<div id="readability-page-1">The online travel agent’s revenue rose 14% in the first quarter, but its latest report lacked discussion of an anti-trust probe into Trip.com, its top stakeholder and a key supplier <h4>Key Takeaways:</h4> <ul> <li>Tongcheng reported its revenue rose 14.4% in the first quarter, led by a 14.7% gain for its accommodations unit and a 60% jump for its hotel management business</li> <li>The online travel agent’s latest report failed to discuss an anti-monopoly probe launched in January against Trip.com, Tongcheng’s main supplier of hotel booking services</li> </ul> By Doug Young Double-digit revenue and profit growth weren’t enough to hide the big elephant in the room that online travel agent Tongcheng Travel Holdings Ltd. (0780.HK) failed to mention in its latest quarterly report released last Thursday. That elephant is an anti-monopoly probe into leading online travel agent Trip.com (TCOM.US; 9961.HK) announced in January, which will almost certainly have a major impact on Tongcheng when a final decision comes in the case. That’s because Tongcheng is part of Trip.com’s market dominance that is under investigation. Trip.com currently holds about 24% of Tongcheng’s shares, and is also the main supplier of hotel booking services that are one of Tongcheng’s top three revenue sources. And yet despite that big overhang, Tongcheng makes no mention of the relationship in its latest quarterly report, which looks relatively positive, including 14.4% revenue growth and 16.4% profit growth in the three months to March. But investors weren’t fooled by the positive numbers, with Tongcheng’s shares slumping 5% on Friday, the day after the latest report’s release. With the Friday selloff, Tongcheng’s shares are now down 33% since the start of the year, almost as bad as Trip.com’s 36% decline. Most of the slump has come since Trip.com confirmed on Jan. 14 that it was being investigated by China’s State Administration for Market Regulation (SAMR). Other reports said the probe was focused on the company’s dominance in China’s hotel booking market. The selloff has sent Tongcheng’s price-to-earnings (P/E) ratio down to just 13, though that’s still roughly twice the 6.6 for Trip.com’s battered valuation. By comparison, the much smaller Tuniu (TOUR.US) trades higher at 16, while global giant Expedia (EXPE.US) trades at 19. Truth be told, Tongcheng could ultimately benefit from this anti-monopoly probe, which almost certainly will result in it being partly or completely cut free from Trip.com’s dominance. Its reliance on Trip.com for its hotel booking services is depressing its gross margin, which stood at just 66.3% last year, compared with 80.6% for Trip.com and an even higher 90.1% for Expedia. But achieving such higher margins will force Tongcheng to develop its own separate sources for completing hotel bookings made over its platform, which takes time. The company is already taking steps in that direction through the development of its hotel management business. That was one of the highlights of its latest report, following Tongcheng’s acquisition last year of the hotel management business of embattled property developer Wanda. That acquisition saw revenue from Tongcheng’s “other businesses,” which include mostly hotel management, rise about 60% year-on-year to 961 million yuan ($141 million) in the first quarter, accounting for nearly a fifth of its 5 billion yuan in revenue. By comparison, that business accounted for just 14% of revenue a year earlier. With the acquisition and rapid growth of its hotel management business, the number of hotels in Tongcheng’s network of managed properties reached 3,200 at the end of March, with another 1,900 in the pipeline. That makes the company a leading Chinese top hotel operator, outpacing Atour’s (ATAT.US) 2,088 hotels at the end of March, though still well behind the more than 13,000 for leading hotelier H World Group (HTHT.US; 1179.HK). <h4>Rebuilding a business</h4> The 3,200 hotels in Tongcheng’s managed property network lays a foundation for building its own direct room booking services without having to use Trip.com as a middleman, though it’s still a tiny fraction of the 4 million hotels and alternative accommodations now on its network. That means the company is probably already starting to talk directly with the big names like H World Group, as well as many of the smaller chains, about forming its own direct relationships for room booking services. The company’s latest annual report shows just how closely it is tethered to Trip.com, which helped to create Tongcheng in its current form by engineering a merger between two large online travel agencies about a decade ago. Trip.com owned a controlling stake of one of those agencies, while internet giant Tencent owned the other. Following the merger, Trip.com emerged with its controlling 24% stake in Tongcheng, while Tencent isn’t far behind with 20%. Tencent is also a key partner for Tongcheng, which derives a big portion of its business through a preferentially placed portal on Tencent’s hugely popular WeChat platform. Tongcheng’s latest annual report shows it received a massive 3.21 billion yuan in commissions and other income from Trip.com in 2025, presumably mostly for providing hotel booking services, equal to about 16.5% of its revenue for the year. In its latest quarter report, accommodation services rose 14.7% year-on-year to 1.36 billion yuan, accounting for 27% of overall revenue. Tongcheng’s largest revenue source is transportation ticketing services, which rose 6.2% in the first quarter year-on-year to 2.12 billion yuan, accounting for 42% of overall revenue. That portion of its revenue shouldn’t be affected by the anti-monopoly probe, since Tongcheng works directly with airlines, rail and bus operators for that part of its business. Growth in accommodations and transport ticketing revenue, combined with the big gains for its hotel management business, helped Tongcheng to boost its profit by 16.4% to 779 million yuan in the first quarter, up from 669 million yuan a year earlier. Tongcheng positions itself as serving customers in China’s smaller cities, and points out in its latest report that 87% of its users in the first quarter were from non-Tier 1 cities. Such a strategy is common in many of China’s consumer sectors, where top operators often directly provide services in Tier 1 cities where margins are highest, and then work with partners to develop smaller markets where margins are thinner. Notably, Tongcheng’s sales and marketing spending grew 16.4% year-on-year in the first quarter to account for 42.2% of its revenue, up from 40.8% a year earlier. That could indicate the company is starting to take more aggressive steps to develop its own hotel relationships for the day when the regulator ultimately orders it to sever or severely curtain its relationship with Trip.com. Still, its silence on such an important issue – both in its latest quarterly results and its annual report released in April – doesn’t seem like the best approach for such a critical issue that could ultimately help the company improve its margins, but will also bring some pain in that transition. To subscribe to Bamboo Works free weekly newsletter, click here</div>

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同程旅行控股有限公司第一季度收入增長 14.4%，但最新報告未提及對其主要供應商攜程網的反壟斷調查。儘管住宿業務增長 14.7%，酒店管理業務增長 60%，但未能掩蓋這一重要問題。

Tongcheng’s rosy report fails to discuss the worrisome elephant in its house