On May 29, Ctrip announced its unaudited financial results in the first quarter ended March 31, 2020, which were greatly affected by the COVID-19 pandemic.
The net operating income of the company in the first quarter stood at 4.7 billion yuan (about 669 million US dollars), down 42% from the same period a year ago, according to the financial report. The operating loss in the first quarter was 1.2 billion yuan not included in the equity-based compensation. The profit and loss balance of operating profit in the first quarter will be achieved if the expenses incurred for users who cancelled their users during the pandemic are excluded, which means that the company benefits their customers for 1.2 billion yuan in user to subsidize the losses of them in this quarter.
Ctrip's capital reserve (cash and cash equivalents, restricted cash, short-term investments, held-to-maturity term deposits and balance of wealth management products) totaled 68.2 billion yuan ended March 31, 2020, up 14% from the end of 2019. The number of employees in the company remains stable compared with that of at the end of 2019, especially the still cemented core service system.
"The tourist industry around the world meets a big challenge because of COVID-19 pandemic. However, we are encouraged that there are signs of stabilization or recovery of travel activities in many markets we operate," Liang Jianzhang, executive chairman of board of directors in Ctrip said." Travel activities maintained a stable trend for recover in the Chinese market after it hit the bottom in February. In recent weeks, the recovery of high-level hotel has significantly exceeded other businesses because of our timely product innovation responding to the new demand during the pandemic. Traveling is the spiritual demand for people, and we believe that with the disappearance of the COVID-19 pandemic, tourist industry will eventually recover and reach a new height," he added.
It was said that with the effective control of the epidemic, the tourism in domestic market gradually went back to normal in March after reaching the bottom in February. The program of "Tourism Recovery V Plan" by Ctrip is also launched to accelerate the industry recovery. At present, there are more than 350 destinations, 500 air lines and 10,000 hotels to participate in the program. At the same time, Ctrip also launched a new approach featuring "Boss Live Streaming + Hotel Pre-sale". Liang Jianzhang generated sales of nearly 400 million via livestream for 11 times.
Operating loss of 1.2 billion: Users who cancelled their users were subsidized by Ctrip during the COVID-19 pandemic
The Chinese market was mainly affected by the pandemic in the first quarter of this year, and the degree of impact among business lines is different in Ctrip.
Business performances in detail are as follows:
the revenue of accommodation reservation in the first quarter of 2020 reached 1.2 billion yuan, down 62% year on year from 2019. It became the most impacted business in the company due to its obvious market share advantage and the losses incurred for users.
The revenue of transportation ticketing fell 29% from the past year to 2.4 billion yuan in the first quarter of 2020. Average revenue was down 46.3% year-on-year compared with that of the major domestic airlines in the first quarter. The company's traffic ticket was less impacted because it had a certain proportion of international business, while international transportation ticketing was not significantly affected by the pandemic in the first half of the quarter.
Business in vacation and travel management benefited from the strong growth before the Spring Festival and the pandemic when the market has not yet affected, and their performance decline eased to some degree. Vacation revenue was 523 million yuan, down 50% from the same period a year ago. Business travel revenue reached 126 million yuan, down 47% compared with the same period a year ago.
Ctrip's operating loss will be 1.2 billion yuan in the first quarter if equity-based compensation is not included, which reflects an important choice made by the company "in response to COVID-19 pandemic", and it is the company's long-term principle of "standing together regardless of difficult situation" with its users. Customers were in panic during the outbreak of coronavirus pandemic, unleashing an unprecedented wave of "cancelling users". Ctrip immediately launched a special policy to cancel and change tens of millions of users to help users recover their losses, involving more than 31 billion yuan. But it also caused a financial loss of 1.2 billion yuan for the company.
The loss is also reflected in the management cost of 1.9 billion yuan in the first quarter, up 136% year on year. Ctrip's current management expenses will drop by 9% instead of increasing, if the financial losses of the special policy of return and change are excluded.
Ctrip's cost control concept of "scrimping and saving to survive during the epidemic" is also reflected in other aspects. The cost of sales and marketing was 1.4 billion yuan, down 38% from the same period last year. The cost of product development was 1.7 billion yuan, down 33% from the same period of last year. In addition, the number of product developers remained stable in the first quarter, and the decrease in bonuses for relevant personnel was the main reason for the decrease in cost.
Notably, all employees received their full year-end bonuses in the first quarter of 2019, and the employees in front-line service positions maintained a normal salary increase. The total number of employees varied within a normal range, compared with that of in 2019.
The approach of "Boss Live Streaming" speeds up business recovery with the fastest recovery in high-level hotel category
Net loss attributable to Ctrip's shareholders in the first quarter of 2020 is 2.2 billion yuan, excluding equity-based compensation and gains and losses from changes in fair value of equity available-for-sale financial assets. It should be noted that the losses caused by non-operating factor will continue to weaken with the recovery of the tourism market. In terms of operating profit, Ctrip's operating profit in the first quarter achieved breakeven if the expenses incurred for users who cancelled their users during the pandemic were excluded.
In terms of liquidity, it can still deal with the current unfavorable factors calmly. As of the end of this quarter's reporting period, Ctrip's capital reserve reached 68.2 billion yuan, an increase of 8.3 billion yuan compared with that of at the end of 2019. In addition, Ctrip signed a credit agreement with financial institutions of up to 1.5 billion US dollars in April this year, of which 1 billion US dollars has been withdrawn.
After the "darkest hour" of the epidemic, the signs of recovery in various markets around the world have become clearer.
The number of orders in air tickets, hotels and scenic spots on Ctrip's platform recovered significantly before the Labor Day holiday. From mid-April, there was a significant increase in air tickets booked by passengers on the platform for the Labor Day holiday. Ticket sales in scenic spots increased 94% month-on-month and package sales of scenic spot + hotel increased more than 100% month-on-month. Ctrip's car rental bookings returned to 70% of the same period last year. As the pandemic in some neighboring countries and regions has been effectively controlled, there are signs of recovery.
Since the launch of its "Recovery V Plan" in March this year, more than 350 destinations, 500 airlines and 10,000 hotels have joined. So far Ctrip's financing platform has provided suppliers with nearly 17,000 loans to help them deal with the difficulties. Two weeks ago, the Intercontinental Hotels Group and Ctrip announced a strategic cooperation to open its first official flagship online travel platform (OTA) store throughout the world. Meanwhile, they will also open up and connect the membership system between them. To support global efforts to epidemic containment, more than 3 million medical masks were donated by Ctrip to more than 25 countries overseas.
What's more, the approach of "Boss Live Streaming + Hotel Pre-sale" by the company has also played a role in accelerating business recovery. In the past two months, Liang Jianzhang traveled 31 cities in China at a speed of two days to go through one city, promoting a comprehensive recovery in tourism, including Beijing, Tianjin and Hebei, which set a sales record of tens of millions in one minute, with nearly 400 million sales via live streaming for 11 times.
After the above campaigns, unlike the low-level hotel which took the lead in the market during the economic recovery, the high-level hotel becomes a hotel category with the fastest recovering speed by implementing measures of business innovation, live streaming and referral traffic, and the Online Accommodation Platform Hotel Pre-sale Service Specification led by Ctrip is also pushing the market recovery towards a healthier direction.
As for the results in the second quarter, it expects that the net operating income in the second quarter of 2020 will drop 67%-77% from the previous year due to the continuous negative impact of the COVID-19 pandemic, which reflects its preliminary judgment based on the current situation, but it may be adjusted in the future.