

Operator: Thank you. One moment for our next question. And actually, this is all the time we have for Q&A today. And I’ll turn it back to Michelle Qi, for any closing remarks.

Michelle Qi : Thank you. Thank you, everyone for joining us today. You can find a transcript and a webcast update call on the investors.trip.com. We look forward to speaking with you on our first quarter 2024 earnings call. Thank you and have a good day.

Jane Sun: Thank you very much.

Operator: Thank you for your participation in today’s conference. This does conclude the program, you may now disconnect. Everyone have a great day.