Tongcheng Travel Holdings Lt Aktie

Good day, and thank you for standing by, and welcome to Tongcheng Travel 2026 Second Quarter and Interim Results Announcement. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the call over to your first speaker today, Ms. Kylie Yeung, Investor Relations Director of the company. Please go ahead.

Thank you. Good morning, and good evening, everyone. Welcome to Tongcheng Travel's 2026 Second Quarter Results Conference Call. I'm Kylie Yeung, Investor Relations Director of the company.

Joining us today on the conference call are our Co-Chairman of the Board Executive Director and CEO, Mr. Heping Ma; our CFO, Mr. Julian Fan; our Chief Capital Officer and President of Wanda Hotels and Resorts, Ms. Joyce Li.

For today's call, our management team will provide a review of the company's performance in the second quarter. Hope will brief us on the company's strategy. Joyce will discuss our business and operational highlights and then Julian will address the details of our financial performance accordingly. We will take your questions during the Q&A session that follows.

As always, our presentation contains forward-looking statements. Such statements are based on management's current expectations and current market operating conditions and relate to the events that in both known or unknown splits. 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 measures. They should be considered in addition to, but not [ necessarily ] 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 Chairman, [ Hope]. [ Hope ] we'll be presenting in Mandarin, and our colleague will provide the English translation afterward. [ Hope], please go ahead.

[Interpreted] Thank you, Kylie, and welcome to our 2026 second quarter earnings call. China travel industry was off to a solid start in the second quarter of 2026, with resilient travel demand during [indiscernible] holiday and spring break. However, this positive momentum was later tempered by higher fuel surcharges, which drove our aircraft and travel costs, resulting in temporarily pressure on long-haul travel demand, facing short-term headwinds arising from higher fuel surcharges.

We proactively adjusted operating strategies, implemented targeted cost management initiatives and continuously enhance operational efficiency to navigate the challenging market environment. On the other hand, the growing trend towards quality-oriented and experience-driven travel consumption remain intact, characterized by increasing consumer demand for immersive experiences.

In light of the structural shift, we remain committed to our long-term strategy, continuously strengthen our competitive advantages while maintaining the organizational agility and flexibility needed to respond swiftly to evolving market conditions. We stayed focused on our core OTA business, further strengthening our market position in China's mass market through continuous innovation in travel products, enhancing service quality and improving operational efficiency.

Meanwhile, we accelerated the expansion of our international business deepen our partnerships with global suppliers and continue to enrich our outbound product and service offerings to better address users' evolving travel needs during the quarter. Both our international accommodation and international air ticketing business demonstrated impressive growth with international room night stores reaching a record high.

In addition, our hotel management business positioned as the company's second growth engine, continue to focus on its rapid network expansion, supported by a comprehensive brand portfolio and advanced technological capabilities. It has rapidly grown into one of China's leading hotel management group, according to the 2025 ranking of the China Top Hotel Groups released by the China Hospitality Association [indiscernible] hotel technology platform and Wanda Hotels and Resorts ranked #7 and #22, respectively, in terms of room count, underpinned by our clear strategic positioning, strong operational capabilities and organizational agility.

We continue to achieve solid growth in both revenue and profit during the second quarter. As the travel industry enters a new phase of high-quality growth, we remain unwaveringly focused on enhancing user value with deep dive into evolving user needs and deliver products and services that better meet the needs of the mass market, thereby enhancing the overall travel experience.

On August 21, we completed the general cash offer for all issued shares of Dida Inc. and as a result, have become the controlling shareholder of Dida. This move represents an important step in our strategic expansion within the mobility sector, enabling us to rapidly enter the cap cooling market and deepening our value chain integration.

Looking ahead, while the travel industry continues to face near-term challenges, the approval of the 15th 5-year plan for building China into a strong tourism nation, further underscores the role of the tourism industry as a strategic pillar of the national economy we expect this policy framework will provide a solid foundation for the industry's long-term sustainable development.

Meanwhile, the rapid integration of AI technologies, including artificial intelligence and big data is accelerating the transformation and upgrading of the travel industry. We believe the AI era presents more opportunities and challenges. We are proactively embracing AI-driven technological transformation and are committed to deeply integrating AI into our business scenario to further optimize our business model and operational efficiency, thereby fostering the company's long-term sustainable growth.

Amidst the AI era, we are confident that with our clear strategy and outstanding execution capability, we are well positioned to capture the emerging growth opportunities and create long-term value for all our shareholders. Next, I will hand over the call to Joyce. She will share with you our business and operational highlights of the second quarter of 2026. Joyce, please go ahead.

Thank you, [ Hope ]. China's travel market was marked by a challenging macro environment in the second quarter at elevated airfares, mainly driven by higher fuel surcharges weighed on long-haul travel demand against this backdrop. We remain disciplined in our execution and delivered solid operational results across all business lines.

In the second quarter, our commendation business sustained its underlying demand resilient. Although high airfare dampened long-haul travel, local and short distance travel demand maintained a growth trajectory, underpinning steady hotel bookings. We continue to observe a structural shift in consumer preferences for higher quality hotels. The proportion of higher [ stock ] hotel room nights sold on our platform increased further during the quarter by approximately 3 percentage points, leading to a decent year-over-year increase in our [ ADR ].

To capitalize on users' growing appetite for experience-driven travel, we curated the destinations with strong experiential appeal and launched differentiated interactive marketing campaign. These efforts drove room night growth in this region at a pace faster than the overall platform.

During the quarter, we continued to enhance our engagement programs for high-value members by offering more exclusive benefits and elevating service quality. These efforts further increase repeat purchases and strengthened user loyalty. As well international accommodation business, we continued to enrich our global hotel supply, particularly by deepening partnerships with local suppliers in Southeast Asia and South Korea, to secure more high-quality hotel supplies with competitive pricing.

At the same time, we stepped up cross-selling with our international air ticketing business by executing more precise marketing campaigns aimed at outbound travelers. In addition, we refined our international hotel products and services to better address users' travel needs and pain points. As a result, our international room nights sold delivered exceptional growth of more than 50% in the second quarter.

Our transportation business faced significant headwinds in the second quarter. The sharp rise in fuel surcharges translated into elevated airfares, which materially suppressed users' travel demand. We responded swiftly, reducing marketing expenses and streamlining our organizational structure. These decisive actions demonstrated the resilience of our transportation business amid market turbulence, throughout the quarter, we remained unwavering in our commitment to user experience.

Our algorithm powered wasting system continue to deliver diverse, reliable end-to-end travel solutions. We further integrated more interestedly and short-distance transportation options into our travel itinerary, making journeys more seamless and convenient for our users. On the marketing front, we continue to innovate. In response to the fuel surcharge burden, we now launched the fuel-free Weixin campaign for first-time international travelers.

We introduced a regret free card that address users' concerns over cancellation fees, substantially lifting conversion rates. Additionally, we leveraged AI to assist users in identifying the best value flight options that match their budget and schedule preferences, thereby facilitate more informed booking decisions. In terms of our international air ticketing business, we stayed true to our differentiated strategy of competitive pricing plus high-quality service, a proposition that has firmly established itself in the minds of our users.

During the second quarter, we collaborated with local partners across key overseas markets and rolled out targeted marketing campaigns around popular overseas destinations. As a result, our international air ticketing revenue maintained a strong growth momentum in the second quarter. Our hotel management business remains a cornerstone of our growth strategy and is positioned as the company's second growth engine.

In the first half of 2026, our eLong hotel technology platform sustained its rapid expansion trajectory with a strategic focus on well-recognized hotel brands. The platform continued to enhance hotel operational efficiency and revenue performance through a comprehensive suite of technology solutions. Meanwhile, we further optimized our membership operations by upgrading the member checking experience through smart hardware integration.

Following its consolidation in October 2025, Wanda Hotels & Resorts completed its smooth and effective integration process, revitalizing its organization and strengthening its core operational capabilities. Leveraging post-merger synergies, Wanda Hotels & Resorts has set up its expansion strategy, strengthened its brand presence and increased its market share in China's high-end hotel segment.

In the first half of 2026, it pursued a refined geographic expansion concentrating on core cities and popular tourist destinations to accelerate new hotel openings. Beyond China, it quickens its pace of international expansion, deepening its presence in overseas markets and bringing homegrown Chinese hotel brands on to the global stage. With more than 300 hotels, resorts and commercial complexes in operation as of June. The business has reached a key strategic milestone in its development.

As of June 30, the total number of hotels in operation exceeded 3,500 with over 2,000 in the pipeline, underscoring the strong growth momentum of our hotel management business, and our steadfast dedication to becoming the industry leader in China's hotel management sector in August. We completed the voluntary conditional general cash offer for all issued shares of [ VIDA ] and obtained control of the company. This transaction marks a strategic step in expanding our transportation business and strengthening our market position.

By leveraging the complementary strengths of the 2 companies, we aim to better serve users with a broader range of mobility options, particularly in short and medium haul transportation. At the same time, Dida is expected to benefit from our extensive user base and advanced technology capability, supporting its return to a growth trajectory. We are confident that these strategic transactions will create meaningful synergies and long-term value for both companies and our stakeholders.

In the second quarter, the Weixin ecosystem remains an important traffic source for us. We continue to optimize our operational efficiency within the ecosystem during the period. Our stand-alone application, a key vehicle for new user acquisitions, sustained solid growth in the second quarter with [ DAUs ] reaching an all-time high of more than [ 5 million ] ahead of the [ May Day ] holiday, tapping into users' evolving preferences for a sense of virtual and relaxation, we launched weekend marketing campaign centered around the weekend gateway theme, evening interaction with a younger user cohort.

Furthermore, we continuously deepened our penetration among younger demographics and enhanced brand awareness. For the 12 months ended June, our cumulative travelers serve exceeded [ 2 billion ] with annual paying users reaching 254 million, indicating per user purchase frequency surpassing 8x. In the meantime, our 12-month ARPU reached RMB 80, representing a year-over-year increase of approximately 10%.

We are committed to harnessing AI to deliver superior services while enhancing the company's overall operational efficiency. We proactively pursue strategic collaboration with leading third-party AI platform to see first-mover advantages in the AI era. For the second quarter, we further deepened our partnership with the Weixin ecosystem. As one of the first [ OTAs ] to integrate with the Weixin AI assistant, we are actively contributing to the development of the leasing AI ecosystem.

In the near term, our focus is on building and validating our capabilities within this ecosystem, spanning user intent understanding, content search, service invocation and end-to-end transaction loop our proprietary AI trip planner, DeepTrip continue to iterate on its capability to better understand user needs and deliver customized travel itineraries.

During the second quarter, we strengthened DeepTrip memory capabilities, enabling it to incorporate users' historical preferences and deliver more precise personalized services while enhancing both information, discovery, efficiency and the decision-making experience, in customer service with further advanced automation function powered by AI. Beyond the high degree of automation already achieved for routine ticketing and hotel booking modification and cancellations, we extended AI applications to scenarios such as compensation claim tracking and abnormal order detection, which has significantly boosted both customer service efficiency and user experience.

Moreover, we deepened AI integration into every manual process, equipping our customer service staff with a diverse set of AI tools that help them understand user inquiries rapidly and accurately and thus resolving issues promptly. Looking ahead, we will continue to invest in AI across our customer service operations, systematically building up service workflow and user data to serve users with ever greater efficiency.

I'll stop here and turn the call over to our CFO, Julian, who will walk you through our detailed financial results for the second quarter. Julian, over to you.

Thank you, Joyce. Good evening, everyone. While travel demand in early April of this year remained resilient, China's travel market has faced headwinds since May. As a significant increase in fuel costs pushed up airfares, the higher airfares have weighed on demand for long-haul travel, creating near-term pressure on China's travel industry.

Despite the short-term challenges, we proactively adjusted our marketing strategy and optimize our cost structure while taking steps to improve operational efficiency over the long term, enabling us to once again deliver solid performance across our businesses. During the quarter, both our top line and bottom line achieved steady growth amidst the challenging macro environment.

Our total revenue reached RMB 5.0 billion, representing a 6.8% year-over-year growth from the same period of 2025 through enhanced operational efficiency, and precise marketing investments. Our adjusted net profit reached RMB 851 million, representing a 9.8% year-over-year growth. Our core OTA business recorded a solid growth with revenue increasing 8.4% year-over-year to RMB 4.3 billion for the quarter.

The revenue of our accommodation reservation business reached RMB 1.5 billion in the second quarter of 2026, representing an 8.0% increase from the same period of 2025. The increase was mainly driven by the continued growth in our [ ADR ] along with a modest increase in hotel room nights sold. Our blended take rate for the accommodation business remained stable through streamlined marketing strategies. Our international accommodation segment maintained strong growth momentum, driven by the successful execution of our cross-selling strategy as well as more targeted marketing initiatives.

Meanwhile, we further optimize our product offerings and deepened our partnerships with global suppliers supported by these initiatives. Our international accommodation revenue increased to 4% of our total accommodation reservation revenue in the second quarter compared with 2.8% in the same period last year. Our transportation ticketing revenue for the second quarter was RMB 1.8 billion, representing a slight decrease of 2.3% compared with the same period of 2025.

Short-term headwinds arising from higher fuel prices and the resulting increase in airfares weighed on long-haul travel demand. To address these challenges, we proactively adjusted our marketing strategies and streamlined our organizational structure. During the quarter, we continued to enhance our monetization capabilities by refining our VAS offerings and strengthening cross-selling across short-distance transportation services, such as car pooling and airport transfers. In our international air ticketing business, we maintain competitive pricing strategy while further improving our service quality.

As a result, our international air ticketing business continued to deliver robust revenue growth and accounted for 8.6% of the total transportation ticketing revenue rising by 2.3 percentage points year-over-year. Our other business continued to perform decently, with revenue reached RMB 1.0 billion in the second quarter, representing a year-over-year increase of 35.7%.

The remarkable growth was mainly attributable to excellent performance of our hotel management business. Our tourism business recorded a revenue of RMB 643 million representing a year-over-year decrease of 2.9%. In the second quarter of 2026, our outbound package tour business underwent a consistent pressure caused by rising fuel costs and the persistent geopolitical uncertainty. In terms of profitability, our gross profit increased by 9.6% year-over-year to RMB 3.3 billion with gross margin rising to 66.7% in for the second quarter of 2026.

In the second quarter, the operating profit of our core OTA business achieved RMB 1.1 billion, with 26.4% margin. Our adjusted EBITDA increased by 7.3% year-over-year and reached RMB 1.3 billion. Adjusted net profit grew by 9.8% to RMB 851 million, with a 17.1% margin, up from 16.6% in the second quarter of 2025.

Adjusted basic EPS for the second quarter was RMB 0.36 with a year-over-year growth of 5.9%. Service development and administrative expenses in the second quarter of 2026, increased by 16.8% from the same period of 2025 due to the one-off expenses caused by organizational restructuring, excluding share-based compensation charges.

Service development and administrative expenses in total, accounted for 17.5% of revenue in the second quarter compared with 15.4% of revenue in the same period of 2025. Selling and marketing expenses in the second quarter of 2026 increased by 5.8% from the same period of 2025, excluding share-based compensation charges, selling and marketing expenses accounted for 32.6% of revenue in the second quarter compared with 32.8% of revenue in the same period of 2025.

As of June 30, 2026. The balance of cash and cash equivalents, restricted cash and short-term investment was RMB 1.5 billion. For the second quarter, the Chinese travel industry was [ refining ] with challenges of heightened airfares caused by rising fuel costs amid the ongoing conflicts in the Middle East, which continuously exerted pressure on the travel industry.

Turning to the second half of this year, we expect summer travel demand to be somewhat softer, reflecting the impact of frequent extreme weather. In addition, the fuel prices remain an area of uncertainty for the second half of the year. We will continue to closely monitor external developments and respond swiftly to changing market conditions.

Overall, we remain optimistic about the future prospects of the Chinese travel market with a clear strategy and strong execution capabilities, we are well positioned to navigate market uncertainties and capture long-term growth opportunities. We will remain committed to focusing on our core OTA business, reinforcing our leadership in the mass market, while proactively expanding our international business.

With respect to our hotel management business, we will focus on network expansion, while placing greater emphasis on improving operational efficiency. Furthermore, we will continue to embrace the opportunities presented by technological revolution and accelerate the integration of AI across our business operations to further enhance operational efficiency.

Finally, as an industry-leading ESG advocate, we remain committed to continuously improving ESG performance and delivering sustainable long-term value to all stakeholders. With that, operator, we are ready to take questions now. Thank you.

[Operator Instructions]. The first question comes from the line of [indiscernible] [ Chung Wang ] of CICC.

Congratulations on the solid results. And my first question is about the travel demand. How was [indiscernible] performance over the [indiscernible]? And what is the status of advanced bookings for mid-autumn [indiscernible] and National [indiscernible] and what is your outlook for the holidays? And excluding the impact of higher fuel and [ ALT ] prices, how is underlying travel demand trending?

And my second question is on the competition. How would you assess the recent or competitive landscape and have you observed intensifying on completion from [indiscernible] and other contact platform?

Thanks for the question, [indiscernible]. Yes, at the start of the summer travel season was somewhat softer than expected, like what we mentioned in prepared remarks, mainly due to the extreme weather conditions at major tours and destinations, especially during the middle of July 2026.

As the summer quarterly progress, the demand showed signs of improvement in the first week of August, supported by lower airfares following the reduction in fuel [ to ] target. However, adverse weather conditions in the second week of August resulted in a widespread life cancellations, which terminally disrupted the travel demand. Looking ahead, we will closely monitor travel demand trends through the upcoming National Day holiday, which will provide a useful indicator of how demand is evolving.

Our focus remains on enhancing user value through better production and services, more seamless and personalized travel experiences and stronger cross-selling and value-added service capabilities to drive user value and our ARPU growth. We will also place greater emphasis on improving internal efficiency which we believe will further optimize our long-term cost structure and enhance operational resilience while maintaining healthy profitability.

So looking beyond the near term, we continue to be in the long-term fundamentals of this travel industry remains solid, structural growth drivers, including the increasing popularity of experiential travel and [ year ] by shock call gateways, together with continued government initiatives to stimulate tourism consumption should continue to support the industry's long-term development.

With our differentiated positioning, [indiscernible] execution and efficient operating model, we are confident in our ability to navigate different market environment and deliver long-term value for both our users and our shareholders. In terms of the competition landscape, Joyce may have her voice.

Sure. We do have observed that some of the platforms are enhancing the visibility of travel-related service. But in our view, this reflects the continued growth potential of the travel sector rather than a fundamental change in the industry structure. In the travel industry, use acquisition is only one part of the operation.

More importantly, long-term competitiveness depends on comprehensive supply capabilities, pricing and inventory management, [indiscernible] quality and post-booking customer service. These capabilities require significant operational experience, this infrastructure and industry know-how, which cannot be built easily.

In addition, travel consumption is typically low or middle frequency and scenario driven, and the users tend to prioritize reliability, service quality and overall experience when they're making the booking decisions. As a result, user retention and repeat purchase are more closely tied to service capability than to traffic hotel alone.

Competition in China's OTA market has always been dynamic, and we have successfully navigated different competitive cycles over the years. We believe our competitive strength rising our strong operational capabilities, comprehensive supply of products and services and a long-standing understanding of user needs and our reliable service delivery.

So now our priority remains unchanged, continuously enhancing our user experience, enriching our product and service offerings and improving operational efficiency, we believe these capabilities will continue to strengthen our competitive position and support sustainable long-term growth.

[Operator Instructions]. The next question comes from the line of Brian Gong of Citi.

Congratulations on decent results. I have 2 questions. First is that following the reduction in airline fuel surcharges on -- this August, have you seen any improvement in [indiscernible] demand of booking trends and could you give us more color on the performance for each segment on the cohort [indiscernible] in the third quarter and the full year 2026? And what has the pricing and the [indiscernible] trends?

And the second thing is about our cost, what will be the trend of cost structure including selling and marketing has on the [indiscernible] of the third quarter and second half this year, what will be the margin trend of the core OTA ahead?

Thank you for the question, Brian. The first question, as we mentioned earlier, the travel industry experienced some demand softness during the summer holiday, mainly due to the extreme weather conditions. So taking into account the current environment, we expect that the growth of our quality business in quarter 3 to moderate from quarter 2.

For accommodation business, we expect the room nights sold to face some near-term pressure year-over-year, mainly due to the impact of extreme weather and travel demand. However, the ADR is expected to be supported by a favorable shift in hotel mix with room nights sold for 3 stars or above hotels continue to grow. Our blended take rate is also expected to benefit from further optimization of our marketing strategies and more efficient user subsidy allocation.

For our transportation business, we expect the revenue continue to see some near-term headwinds year-over-year, primarily due to compliance related adjustments to our train ticketing business. And air ticket volume is expected to recover in quarter 3 and our blended take rate is expected to trend positively, supported by deeper cross-selling of short- and medium-haul transportation services.

For our other business, we expect the revenue in quarter 3 to grow at a similar pace to quarter 2, mainly driven by the strong growth momentum of our hotel management business. As for the fourth quarter, it is still too early for us to have clear visibility. However, given the softer travel demand during the summer holiday due to extreme winter conditions, we see potential for some of the deferred travel demand to be released during the upcoming National Day holiday.

And in terms of the cost structure and profitability trends in the second quarter against the more challenging marketing backdrop, we responded proactively by implementing and organizational restructuring to further streamline our operations and improve execution efficiency. While this resulted in the one-off [indiscernible] of approximately RMB 58 million, which temporarily increased the combined ratio of our service development and general administrative expenses to revenue rate to 17.5% in quarter 2.

Our underlying cost structure continued to improve. Excluding these one-off expenses, the combined ratio of service development and G&A extended, we have been 16.4%, so our adjusted net profit in quarter 2 would have been 18.2%. As these restructuring costs are nonrecurring, we expect that the combined ratio of service development and general and administrative expenses to benefit from the absence of these costs from quarter 3 onwards.

However, we will continue to make disciplined marketing investments to support the business growth. So for the second half of 2023, we will continue to optimize operating efficiency, [indiscernible] the application of AI technologies across our business and further refine our marketing investment allocation to support stable profitability. Thank you for the question.

[Operator Instructions]. The next question comes from the line of Wei Xiong of UBS.

First, I want to follow up on the easing of fuel surcharges in early August. So after that change, how do you -- the outlook for outbound travel demand for the rest of the year? And has this changed your outbound strategy in any way?

And second, this year, the OTA industry has experienced some regulatory adjustments. So looking ahead into the second half of this year and next year, do we see any areas that might get additional regulatory attention? Also, how do we assess the industry's [indiscernible] adjustments in the first half?

Thank you, Xiong Wei, for your questions. In terms of outbound travel, while [ tire funeral ] surcharges create the headwinds for overall travel demand as we mentioned during the second quarter, our international business remained resilient, with user generally adjusting their destination choices rather than canceling their trips altogether.

So we continue to see healthy demand across [ shot ] and media for destination including South Korea, Malaysia, Thailand, Singapore, Hong Kong and Macau. Our international [indiscernible] business continued to deliver strong revenue growth, supported by our differentiated value proposition of competitive pricing and high-quality service as well as target destination market campaigns. And meanwhile, as we mentioned in the prepared remarks, our international accommodation business remained exceptional growth, with our international room nights sold increasing by more than 50% year-over-year, thanks to our successful execution of core selling strategy.

Looking into the second half of this year, we are encouraged by easing our [indiscernible] charges since early August. While it is still early to assess the full impact, we believe the lower assets should help gradually improve our bond travel demand. So in terms of strategy, I should say there has been no change. We'll continue to optimize our product offering and marketing initiatives in line with evolving travel demand, while further strengthened cross-selling between the outbound transportation and the combination product.

At the same time, we remain focused on enhancing the quality of our growth through disciplined marketing investments and a strong operational efficiency. The contribution from outbound business to our cohort revenue continue to increase steadily. We expect that outbound revenue contribution to increase to around 9% in [indiscernible] supported by growing business volumes and expand user base and improving operational leverage.

Overall, we expect the international business to continue expanding in scale and become an increasingly meaningful contributor to our revenues. And in terms of the question about regulatory environment, while we believe the regulatory compliance will always remain an important focus for us and other market players. We do not see any material change to our strategy or day-to-day operations.

Tongcheng has always been committed to operating in full compliance with applicable rules and regulations. We will continue to strengthen our platform governance, enhanced consumer protection and maintain a fair and healthy marketplace for users and business partners.

Looking ahead, we believe the industry will increasingly compete on service quality, user experience and operational capabilities. With our strong execution, differentiated positioning in the mass market, and continuous investment in technology, we are well positioned to capture the long-term growth opportunity in China's travel industry. Thank you.

Our next question comes from the line of Yang Liu of Morgan Stanley.

Congratulations on the solid results. I have 2 questions all regarding the accommodation business. The first one is that we observed that Tongcheng's ADR has outperformed broadening of several consecutive quarters. How do you build the industry ADR outlook for the second half of this year? And do you expect Tongcheng to continue outperforming the market?

My second question is that we noticed that some OTA industry peers adjusting their hotel traffic distribution system. Will this kind of adjustment to bring any changes to Tongcheng's hotel take rate and whether it will change Tongcheng's future hotel supply or supply chain partner strategy?

Thank you for the question, Yang. First, let's talk about the ADR. The industry are starting the second quarter on a very solid footing supported by a very resilient travel demand in April. However, as we mentioned, following the sharp increase in fuel surcharges from May onwards, higher airfares weighed on long-haul travel demand, resulting in a noticeable moderation in industry ADR growth during May and June.

While on [indiscernible], the ADR continues to outperform the broader industry, primarily driven by ongoing improvements in our hotel mix and continued user upgrades towards high-quality accommodations. The proportion of 3 star and above hotel room nights and our platform increased by approximately 3 percentage points year-over-year in the second quarter, the same pace at the first quarter, supporting continued healthy growth in our ADR.

In addition, we remain disciplined in our marketing investment and continue to optimize our operations. These initiatives have enabled us to maintain healthy take rates while driving sustainable business growth in our accommodation segment. So overall, we believe our differentiated positioning and the disciplined execution and continued consumer upgrades will enable us to sustain ADR outperformance versus the broader industry.

So based on these trends, we expect the ADR improvement to remain supportive factor to our accommodation revenue growth over the coming quarters. And in terms of the take rate, actually, based on our current assessment, we have not observed any material impact from this new traffic distribution system and the commission mechanism on our hotel operations and user traffic or financial performance.

Our operation with the strategic partners remains stable. We have always been committed to compliance and fair corporation and continue to work closely with our hotel partners to create long-term value and supported sustainable growth for all parties. So we will continue to monitor the implementation and any broader industry development. But based on what we have seen to date, we do not expect a change to have a meaningful impact on our business and the take rate from accommodation business. Thank you for the questions.

The next question comes from the line of [ Jason Zhang ] of Macquarie.

Congrats on the solid set of results. So I just got one question here. So could you share the latest progress of your collaboration with Weixin's AI system? What are your expectations for the partnership and its potential contribution over the longer term?

Thank you for the question. Our cooperation with Weixin and [indiscernible] is progressing well. As one of the first online travel platform to participate in the pilot program, we completed the initial integration during the second quarter and have now entered the testing and continuous optimization phase.

At this stage, [indiscernible] as remains in the [indiscernible] base. Our current sector is there on driving near-term traffic but are working closely with the 10% to [ grow ] how AI can better understand user travel intentions to revenue content, facilitate service in location and ultimately support transaction completion within [indiscernible] ecosystem. So looking ahead, we believe AI systems has the potential to become an important intelligent traffic entry point within the Weixin ecosystem as involved from the information retrieval to task execution.

But our long-standing strategic partnership with Tencent, we believe Tongcheng is well positioned to participate in this evolving AI ecosystem. As technology and use adoption continue to mature, we expect this collaboration to create new opportunities for user conditions, user engagement and transaction conversion over the long term. Thank you.

Our last question will come from the line of [ Simon Chan ] of [ Comet ].

I just have one small question. In relation to your hotel management business, you have gave some hotel numbers on et cetera. Can you perhaps further elaborate a bit more on the revenue and the profitability of the business, your expectation going forward? And also remember, you mentioned briefly about your [indiscernible] expenses for this hotel management business, can you perhaps share a bit more color on that front as well?

Thank you for the question. In terms of the [indiscernible] management business, our hotel management business remains one of the company's key growth drivers. And going forward, our strategy will focus on complementary development of eLong Hotel technology and vendor hotels and the results.

For eLong Hotel technology, we'll continue to prioritize high cost network expansion with the strategic process on well [indiscernible]. At same time, we will further strengthen our technology capabilities by providing a comprehensive fees of AI-enabled it solutions to improve the hotel operating efficiency and enhanced [indiscernible]. We also continue to optimize our membership ecosystem and elevate the guest experience with more technology further enhancing the customer loyalty and hotel operating efficiency.

For Wanda Hotel & Resorts, our focus is on strengthening our leadership in upscale and luxury hotel sector. During our written milestone of 300 open hotels, we're continuing to accelerate our expansion in China while broadening the international growth opportunity. Besides we are also replicating our successful and greater results model, such our flagship [ Changbai Manten resorts ] across new destinations to drive high-quality growth.

Internationally, following on our recent additions in South Asia and [indiscernible] Africa, we are building a strategic network in many global markets. And on the digital front, our strategic integration with Tencent has reshaped our technology foundation, positioning us to further drive efficiency and in-house guest experience. By consistently delivering high-quality products and services, we aim to spend our market presence, strengthen our brand influence and build and in a leading Chinese [indiscernible] high hotel brand with growing global recognition.

Another strategic priority is to further strengthen our membership system, supported by more than 35 million include members and approximately 24 million and club members. We have built a strong membership foundation spanning both mass and premium segments. Going forward, we will continue to leveraging both loyalty programs alongside our OT platform to drive higher direct booking penetration, green customer loyalty and improve traffic convention across our hotel network.

Looking ahead, eLong Hotel Technology and Wanda Hotel and Resorts will enable us to offer a comprehensive hotel management platform that creates great value for hotel owners and strengthen our long-term competitiveness.

With that, I'd like to hand the call back to the management for closing remarks.

Thank you. We will end 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.

That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.

Good day, and thank you for standing by. Welcome to Tongcheng Travel 2026 First Quarter Results Announcement. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the call over to your first speaker today, Ms. Kylie Yeung, Investor Relations Director of the company. Please go ahead.

Thank you. Good morning and good evening, everyone. Welcome to Tongcheng Travel's 2026 First Quarter Results Conference Call. I'm Kylie Yeung, Investor Relations Director of the company. Joining us today on the conference call are our Co-Chairman of the Board, Executive Director and CEO, Mr. Heping Ma; our CFO, Mr. Julian Fan; our Chief [indiscernible] Officer and President of Wanda Hotels and Resorts, [indiscernible].

For today's call, our management team will provide a review of the company's performance in the first quarter. Hope will brief us on the company's strategies Joyce will discuss our business and operational highlights, and then Julian will address the details of our financial performance accordingly. We'll take your questions during the Q&A session at calls.

As always, our presentation contains forward-looking statements. Such statements are based on management's current expectations and current market operating conditions and relates to events that involve loan [indiscernible] uncertainties and other factors, which may cause the company's actual results, performance or achievements to differ from those in the forward-looking statements. The presentation also contains some unaudited non-IFRS financial measures. They should be considered in addition to, but not necessity for measures of the company's financial performance pain accordance with IFRS. For a detailed discussion of non-IFRS measures, please refer to disclosure documents in the IR section of our website. Now let me introduce our Chairman, Heping. Heping will be presenting in Mandarin, and our colleague will provide the English translation afterwards. Heping, please go ahead.

[Interpreted] Thank you, Kylie, and welcome to our first quarter earnings call. As we enter 2026, China's travel industry has sustained its strong growth momentum. This expansion is being driven by profound structural shifts in consumer travel demand coupled with favorable new holiday policies. Over the past quarter, the industry has demonstrated exceptional resilience and dynamism, laying a solid foundation for the execution of our strategic initiatives in the year ahead.

During the first quarter, travel demand remained highly robust, driving steady industry growth alongside ongoing structural upgrades. We are seeing personalized experiential travel gradually emerge as a mainstream trend. Today, younger travelers are increasingly willing to book trips exclusively for a single concept or a unique culinary experience transforming travel from a discretionary expense into an essential life [indiscernible]

Ultimately, the preferences of these younger consumers are reshaping product design and the broader value chain across the entire industry. Meanwhile, government support for the travel sector remains robust. Notably, China's 2026 government work report explicitly advocated for the introduction of spring and autumn brakes in eligible areas, which was later implemented across multiple provinces.

This is the landmark signal, elevating pro travel policy from regional, local experiments to a national directed. By redistributing consumers leisure time, these additional holidays will blur the traditional lines between peak and also big travel seasons has effectively stimulating travel consumption and injecting fresh momentum into the ongoing growth of the travel industry. Against this backdrop, we are delivering solid execution on our strategy and actively seizing growth opportunities arising from structural market share.

In the first quarter, we achieved decent growth in both revenue and profit with APU once again hitting a record high. Domestically, we reinforced our market position and deep user engagement, further solidifying our competitive moat. In the meantime, we accelerated our global expansion by enriching product offerings successfully capturing greater market share in the outbound segment. Additionally, our hotel management business maintained its strong growth trajectory, scaling rapidly and generating significant revenue growth we remain highly optimistic about the growth prospects of this segment. It is steadily evolving into a key pillar of our overall top and bottom line growth, serving as a powerful engine for our long-term sustainable development.

Moving forward, we remain steadfast in our strategy guided by a clear path to growth with a relentless focus on user value, we will continue to strengthen our core OTA business to capture growth opportunities arising from structural market shifts Alongside this, we view our hotel management business as the second growth driver for long-term development, and we'll continue to invest to drive expansion. Furthermore, we will proactively embrace technological innovations, particularly AI to optimize operational efficiency and elevate user experience. Above all, we are fully committed to delivering sustainable and consistent returns for our shareholders and partners.

Next, I will hand over the call to Joyce. He will share with you our business and operational highlights of the first quarter of 2026. Joyce, please go ahead.

Thank you, Heping. China's travel market entered 2026 with continued vitality as consumers are demonstrating a growing preference for quality-driven and experience-oriented travel. In addition, the 2026 Spring Festival marks the longest holiday period on record. During the 9-day break, consumers took multiple shorter trips, such as visits to their hometowns and leisure travel. Against this backdrop, we delivered strong execution on our strategic priorities and achieved solid performance across all business lines for another quarter.

In the first quarter, our accommodation business sustained its growth momentum with both room nights sold and revenue showing robust growth, driven by the continued demand for higher-quality accommodation options. The proportion of high-quality hotel room nights sold on our platform increased by approximately 4 percentage points year-over-year. During the quarter, we implemented targeted user segmentation and tiered engagement strategy to drive purchase frequency and enhance user loyalty. In the meantime, we expanded our focus on emerging travel scenarios, prioritizing unique and curated experiences. These initiatives have successfully reinforced our market leadership across key target demographics.

As for our international accommodation business, we continue to expand cooperation with global suppliers and steadily enrich our global product offering. We also leveraged our domestic user base to drive cross-sell initiatives and execute a precise marketing campaign, targeting high potential users. These efforts contributed to robust growth in our international [indiscernible] sold in the first quarter. In terms of our transportation business, we continue to demonstrate resilience in the first quarter. We remain focused on enhancing user experience by making travel more convenient, seamless and comfortable our algorithm-driven hosting system provides users with viable end-to-end travel solutions, especially during peak travel periods.

During the quarter, we also strengthened engagement with younger users by developing features that address their evolving preferences for interaction, personalization and emotional connection One example is the weekly travel Fortune, which provides a playful troubles weekly fortune feature and has resonated well with younger users. These initiatives not only strengthened our brand mindshare among younger demographics but also reinforce our positioning as an experience-driven platform. In our international air ticketing business, we further solidified our brand recognition through competitive pricing strategies and high-quality services achieving resilient growth in both volume and revenue in spite of geopolitical headwinds impacting outbound travel demand to certain regions in the first quarter, driven by our goal of industry leadership we remain committed to investing in our hotel management business, cementing its role as the company's second growth driver.

During the first quarter, we continued to expand our hotel network by leveraging our comprehensive brand portfolio, competitive technological capabilities and organizational agility. Our along hotel technology platform focused on hotel brands with a proven track record of market recognition Simultaneously, the platform enhanced operational efficiency by exporting AI-driven digital solutions that span the entire life cycle of hotel operations. Meanwhile, our Wanda Hotels & Resorts accelerated its network expansion nationwide, capitalizing on strong brand equity and end-to-end service capabilities ranging from design to operational management. In a testament to our service excellence, its luxury hotels have successfully hosted a number of heads of states during their visits to China, earning high commendation Furthermore, Wanda Hotels & Resorts operates a top-notch in-house design institute with proven track record of design abilities, recognized for its innovative integration of local culture and modern design the [indiscernible] secured the 2025 IIDA Best of Asia Pacific Design Award, one of the industry's most influential accolades as of the end of March, the total number of hotels in operation exceeded 3,200 with more than 1,900 in the pipeline, reflecting our continued expansion momentum.

With a comprehensive brand portfolio, our hotel management business will continue to expand its geographic footprint and elevate operational standards to deliver warm memorable experiences for guests while generating consistent returns to our hotel investors, building on our extensive user base we are committed to enhancing user engagement and improving operational efficiency across all traffic channels. Over the past decade, we have built a strong and enduring partnership with Tencent, leveraging the recent ecosystem, we have effectively established a broad user base across China's mass market particularly in lower tier cities.

Meanwhile, our stand-alone app maintained strong momentum in acquiring new users with its DAUs increasing by over 20% year-over-year in the first quarter. During the spring festival travel season, we launched a series of creative and targeted marketing campaigns that effectively boosted user engagement and loyalty. further reinforcing our positioning as an experience-driven travel platform. Additionally, we continue to step up our efforts on mainstream social media platforms through influencer collaborations and high-quality content we further enhanced brand awareness among young travelers seeking personalized experiences. We remain dedicated to strengthening user loyalty by continuously optimizing user benefits and enhancing membership value on our platform.

During the quarter, we made significant upgrades to our loyalty program by launching an innovative dynamic platinum membership system. Under this new system, membership benefits have evolved from a standardized structure to a more personalized model that aligns user tier status and consumption preferences, enabling us to offer highly targeted exclusive benefits to users across different tiers. These initiatives have strengthened engagement among high-value users, increased user stickiness and supported higher repurchase contributing to sustained business growth through targeted marketing campaigns and effective user engagement, we have accumulated the most extensive user base in China's OTA industry.

For the 12 months ended March, our annual paying user once again reached a historic high of 254 million, with the accumulated number of travelers served exceeded 2 billion. This indicates an average of more than 8 purchases per user annually. In the meantime, our MPUs for the first quarter achieved 46 million. On top of that, our annual ARPU continued its growth momentum and climbed to almost RMB 79, displaying a year-over-year increase of approximately 9.2% and review AI era as a time of immense opportunity rather than a threat amid its rapid iteration, we proactively embrace innovation to drive business transformation, our proprietary AI agent [indiscernible] has undergone rapid iteration over the past year with expanded capabilities and broader application scenarios.

We can now anticipate users' underlying needs and recommend highly relevant travel options even from ambiguous clip, effectively accelerating the conversion funnel from inspiration to bookings. We also expanded [indiscernible] integration with additional transportation resources, including bus ticketing to deliver AI-driven end-to-end travel solution. Furthermore, [indiscernible] has been integrated into our air ticketing service to address users' prebooking inquiries and help them identify options with more competitive prices. On the other hand, we continue to pursue strategic collaboration with leading external AI agents to seize future growth opportunities. To secure a first-mover advantage and deepen our market penetration, we have deployed [indiscernible] skill on platforms such as [indiscernible], embedding our services within third-party AI ecosystem. In our customer service, we have deeply embedded AI across our entire workflow, driving increasing automation rates for general inquiry.

During the quarter, we introduced real-time simultaneous interpretation across both online consultation and voice consultation channels, effectively eliminating language barriers and significantly enhancing global user experience. Additionally, we've leveraged AI capabilities to empower our customer service team in better understanding user inquiries and delivering faster accurate responses as a socially responsible enterprise we have integrated social responsibility into every aspect of our day operations.

In late February, we established an emergency response team promptly following the outbreak of conflicts in the Middle East to safeguard user travel and support affected users. In addition, our outstanding performance in ESG has once again received international recognition. We were awarded the industry mover by S&P Global for the second consecutive year and were included in S&P Global Sustainability [indiscernible] China for the fourth consecutive year.

Looking ahead, we will continue to safeguard every journey for our users, create greater value for all stakeholders and drive long-term sustainable development across the industry. I'll stop here and give the call to our CFO, Julian. He will share with you the detailed financials for the first quarter. Julian, I'll turn it over to you.

Thank you, Joyce. Good evening, everyone. In the first quarter of 2026, China's travel industry demonstrated sustained resilience and continued its growth trajectory, driven by robust travel demand. by strategically capitalizing on opportunities arising from structural market shifted, we delivered another quarter of strong performance, laying a solid foundation for the rest of the year. During the quarter, both our top line and bottom line achieved solid growth. Our revenue reached RMB 5 billion, representing a 14.4% year-over-year growth from the same period of 2025, thanks to very enhanced operational leverage and effective marketing investments.

Our adjusted net profit reached RMB 941 million, representing a 19.4% year-over-year growth. Our core OTA business delivered strong growth, with revenue increasing 17.3% year-over-year to RMB 4.4 billion for the quarter. Our accommodation reservation business achieved RMB 1.4 billion for the first quarter of 2026, representing a 14.7% increase from the same period of 2025. The revenue increase was mainly driven by robust growth in both hotel room nights sold and ADR supported by strong travel demand. In the first quarter, our ADR maintained its upward trajectory, delivering solid growth alongside a stable net take rate year-over-year.

During the quarter, we continued to observe structural shift in user preferences highlighted by a rising mix of high-quality hotel bookings on our platform. In our international accommodation segment, we further expanded our global supply network while enhancing operational efficiency. Our transportation ticketing revenue for the first quarter was RMB 2.1 billion, representing a 6.2% increase compared with the same period of 2025. We enhancing user experience remains our priority.

During the quarter, we consistently enrich and optimize our VAS offerings to better serve users. In our international air ticketing business, we prioritize revenue growth over pure volume expansion. As a result, the segment delivered strong revenue growth, accounting for 6.5% of the total transportation ticketing revenue alongside a healthy growth in volume. Other business continues its trajectory of robust performance with revenue reaching RMB 961 million in the first quarter. representing a stellar growth of 59.6% year-over-year.

The growth was mainly driven by excellent performance of our wholesale management business and the consolidation of Wanda Hotels and Resorts. Our tourism business achieved a revenue of RMB 556 million, representing a year-over-year decrease of 5.0%. This decline was primarily attributable to dampen demand for outbound package tour arising from geopolitical risk. In terms of profitability, our gross profit increased by 16.1% year-over-year to RMB 3.5 billion for the first quarter of 2026. The operating profit margin of our core OTA business was 29.3%, while the open of our tourism business was 3.4%.

Our adjusted EBITDA increased by 19.8% year-over-year and reached RMB 1.4 billion. Adjusted net profit grew by 19.4% year-over-year, to RMB 941 million in the first quarter. Adjusted basic EPS for the first quarter was RMB 0.4 with a year-over-year growth of 17.6%. The service development and administrative expenses in the first quarter of 2026 increased by 6.1% from the same period of 2025, excluding share-based compensation charges, service development and administrative expenses in total accounted for 16.3% of revenue in the first quarter compared with 16.8% of revenue in the same period of 2025.

Selling and marketing expenses in the first quarter of 2026 increased by 16.4% from the same period of 2025. Excluding share-based compensation charges, Selling and marketing expenses accounted for 33.7% of revenue in the first quarter compared with 33.0% of revenue in the same period of 2025. As of March 31, 2026, the balance of cash and cash equivalents, restricted cash and short-term investment was RMB 13 billion. Looking ahead into the rest of the year, we maintain a positive outlook for both our company's performance and the broader China travel industry. The implementation of spring and autumn breaks in excited regions across China will further accelerate the industry growth as evidenced by solid travel demand during the past timing and Labor Day holidays.

Furthermore, consumers, particularly the younger demographics are increasingly prioritizing experiential consumption to foster meaningful connections in emotional well-being. This shift in consumer behavior has positioned travel as a highly resilient lifestyle staple even amid macro uncertainties. In the coming quarters, we will remain focused on our core OTA business deepening our penetration in the mass market, while consistently expanding our outbound operations to strengthen our global presence. In the meantime, we will accelerate the growth of our hotel management segment with a strong emphasis on expanding hotel network and enhancing execution efficiency. We are also proactively leveraging AI technological innovations to capture new growth opportunities and improve operational efficiency.

Finally, we will continue to place great emphasis on our ESG performance and create sustainable long-term value for society and our stakeholders. With that, operator, we are ready to take questions now. Thank you.

[Operator Instructions] The first question comes from the line of Yang Liu of Morgan Stanley.

Congratulations on the solid earnings. I have 2 questions. The first one is how have the market conditions and the business performance trended recently. The industry data for Labor Day holiday travel seems to be intact. How do we view the market situation in the second half of this year? And my second question is, could you please give us some more color on the performance for each business segment of the core OTA business in second quarter this year and 2026 full year. And what are the pricing and the take rate trend?

Thank you for the question, Liu Yang. Actually, during the Labor Day holiday, according to the Ministry of Transport, the national passenger fuel increased by around 3% year-over-year, but [indiscernible] concern over the impact of heightened airfares arising from the Middle East conflict, the daily average air passenger volume declined by 5% to 6% year-over-year during the Labor Day holiday. But the total railway passenger volume still recorded a growth up 4% year-over-year. So that means we -- it shows a negatively impacted for the long hole travel. But as we observe the short haul and stay vacation travel is still strong. The demand is still very strong. So our accommodation business still maintain a healthy growth for both revenue and business volume, achieving a modest year-over-year increase. Of course, the revenue growth outpaced the room night growth, while higher quality hotels significantly outperformed the low-tier properties. This trend reflects our ability to capture evolving user preferences as travelers increasingly prioritize the premium and quality accommodation insurances. As a result, our hotel ADR again recorded single-digit growth during this period. Meanwhile, the outbound travel demand remains strong overall for the accommodation, particularly in the accommodation segment. where the room nights grew by nearly 50% year-over-year for the outbound accommodation segment. However, the rise in fuel prices and fares have created pressure on both the supply and demand end of the aviation market we have had a noticeable impact on both the industry-wide and also our air ticketing volume since the beginning of May. But actually, as we observed with the impact of the higher oil prices as a short-term fluctuation, as the summer travel season of projects, we believe the rigid travel demand will help mitigate the impact of rising airfares. So during the headwind, we will place greater emphasis on improving internal efficiency. During May and June, which we believe will help optimize our long-term cost structure and enhance operational resilience for transportation segment. For the second half of this year, it's still very early to have the visibility because of the short booking window of travelers, but I can share some colors and views for quarter 2 for our business -- each business segment. As I mentioned earlier, the higher airfares and reduced the flight capacity may restrain the long-haul travel demand. So as a result, we expect the transportation segment to face some pressure on growth year-over-year in quarter 2. However, the impact of Arising revenue is expected to be partially offset by incremental revenue contributions from transportation services such as airport transfer ride sharing, car rental, et cetera, supported by our continued cross-selling efforts and one-stop shop strategy. Meanwhile, we continue to see strong demand for short-haul travel and expectations, as I mentioned, particularly in low-tier cities, which will support the growth in our accommodations segment, driven by those volume expansion and ADR increase in quarter 2. Other revenue is expected to maintain a solid growth momentum, mainly attributable to the continued expansion of our hotel management business and growing contribution from our membership program. One thing I would like to highlight is that in the second half of 2024, we have accelerated our globalization efforts and strengthen the operations of our stand-alone apps. In the first quarter of 2026 and also the second quarter of 2026, these initiatives performed beyond our expectations and contributed meaningfully to revenue growth. In our accommodation and transportation segment, outbound business contributed nearly 6% of the revenue, while stand-alone half already accounting for nearly 9% of our total revenue contribution between quarter 1 and quarter 2. Based on current trends, we expect this growth momentum to be continued in the rest of 2026.

Our next question comes from the line of Wei Xiong from UBS.

Firstly, since the beginning of this year, 12306 has strengthened the regulation over OTAs by restricting express ticketing services and increasing public communication effort [indiscernible] to book directly through its own platform. So how should we think about [indiscernible] train ticketing business. And secondly, I want to follow up on the point that airfares has risen significantly because of that higher fuel surcharges. So could management elaborate on the potential impact on travel demand and your business.

Thank you, Xiong, for the question. I will answer the first one, and I think Julian will have take the second. In terms of impact from [indiscernible], I think our core objective in terms of transiting business has been always to help users find viable travel solutions that are faster, more convenient and more cost effective. We will continue to optimize the capability of our rating system to enhance transfer recommendations and alternative travel solutions across both long and distant transportation scenarios. While train travel remains the most important transportation option for short and medium distance travel during the peak travel periods will also place greater emphasis on alternative transportation solutions including ridesharing, airport transfers, intercity bus services and urban transactions such as buses and mature systems [indiscernible] our users to flexibly shift across different transportation roads. With revenue contribution from the trend ticketing as a percentage of OTA revenue has declined from around 35% in 2018 to around less than 20% in recent quarters. with express ticketing service accounted for only a low single-digit percentage of our transportation revenue. The reduction in contribution has already been offset by revenue growth from the other short and immediate and transportation solutions. In response to evolving market dynamics, we will further optimize the cost structure of the transportation business and streamline the fixed cost to protect overall profitability while improving the middle to long-term margin profile of the transportation segment.

For the [indiscernible], as I think everybody has seen that recently rising oil prices driven by political tensions have led a sharp increase in future targets across China's aviation market. Of course, higher fuel surcharges have pushed up affairs and weigh on air travel demand, particularly among more price-sensitive travelers during the recent holidays, as I mentioned, China aviation passengers volume declined by approximately 5 to 6 years year-over-year. However, we believe this reflects more of a transportation substitution effect rather than a weakening in overall travel demand. In [indiscernible], some users shifted from air travel to alternative transportation options such as high-speed train or step driving for shop to meet distance trips we view a few surcharges increases as more of a short-term industry cycle rather than structural or long-term disruptions to travel demand. The industry has already experienced a similar period of airfare volatility in the past and travel demand has generally remained resilient over the long term. Despite sector air travel demand, the overall travel consumption is still there during the holiday. The railway passenger volume continued to grow steadily. And also, our accommodation demand across the industry also remain healthy. And of course, just like I mentioned, the accommodations business continues to outperform the industry, also remain a modest growth with high-quality hotel demand are released. And also, we have monitored a solid ADR growth as well. But we have to leave that we might have headwind for transportation business in quarter 2. Under this circumstance state we still do something. We enhance our pricing and recommendation capabilities, including fair comparison, travel timing suggestions and alternative routine recommendations to our users, helping the tapes better navigate airfare volatility and identify better value travel options. So this supported user conversion and also satisfaction even amid the higher air fare environment. And in the meantime, we reacted splitly to improve the efficiency of our transportation business by tightening promotional spending refining our organizational structure and exercising stricter control over fixed costs for this segment, including the personnel-related expenses. So these initiatives have mitigated the impact on profitability in the near term or in quarter 2, while also supporting healthier margin expansion for the Transportation segment in the [indiscernible].

Our next question comes from the line of Brian Gong of Citi.

This is [indiscernible] on behalf of Brian Gong from Citi. So we have 2 questions. The first question is what are the reasons for the increased percentage of selling and marketing expense in the first quarter and what would be the trend of cost structure, including your S&M cost of value and G&A in the second quarter and through year this year? And what will be the margin trend for core EA as well? And then my second question is what is the current margin level of your hotel management. When do you expect the margin of your hotel management business to converge with the industry levels or catch up with the leading piece?

Yes, as we talked, our marketing spend is adjusted flexibly in response to evolving market conditions. So in the first quarter, as we saw encouraging early booking trends ahead of the [indiscernible] New Year holiday this year and selectively stepped up our marketing efforts to bank capture the demand while maintaining -- still maintaining a disciplined approach [indiscernible] across all kind of channels. At the same time, our operating efficiency continued to improve, supported by mowing revenue scale and also the internal application of the AI. As a result, the combined ratio of service development and general administrative expenses to revenue declined by nearly 1 percentage point year-over-year driving an increase of 0.8 basis points in adjusted net margin in the past quarter, quarter 1, that's for in the second quarter. Following the headwinds in the air ticketing market since April the end of [indiscernible], we responded quickly by optimizing the cost structure of our transportation segment and reallocating part of our marketing investment towards the accommodation segment. and short-haul topping area to capture growing demand for [indiscernible] vacations. As a result, we do expect adjusted net margin in quarter 2 to continue improving year-over-year reflecting our operational flexibility and disciplined cost control and short-term market heavily. For the whole year of 2026, as discussed at the very beginning of this year, we still continue to optimize operating efficiency, given the application of AI technologies and also further refine our marketing investment allocation. So we're pretty sure how the very strong belief that margin improvement will be delivered for the full year of 2026. In terms of the hotel management, I think Joyce will give you more color.

Thank you for question. In terms of the margin level of our hotel management business, we can look at the margin profile from 2 perspectives, given the [indiscernible] stage of [indiscernible] Hotel technology platform and [indiscernible] Center resort. For [indiscernible] Hotel [indiscernible] platform, the segment has experienced rapid growth over the past few years with a significant increase in the number of hotels under management. as we have been focused on accelerating market penetration and expand our forcing. Our blended take rate remains lower than that of the leading industry players. Well, in contrast, when the hotel's results is the most established platform with a mature operating model and a stable profitability. With an established brand influence, its full structure is comparable to the leading global hotel management group, which supports a stable and sustainable revenue model. Following the consolidation, when has provided an immediate improvement to the overall financial performance of our hotel management business. Still at the same time, we have been investing in building our direct sales capabilities the Wanda and [indiscernible] membership program to gradually strengthen brand awareness and customer loyalty. While the contribution from our own membership programs remains below that of the more mature hotel management platform, we expect it to become an increasingly important driver of margin improvement in the future. As the business is still at an early stage, we expect profitability to improve gradually at scale, operational efficiency and sale contribution continue to increase. Looking ahead, our driven strategy will remain disciplined and balanced. We will continue to expand the scale of the management hotel network while improving operational efficiency optimizing the revenue structure and enhancing direct sales channel capabilities. With the combined platform and a growing scale, we expect overall operating leverage of the hotel management business to improve gradually over time.

Our next question comes from the line of Leo You from CLSA.

So I have 2 questions. First as the AI agents and AI bots are becoming more important user entry points, how should we think about the impact on our traffic acquisition and the user behavior for -- and how will Tongcheng position itself in the emerging AI ecosystem. And the second one, I want to follow up on the hotel. So we saw the industry ADR had a slight decline on a same start year basis during the Labor Day holiday. So how should we think about the industry trend going forward? And what is the implication on our accommodation business? How long can we still enjoy the tailwind in the hotel ADR?

Thank you for the questions. In terms of our positioning in the AI period, as we mentioned before, we do AI agents as a new interaction interface rather than a drug replacement for existing channels. While AI may reach up how users search for travel information the high-value travel transactions continue to rely on the comprehensive [indiscernible], real-time inventory management and reliable service fulfillment as well as [indiscernible] OTA remains strong advantages. Recent adjustments by some AI platforms in their e-commerce initiatives also highlights the current limitation of AI in handling complex travel transactions. At the same time, AI is introducing new traffic distribution mechanism and create incremental opportunities where we are focused on ensuring that our content and service capabilities can be effectively accessed, referenced and transacted with an AI ecosystem enabling a [indiscernible] look from exploration to bookings. At this stage, traffic contribution from AI channel remains relatively small and has not had a material impact on our overall traffic structure or user behaviors. Strategically, we are actively positioning ourselves within the emerging AI ecosystem as a trusted travel service partner leveraging our extensive transaction data, operational expertise and the user insights to deliver accurate recommendations and bookable solutions across Air platform. In particular, we have established a deeper collaboration with the Tencent ecosystem by enabling traffic reduction from ramp to our mini programs and apps while users complete bookings within our ecosystem. Supported by our long-standing partnership with Tencent, we believe we maintain a strong strategic cooperation priority within the Tencent ecosystem as AI-driven traffic continues to grow. Importantly, this model allows us to maintain drug user relationships and retain transaction data within our own ecosystem, which further strengthen our capabilities in personalization, user engagement and long-term user value enhancement. On the other hand, we continue to pursue a strategic collaboration with leading external Ai agents to capture future growth opportunities. As part of our strategy to capture early stage opportunities and broad distribution, we have embedded deep trip functionalities into platforms such as [indiscernible], expanding our service presence across external air ecosystem. Over the long run, we believe competition in the AI era will still come down to operational capabilities and service quality. By strengthening our product offering, service fulfillment, and ecosystem partnerships. We are well positioned to capture opportunities brought by AI while reinforcing our core competitive advantages.

For EDR, yes, during the recent Labor Day holiday, the industry ADR on a same start basis since our year basis. So a slight year-over-year decline for sure. But not [indiscernible] ADR still continues the increasing trend year-over-year, primarily driven by the ongoing improvement in our hotel mix and continued user upgrades towards higher-quality accommodations. So over the past years, the bookings for 3 Star and a go hotel increased meaningfully with their proportion on our platform in quarter 1, rising by approximately 4 percentage points year-over-year. but few for the 3 star and evoke hotels only of less than 30% in our platform. So as a result, our blended ADR continue to record healthy growth based on these trends, we expect the ADR improvement to remain as a figure for accommodation revenue growth over the coming quarters. And meanwhile, we have maintained a more disciplined and refined approach user incentives through more targeted subsidy allocation and improve the marketing efficiency as well. we have been able to keep our net pirate at a healthy and stable level while supporting sustainable business growth. So overall, we are very opportunistic about the ADR on our platform improvements ongoing supported by our extensive exposure in the mass market and our ability to [indiscernible] to train [indiscernible] in demand and capture imaging opportunity. So thank you for the question.

At this time, there are no further questions on the line. I would like to hand the call back to Ms. Kylie Yeung for closing remarks.

Thank you, operator. We are closing 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 [indiscernible]

That concludes today's conference call. Thank you for your participation. You may now disconnect.

Good day, and thank you for standing by. Welcome to Tongcheng Travel 2025 Fourth Quarter and Annual Results Announcement Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Ms. Kylie Yeung, Investor Relations Director of the company. Please go ahead, ma'am.

Thank you. Good morning, and good evening, everyone. Welcome to Tongcheng Travel's 2025 Fourth Quarter and Annual 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. Hope Ma; our CFO, Mr. Julian Fan; our Chief Capital Officer and President of Wander Hotels and Resorts, Ms. Joyce Li.

For today's call, our management team will provide a review of the company's performance in the fourth quarter and full year 2025. Hope will brief us on the company's strategies. 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 that follows.

As always, our presentation contains forward-looking statements. Such statements are based on management's current expectations and current market operating conditions and relate 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 measures. 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, Hope. Hope will be presenting in Mandarin, and our colleague will provide the English translation afterwards. Hope, please go ahead.

[Interpreted] In 2025, China's travel industry and the company entered a new phase of high-quality development. Over the past year, we witnessed resilient travel demand with increasingly diversified trends as immersive and experiential consumption continues to gain popularity. Amid this backdrop, we deeply dive into user needs and comprehensively optimize our travel products and user experiences. As a result, both our user base and ARPU demonstrated robust growth in 2025 with APU reaching a record high. The robust business growth reflected the ongoing enhancement of our service quality and the expanding influence of our brand.

The year 2025 was a year of challenges and opportunities for us. In response to consumers' diversified and personalized needs, we continuously enriched our product offerings, facing growing expectations for premium services. We consistently improved our service quality. Amidst AI-driven technological revolution, we proactively embraced new frontier technologies with an open attitude. All these showcased our strong organizational agility and exceptional execution capabilities, further reaffirming our commitment to our user-centric mission of make travel easier and more joyful.

The Chinese government sees travel as a vital pillar of national economic development. The latest 15th 5-year plan has explicitly stated the commitment to expanding the supplies of high-quality travel products and to enhancing travel service standards with the goal of establishing China as a premier travel destination from the pilot implementation of autumn and winter vacations in certain regions to the longest spring festival holiday on record. These expanding holiday arrangements underscore significant governmental support for the travel industry. In terms of demand, travel has become an essential part of people's pursuit of a better life with seasonal themes such as spring flower viewing, summer retreats, all foliage tours and winter snow activities continuously gaining popularity.

In the coming year, we will remain focused on domestic market and deep dive into user needs, aiming to further solidify our leading position in the mass market. Simultaneously, we will make intensified efforts to capture growth opportunities in the outbound travel market to propel our global expansion strategy. On the operational front, we will continue to implement technological innovation and product upgrades centered on user experience while enriching membership privileges and deepening user engagement.

In 2021, we tapped into the hotel management business. After several years of rapid expansion, it has now gained meaningful scale. The integration of Wanda Hotels and Resorts in 2025 marked a pivotal milestone in the development of our hotel management business. This strategic move strengthened our brand portfolio and ecosystem while substantially elevating our competitiveness and market influence. By consistently executing our strategy and leveraging our strong Internet DNA, we are well positioned to accelerate the segment expansion in 2026, laying a robust foundation for our long-term sustainable growth.

Amidst the rapid advancement of AI technology, we are devoted to expanding the application of AI in our business process, further optimizing operational efficiency and enhancing user experience. Building on our user-centric value proposition, market acumen and superior execution capabilities, we are confident that we will continue broadening our competitive moat in the travel industry. Moving forward, we will continue to export our technologies and expertise to empower our partners and support the broader industry ecosystem while strengthening our commitment to corporate social responsibility to foster sustainable industry growth and create greater value for all stakeholders.

Next, I will hand over the call to Joyce. She will share with you our business and operational highlights of the fourth quarter and the full year of 2025. Joyce, please go ahead.

Thank you, Hope. 2025 was a pivotal year of growth and achievement for our company. Beyond the steady expansion of our domestic business, our outbound travel and hotel management businesses made remarkable progress, contributing meaningfully to the overall growth momentum of the company. During the past year, we acutely grasped users' evolving preferences and precisely captured emerging demand. This enabled us to once again deliver solid growth across all business segments, highlighting our excellence in strategic execution, operational efficiency and organizational agility. Throughout the year, our accommodation business sustained robust growth momentum and achieved a record high in room nights sold.

In early 2025, we identified a notable shift in users' preference towards high-quality hotels. In response to the changes, we strategically reallocated operational resources to meet this evolving demand, resulting in an approximately 5 percentage point year-over-year increase in the proportion of high-quality hotels sold on our platform. In the meantime, we prioritized enhancing user experience. We not only offer the best value for money products and services, but also provided faster and more responsive support to user requests to further strengthen our presence in the mass market. As for our international business, we continue to enhance our product capabilities by deepening partnerships with third-party providers as well as expanding our product and service offering.

In addition, we leveraged our domestic user base to drive cross-sell initiatives and execute the precision marketing campaigns targeting high potential users. All these efforts collectively led to nearly 30% growth in our international room nights sold in 2025. In terms of our transportation business, it continuously demonstrated strong resilience throughout the year. Over the past year, we placed a strong emphasis on improving both user experience and engagement. At the core of the efforts is our Algorithm-driven Huixing system, which leverages advanced algorithm capabilities to provide users with viable and accessible travel solutions by utilizing a comprehensive range of transportation options.

The intelligent system significantly enhances the overall travel experience for users. In the fourth quarter, we launched skiing-themed marketing campaigns and rolled out various benefits to skiing enthusiasts so as to reinforce our positioning as an experience-driven platform and further engage our user base. On the international front, we focused on improving operational efficiency by implementing a more disciplined subsidy policy and expanding our VAS offerings. As a result, we achieved a balanced growth in both volume and revenue throughout the year with volume growth of nearly 25% for 2025.

As mentioned at the beginning of the speech, 2025 marked a milestone year for our hotel management business with significant progress achieved. This year, we successfully completed the acquisition of Wanda Hotels and Resorts, a company that possesses a renowned portfolio of upper upscale and luxury hotel brands with strong market presence in China. In addition to its hotel management expertise, the company is the only hotel management firm in China with proven specialization in operating scale resorts. This unique capability can help us strengthen supply chain resources in the travel industry, thereby enhancing our influence and competitiveness.

Furthermore, Wanda Hotels and Resorts operates its own in-house design institute which is recognized as one of the leading hospitality design teams in China and has received numerous prestigious international awards. The team possesses strong capabilities in designing and managing large-scale hotels as well as convention and exhibition centers. Its design solutions serve not only its own properties, but also high-end hospitality projects across the industry. Following the acquisition, the Wanda Hotels and Resorts team underwent a seamless integration process, resulting in a significant boost to its vitality and optimized organizational capacity and refined strategic direction.

This strategic integration has improved our brand portfolio, strengthened our market presence and accelerated the sustainable growth of our hotel management business. Regarding our eLong hotel technology platform, we remain focused on expanding our geographical footprint while prioritizing quality growth throughout the year. The platform also offers technology-enabled hotel management solutions featuring a proprietary property management system, a smart marketing solution, [indiscernible] and service robots for automated in-room delivery. By the end of December, our total number of hotels in operation exceeded 3,000 with more than 1,800 in the pipeline.

Looking ahead, we are committed to further expanding our asset-light hotel management business through network expansion and ecosystem enablement. This strategic approach will position us to achieve leadership in China's hotel industry and establish a second growth engine for the company. Traffic operation has been the foundation of our success, leveraging the Weixin Mini program, we have effectively reached a broad user base across China, in particular, those in lower-tier cities. Over the past year, the Weixin ecosystem continued to serve as a critical traffic channel, where we focused on enhancing operational efficiency. At the same time, our stand-alone app, a key driver of new user acquisition, demonstrated strong growth momentum over the past 4 quarters.

To attract younger demographics, we rolled out a series of innovative products and engaging marketing campaigns to enhance user mind share and solidify our positioning as an experience-oriented travel platform. As such, the average DAUs of our stand-alone app posted more than 30% growth year-over-year in 2025. Additionally, social media has played an increasingly vital role in engaging users, particularly those younger audiences. During the year, we stepped up our efforts in social media platforms to connect with younger travelers and broadened our user reach through effective and targeted user engagement.

We have accumulated the most extensive user base in China's OTA industry. For the 12 months ended December 2025, our annual paying users climbed to 253 million, representing a year-over-year growth of 6%. In addition, the accumulated number of passengers served on our platform over the past 12 months continued to expand and reached 2,034 million with an annual purchase frequency exceeding 8x per user. Moreover, our annual ARPU for the year further rose to RMB 76.8, reflecting a year-over-year growth of 5.5%. Besides our MPU also maintained a growth trajectory throughout the year and increased by 6% year-over-year to 46 million for 2025. As an innovation-driven company, we fully embrace new technologies such as Gen AI to transform our business.

In December, we rolled out collaboration with Yuanbao, enabling users to access to our travel booking services via the Weixin Mini program by searching travel itineraries on Yuanbao app. In mid-March last year, we introduced our AI-powered travel planner, DeepTrip, which integrates the supply chain capabilities and market insights of our platform with the resuming capabilities of DeepSeek. Over the past few quarters, we have continuously refined its functionality, incorporating social features to enhance its shareability among users. In the fourth quarter, we embedded a map tool to give users a clearer visual representation of their travel destinations. By the end of December, approximately 6.8 million users in total have utilized DeepTrip.

Additionally, we extended its application to some business scenarios by integrating DeepTrip into air ticketing service. We aim to address users' prebooking inquiries as well as helping them find competitive ticket prices, which not only improved operational efficiency, but also enhanced overall user experience. In customer service, AI now covers around 80% of user inquiries, demonstrating its important role in streamlining operations and enhancing user experience. Over the past year, we have consistently advanced the integration of AI in every phase of the customer service process, which not only reduced the workload of customer service staff, but also improved overall operational efficiency.

Furthermore, we have made continuous advancements in AI capabilities to enhance its precision in identifying user requests and delivering timeless, contextually relevant and human-like responses. By leveraging AI-driven solutions, we aim to further optimize customer interaction, reduce response time and maintain seamless user support as we continue to grow. In pursuit of global excellence in ESG practices, we have achieved milestones in improving our ESG performance over the past few years. Notably, in 2025, our MSCI ESG rating was elevated to the top AAA level, surpassing 95% of global industry players.

In addition, we were included in the S&P Global Sustainability Yearbook China for the third consecutive year, and we were also honored with the Industry Mover Award for our remarkable progress in driving sustainable development within our sector. All these achievements have not only demonstrated our leadership in ESG performance among global peers, but also reflected our resilience and excellence in corporate sustainability in the face of market uncertainties, evolving policy landscape and dynamic social development, we remain dedicated to further strengthening our ESG practices and contributing to a more sustainable future.

I'll stop here and give the call to our CFO, Julian. He will share with you the detailed financials in the fourth quarter and for the year of 2025. Julian, it's your turn.

Thank you, Joyce. Good evening, everyone. Over the past quarter, China's travel industry showcased remarkable resilience driven by rising demand for immersive and experiential travel experiences across both traditional holiday hotspots and newly emerging destinations. Leveraging our profound understanding of evolving traveler preferences, we delivered another quarter of robust performance, capping off a highly productive year. In the fourth quarter of 2025, we achieved healthy growth in both top and bottom line. We reported net revenue of RMB 4.8 billion, representing a 14.2% year-over-year increase from the same period of 2024. We executed targeted marketing campaigns to strategically prepare for the 2026 Chinese New Year, while upholding rigorous cost discipline to ensure financial prudence.

During the fourth quarter, our adjusted net profit rose to RMB 779.8 million, reflecting an 18.1% year-over-year growth. The increase was principally fueled by the enhanced economies of scale and the optimized operations of our OTA business. Our core OTA business revenue registered a 17.5% year-over-year increase to RMB 4.1 billion during the fourth quarter of 2025. Our accommodation reservation business achieved RMB 1.3 billion in revenue for the fourth quarter of 2025, representing a 15.4% increase from the same period in 2024. The revenue increase was primarily driven by growth in hotel room nights sold, coupled with a modest rise in ADR. In our domestic accommodation business, we proactively explored diverse accommodation scenarios to capture emerging growth opportunities, including themed offerings tailored to specific demand such as winter vacation and exam season space.

For our outbound accommodation business, we strengthened cooperation with third-party partners to expand product offerings as well as our destination footprint catering to growing user demand. In the fourth quarter, our ADR once again achieved year-over-year growth, benefiting from growing consumer demand for high-quality hotels and our proactive adjustment to user subsidy strategies, supported by precise and disciplined marketing strategies. Our net take rate remained stable year-over-year. Our transportation ticketing revenue for the fourth quarter reached RMB 1.8 billion, marking a 6.5% year-over-year increase compared with the same period of 2024.

During the past quarter, we heightened our focus on improving user experience. We actively expanded travel supply chain and enriched VAS offerings to deliver a broader range of mobility options and ensure seamless travel experience for users. As for our international air ticketing business, it achieved balanced growth in both volume and revenue, which aligns with our long-term strategy. In the fourth quarter, our international air ticketing revenue increased to more than 7% of our total transportation ticketing revenue. Our other business segment maintained stellar growth momentum with revenue reaching RMB 916.7 million in the fourth quarter, representing a growth of 53% year-over-year.

This growth was mainly propelled by outstanding performance of our hotel management business and the consolidation of Wanda Hotels and Resorts. Our tourism business achieved a revenue of RMB 777.5 million, which was largely flat year-over-year. mainly due to our proactive reduction in prepurchased business as well as softer demand for Southeast Asia and Japan. In terms of profitability, our gross profit increased by 18.5% year-over-year to RMB 3.2 billion for the fourth quarter of 2025. The operating profit margin of our core OTA business remained flat year-over-year for the fourth quarter of 2025, while the operating profit margin of our tourism business has been affected by the one-off goodwill impairment. Our adjusted EBITDA increased by 28.6% and reached RMB 1.3 billion in the fourth quarter of 2025.

Adjusted net profit grew by 18.1% to RMB 779.8 million in the fourth quarter of 2025. Adjusted basic EPS for the fourth quarter of 2025 was RMB 0.33 with a 17.9% year-over-year increase compared to the same period in 2024. Service development and administrative expenses in the fourth quarter of 2025 increased by 6.8% from the same period of 2024. Excluding share-based compensation charges, service development and administrative expenses in total accounted for 18.1% of revenue in the fourth quarter compared with 18.6% of revenue in the same period of 2024. Selling and marketing expenses in the fourth quarter of 2025 increased by 22.7% from the same period of 2024, excluding share-based compensation charges. Selling and marketing expenses accounted for 32.4% of revenue in the fourth quarter compared with 30.2% of revenue in the same period of 2024.

Now let's move to our results for financial year 2025. Our net revenue in 2025 achieved RMB 19.4 billion, representing an 11.9% year-over-year increase. The core OTA revenue achieved RMB 16.5 billion, representing a 16% year-over-year increase. Our accommodation reservation revenue was RMB 5.5 billion in 2025, representing a 16.8% year-over-year increase. Our transportation ticketing revenue reached RMB 7.9 billion, representing a 9.6% year-over-year increase. Other business revenue for 2025 achieved RMB 3.1 billion, representing a 34.4% year-over-year increase. Our tourism revenue for 2025 reached RMB 2.9 billion, representing a 6.9% year-over-year decrease.

In terms of profitability, our gross profit in 2025 increased by 15.7% year-over-year to RMB 12.9 billion. Adjusted EBITDA for 2025 improved by 26.9% year-over-year to RMB 5.1 billion. Meanwhile, adjusted net profit for 2025 increased by 22.2% year-over-year to RMB 3.4 billion. Adjusted basic EPS for 2025 was RMB 1.45 with a 20.8% year-over-year increase. As of December 31, 2025, the balance of cash and cash equivalents, restricted cash and short-term investments was RMB 12.3 billion. We highly appreciate our shareholders' consistent support and are committed to delivering sustainable capital returns. Our Board of Directors has proposed a final cash dividend of HKD 0.25 per share, marking a 38.9% increase from last year. This reflects our commitment to enhance capital returns to shareholders.

Over the past year, China's travel industry has demonstrated increasingly prominent trends towards diversification and personalization as consumers place growing emphasis on emotional value and unique experience-driven travel opportunities. Notably, the 2026 Spring Festival represented the longest holiday period on record. During the 9-day holiday, consumers divided their holidays into multiple shorter trips such as homecoming visits and vacation travel. Incremental demand from multiple trips during the festival has driven robust growth in our business volume. In addition, the pilot implementation of spring and autumn vacations initially launched in Zhejiang and Sichuan has been expanded to include more regions such as Jiangsu and Anhui. We believe this initiative will help stimulate travel consumption and provide additional momentum to the growth of the tourism industry.

Such supportive government policy, combined with sustained strength in user demand, fuels our optimism about the upward trajectory of China's travel industry in the coming year. Moving forward, we will remain focused on our core OTA business, providing users with diverse domestic and international travel products while sparing no effort to enhance user experience. As we continue to improve operational efficiency in domestic OTA operations, we will actively expand our outbound business to bolster our global brand presence.

Additionally, our hotel management business will enter a new phase of high-quality growth, building a solid foundation for the company's long-term sustainable development. Concurrently, we will continue to adopt technological innovations as well as deepening the integration of AI technology with our supply chain capabilities, striving to better meet user needs. Last but not least, we will strengthen our corporate social responsibility to support the healthy development of the travel industry and to create greater value for our stakeholders.

With that, operator, we are ready to take questions now. Thank you.

[Operator Instructions] We will now take our first question from the line of [ Xi Wei Liu ] from Citi.

Xi Wei From Citi. Congratulations to the company on a solid operating performance. I have 2 questions. The first about outbound travel. There have been many flight cancellations between China and Japan recently. How has this impacted your outbound business? Could you share the regional breakdown of your outbound markets? And what are your 2026 targets for outbound revenue growth and profitability? The second about large model and AI strategy. The company has actually rolled out some partnerships with large models so far. In the long run, as AI model portals become more important, how will the company position itself?

Thank you, Xi Wei for the question. The first one is in terms of outbound travel. We did observe a decline in Japan-bound travel volume given the current circumstance. However, the overall impact on our business has been limited as outbound travel accounts for only around 5% to 6% of our total transportation and accommodation revenue. And at the same time, outbound travel demand remains resilient, and we have been seeing users shift to alternative destinations rather than cancel their travel plans. During the Chinese New Year holiday, shop to middle-haul destinations within a 5-hour flight regions such as South Korea, Singapore, Malaysia, Hong Kong and Macau remain among the most popular choices, while demand for Thailand also shown signs of gradual recovery.

In addition, demand for long-haul travel increased year-over-year with European destinations such as Italy and Spain seeing particular strong growth. We have been actively adjusting our product offerings and marketing focus to capture this demand shift. Overall, given the relatively small contribution of our outbound travel to our core OTA business and the substitution effect across destinations, we do not expect a material impact on our overall performance. And looking ahead to 2026, our priority remains to further improve the quality of growth by enhancing pricing discipline, optimizing marketing efficiency and strengthening cross-selling from air tickets to accommodation and other travel products.

At the same time, we will continue to deepen partnerships with global suppliers to improve service capabilities and user experience. Overall, we expect the international business to continue expanding in scale and become an increasingly meaningful contributor to our revenue. Over the next 2 to 3 years, growing business volume and expanding the user base will remain the key priorities while maintaining a strong focus on improving growth quality and profitability. We expect the revenue contribution from the outbound segment to increase to around 10% to 15% with increasing operating leverage over time.

And in terms of the AI cooperation, our AI strategy focused on enhancing both user experience and operational efficiency as we continue to evolve from a traditional OTA toward a more intelligent travel platform. We see AI as a core capability that helps us better understand user needs, improving decision-making and optimize service delivery across the entire travel journey. At the same time, AI-driven efficiency improvements are significantly enhancing staff productivity and optimize our cost structure, which we believe will be an important driver of margin improvement over time.

On the user side, we have integrated our proprietary travel-specific AI with advanced large language models to develop DeepTrip, which supports itinerary planning, travel inspiration and personalized product recommendations. By combining AI capabilities with our real-time supply and transaction ecosystem, DeepTrip provides a practical and actionable solution and enables a seamless end-to-end booking experience. We will continue to iterate its functionalities to better support users across different travel scenarios. And as a positioning of us, I think that we have been started exploring the partnership with large AI platforms and large model ecosystems.

For example, we enabled traffic [ redirection ] from Yuanbao to our mini programs and apps. So our strategy is to actively participate in the emerging AI ecosystem by positioning our platform as a trusted travel service partner with deep market insights and a strong understanding of user behaviors. Leveraging our long-term accumulation of transaction data and operational experience, we are able to provide users with more accurate recommendations and practical bookable travel solutions on our AI platforms. Users who enter through AI platforms complete their bookings within our mini programs or apps and the related user and transaction data remain within our ecosystem. This allows us to maintain direct user relationships, accumulate valuable behavior insights and continuously optimize our product services and personalized recommendations. It also enables us to strengthen user engagement and lifetime value, which remains a key competitive advantage for our OTA platform.

Going forward, we will continue to monitor development of the AI ecosystem and expand partnerships where it makes strategic sense, while maintaining our focus on strengthening our product service offerings, operational capabilities and user experience.

We will now take our next question from Wei Xiong of UBS.

First, I want to get your thoughts on regulations because recently, an OTA peer has been under antitrust investigation. So how should we think about the implications to the OTA sector? Do you foresee any impact on OTA's business model or lead to any change in the competitive landscape?

Thank you, Wei Xiong, -- please go on.

Yes. Sure. So second question is on the hotel management business, which is set to become our second growth engine. So I wonder, could management elaborate your strategic focus and planning for this year? And what are the key operational goals and financial metrics that we look to achieve in 2026 and in the medium term as well?

Okay. Thank you for the question, Xiong, Wei. In terms of the investigations, as you mentioned, we closely monitor regulatory developments recently. At this stage, we have not observed any material changes that would impact our day-to-day operations. Tongcheng has always operated with a strong focus on compliance and fair cooperation with our partners. We believe a well-regulated market environment is beneficial to the long-term healthy development for the company and also for the industry. We will continue to adapt our business practices as required to ensure full compliance in the company. Overall, we remain focused on executing our strategy and delivering sustainable growth and profitability improvement.

In terms of the hotel management plan, I think Joyce will have her words.

Thank you, Xiong, Wei. Actually, following the completion of the Wanda Hotels and Resorts acquisition, the integration has progressed smoothly and is better than our expectations. We have achieved rapid organizational alignment, revitalized organization and teams and further refined the strategic direction of the business. Overall, the post-acquisition integration has been very successful. On the synergy front, we are beginning to see encouraging early results. The addition of the Wanda's upscale and luxury brands has enhanced our overall brand portfolio and strengthened our positioning in the middle to high-end segment of our hotel management business.

At the same time, the integration has enabled better resource sharing across business development, operations and membership, which is gradually improving operational efficiency. It also further reinforced Tongcheng's presence within the accommodation supply chain. From the other perspective, Tongcheng also empowers Wanda Hotels and Resorts through our technology capabilities. By providing standardized system tools and digital solutions, we help improve internal operational efficiency while reducing research and development efforts and lowering system maintenance and third-party service costs.

From a financial perspective, the acquisition has already delivered a positive contribution at the operational level as Wanda Hotels and Resorts is an established hotel management company with a solid operating track record. The consolidation has enhanced our revenue scale, optimized the business mix and strengthened the earnings visibility of the segment. As we move forward, our development strategy will remain disciplined with a focus on balancing scale expansion with operational efficiency and healthy returns, ensuring sustainable and high-quality growth of the business segment. With continued expansion of scale and improving operational efficiency, together with the contribution from Wanda Hotels and Resorts, we expect the hotel management segment to maintain strong revenue growth with a further improvement in profitability from 2026 onwards. Thank you.

We will now take our next question from the line of Brian Gong of Citi.

Two questions here. First is, how do you -- how is the travel consumption trend for the industry in the first quarter considering recovery on hotel ADR. Do we still expect teens level on room nights growth this year? Second question is that recently, [indiscernible] has been under government's investigation. Do you think this will impact their cooperation with us and their stakeholding on us? [indiscernible] is adjusting their hotel business to comply with government's requirement. How will this impact the industry and us?

Okay. Thank you for the questions, Brian. In terms of the first quarter's performance and also the industry outlook, actually, during the Chinese New Year holiday, as we mentioned in the prepared remarks, the China travel market continued to demonstrate very solid demand. According to the Ministry of Transport, national passengers throughput during the 9-day Chinese New Year holiday reached a throughput record 8.2% year-over-year growth during the holiday with decent growth for both long-haul and short-haul travel. Our passenger throughput of railway and airline increased by around 10% and 7% year-over-year, respectively. Meanwhile, according to the industry statistics, overall hotel ADR increased during the Chinese New Year holiday among all segments.

With demand for family reunions concentrated in the pre-holiday period, we observed a pickup in passenger throughput during the latter part of the Chinese New Year holiday this year. In response, we promptly adjusted our operational resources, strengthened supply coordinations with our partners and enhance the targeted marketing efforts to capture the rebound in travel demand and improve conversion efficiency in the latter part of Chinese New Year holiday. So as a result, we continue to outperform the industry in the first quarter and also during the 9-day Chinese New Year holiday with especially strong momentum in our accommodation business. Average daily room nights sold increased by 30%.

Specifically, room night growth for 3-star and above hotels significantly outpaced that of lower-tier properties. This reflects our ability to respond effectively to changing user preferences as more travelers place greater emphasis on higher quality accommodation experiences. As a result, our hotel ADR in quarter 1 maintained a positive trend during the period and once again exceeded the industry average. For transportation business, we continue to focus on improving monetization, while average daily air ticket volume was broadly in line with the overall market. And also for the room nights growth in the full year of 2026, actually, I cannot provide a very clear numbers here because of the short booking window.

But as we mentioned, looking into 2026, we continue to view the long-term fundamentals of China's travel market positively. Consumer preferences are increasingly shifting towards experiential-oriented spending with growing interest in event-driven and themed travel such as concerts, exhibitions and outdoor activities. At the same time, travel is becoming more integrated into everyday lifestyle, supporting more frequent and diversified travel demand. In addition, supportive policy measures aimed at expanding domestic consumptions and promoting high-quality tourism development provide a favorable backdrop for the whole industry.

And also for the second question about the investigation, actually, we don't monitor any change on the cooperation with Trip and also, we don't monitor any change of the shareholder structures or potential change of the shareholder structures. So currently, as I mentioned in previous question, we're just focusing on our own execution and long-term competitiveness improvement. So actually, our strategy remains very consistent, focusing on enhancing our user value, improve the ARPU, strengthening our product and service capabilities and deepening cooperation with our suppliers through a mutual beneficial approach. And also, at the same time, we will continue to take a disciplined and prudent approach while monitoring the industry regulatory development. Thank you for the question.

We will now take our next question from Yang Liu of Morgan Stanley.

I have 2 questions. The first one is also related with AI. Could management elaborate more about the DeepTrip's contribution to the business, especially on the business -- overall business volume and also cross-selling side? And my second question is regarding the marketing intensity this year, given the geopolitical risk in both China and Japan and also Middle East this year, will management adjust the outbound business marketing intensity? Yes, that is my second question.

Thank you. The first question is concerning our DeepTrip. As I mentioned, DeepTrip is our AI-driven travel planner that use the reasoning power of DeepSeek and our platform supply chain advantages to create personalized travel itineraries. Since launch, DeepTrip has served about 7 million users with orders placed through the platform steadily increasing over the past few months. Over the past quarters, we continue to enhance DeepTrip with the goal of strengthening user awareness and building long-term trust.

We have been continuously upgrading its user-facing capabilities to support more comprehensive travel planning. Key enhancements include the integration of trend transfer data to enable seamless multimodal itineraries. The addition of social sharing features to improve engagement as introduction of a map tool in the fourth quarter to provide a more intuitive visualization of travel plans. In addition, DeepTrip has been embedded into our air-ticketing service to help users address pre-booking inquiries and identify more competitive fare options, delivering a more seamless booking experience.

Beyond user-facing applications, we have also extended DeepTrip into different business scenarios to improve operational efficiency. We integrated customer service agent capabilities into DeepTrip to respond to customer inquiries directly within DeepTrip and guide users to human support when needed. For corporate clients, we piloted a travel booking suggesting tool customized according to travel profiles, business travel policies and past bookings. In the future, DeepTrip will continue to serve as a platform for understanding and addressing users' comprehensive travel needs across diverse scenarios. We will further leveraging our AI capabilities across various business segments to provide valuable solutions to users, thereby strengthening our competitive advantages.

Additionally, we have begun the cooperation with [indiscernible] to acquire more traffic. We're also actively exploring potential collaborations with our AI agent platform to further broaden our reach and engagement opportunities. We remain committed to leading AI innovation, continuously increasing the investments in this area and delivering cutting-edge user-focused features to elevate our user travel experience. And in terms of the current circumstance in terms of outbound business, we have seen considerable growth potential in the outbound tourism market. As the travel habits evolve, more travelers are eager to explore the international destinations. The number of outbound tourists is still significantly lower than the domestic travelers, revealing a substantial opportunities for expansion in this area.

At present, we believe that there are only a limited number of Chinese OTA players have the capabilities and resources to actively drive outbound business. This situation place us in a favorable positioning facing relatively low competitive pressure and allowing us to fully capitalize on the growth potential of the market. Again, our strategy and confidence are anchored in the long-term growth prospects of China's outbound industry and our competitive advantages. While we remain agile in our short-term tactics in response to the market conditions, I think our business momentum remains unaffected. Thank you.

In the interest of time, we will take our last question from Thomas Chong of Jefferies.

Congratulations on a solid set of results. My first question is about our future growth driver and the take rate trend for accommodation and transportation. And my second question is relating to margin. How should we think about the 2026 margin trend as well as the margin driver in the future?

Thanks for the question, Thomas. For growth, actually, the company's focus remains on achieving a high-quality growth in 2026 by balancing scale expansion with operating efficiency improvement, while continuously enhancing our user value and ARPU. So in the first quarter and also the second quarter, we will prioritize healthy and sustainable growth across our core OTA segments, supported by improved operational efficiency and more refined resource allocation. At the same time, we will continue to strengthen our competitiveness positioning and capture growth opportunity to future expand our market presence.

Within the core OTA business, we anticipate that the accommodation business will grow faster than transportation business through the whole year. For accommodation business, we believe that the growth will be driven by volume expansion and ADR improvement, as we mentioned a lot of times. Our volume is expected to continue outpacing the market growth, while our ADR will benefit from the ongoing upgrade in hotel star mix driven by shifts in user preference. So we think it's enough to support a very nicely growth for accommodation business by these 2 reasons. So this year, in terms of the take rate of the accommodation, we expect that the take rate may be stable year-over-year at 2025.

For transportation business, volume growth will be in line with the market and still one of the reasons of the revenue growth for transportation. While our take rate improvement driven by cross-sell and VAS will continue to contribute to the revenue growth of the transportation segment. Also, we expect the hyper growth for other revenue, mainly due to Wanda consolidation since the middle of October last year and the hyper growth of our original hotel management and PMS business and also our Black Whale business, the membership business.

In terms of the profitability, as we promised, the margin improvement is one of the very important strategic priorities for the company. For the reasons, one, for our core OTA business, the improvement in operational efficiency will continue to be an important driver of profitability over time. In particular, we are leveraging AI technologies to enhance both customer service automation and R&D efficiency, which help improve staff profitability and overall operating efficiencies. For the development of our hotel management business, including eLong Hotel Technology platform and Wanda Hotels and Resorts, we will continue to support its high-quality expansion with a near-term focus on scaling the business, while the return profile is expected to improve progressively as the business matures.

For our international business, we will maintain a very prudent approach as we continue to build the foundation for future growth and cultivate the company's next growth engine over the coming years. Last, in terms of the marketing investments, our marketing dollars may fluctuate slightly depending on market opportunity. For example, in quarter 4 last year and quarter 1 this year, we identified strong early booking demand for the 9-day Chinese New Year holiday period and therefore, increased our marketing investments to capture early demand and gain market share. At the same time, we will continue to strengthen ROI management across different marketing channels. So overall, we will continue to balance growth opportunities with disciplined cost management while focusing on improving operational efficiency across the business and improve our margins. Thank you.

That's the end of the question-and-answer session. Thank you very much for all your questions. I'd now like to turn the conference back to Ms. Kylie Yeung, for closing comments.

Thank you. We are closing 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 for your participation in today's conference. This does conclude the program. You may now disconnect your lines.

Good evening, and good morning, everyone. Welcome to Tongcheng Travel's 2025 First Quarter 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. Hope Ma; our CFO, Mr. Julian Fan; and our Chief Capital Officer, Ms. Joyce Li. For today's call, our management team will provide a review of the company's performance in the first quarter. Hope will brief us on the company's strategies, Joyce will discuss our business and operational highlights, and then Julian will address the details of our financial performance accordingly. We will take your questions during the Q&A session that follows.

As always, our presentation contains forward-looking statements. Such statements are based on management's current expectations and current market operating conditions and relate 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 measures. 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, Hope. Hope will be presenting in Mandarin, and our colleague will provide the English translation afterwards. Hope, please go ahead.

[Interpreted] Thank you, and good evening, everyone. Welcome to our 2025 third quarter earnings call. In the third quarter of 2025, China's travel market continued to unleash its growth potential, driven by profound changes in tourism consumption patterns and behaviors. Notably, we have observed a growing trend toward more diversified and personalized consumer demand. Experience-oriented consumption, including emerging segments such as event-driven economy and concert economy has gained significant traction. The ongoing emergence of innovative service scenarios and business models has introduced new momentum into the industry, fostering sustainable growth. Riding on this tailwind, we swiftly identified changing market demand and proactively grow product innovation to meet these evolving needs. Benefiting from these initiatives, our ending paying users in the third quarter reached a historic high and surpassed 250 million, which demonstrates our organizational agility to capture new opportunities and our continuously expanding brand influence. Horizontally, we're expanding our business by proactively enriching our product and service offerings to cater to diverse demand while maintaining steady growth in our core domestic OTA business. Vertically, we're deepening our value chain integration through exploring potential growth opportunities to build a solid foundation for our long-term development. Driven by our effective expansion strategy and outstanding execution capabilities, we delivered robust results in the third quarter, marking a milestone in our overall development. In the National Day holiday, the travel industry exhibited a healthy growth momentum supported by sustained travel enthusiasm, validating the resilience and growth potential of China's travel industry. As a leading travel platform in China, we will consistently embrace technological innovation to drive product and service upgrades with a steadfast focus on delivering high-quality, convenient and diversified travel experiences for our users. Concurrently, we remain committed to executing our core strategy. While maintaining focus on mass market to consolidate our domestic leadership, we will continue to expand our outbound business and explore opportunities across the travel industry to seek new growth drivers.

On October 16, 2025, we successfully completed the acquisition of Wanda Hotel Management, which we believe will accelerate the growth trajectory of our hotel management business, contributing to further expansion and strengthening of our company. Going forward, we will further promote the integration of AI technologies and our supply chain resources to persistently enhance operational efficiency and user experience. We have strong conviction that our clear strategic road map and excellent operational capabilities will enable us to achieve long-term sustainable growth and generate more value for all stakeholders.

Next, I will hand over the call to Joyce, who will share with you our business and operational highlights of the third quarter of 2025. Joyce, please go ahead.

Thank you. Since the start of this year, China's travel market has been demonstrating an upward trajectory, characterized by rising demand for immersive natural and cultural experience. Against the backdrop of the evolving consumer preference, we continue to achieve solid growth across all segments, underpinned by the precise execution of our strategies. In the third quarter, our accommodation business sustained its growth momentum, reaching record highs in both daily room nights sold and quarterly revenue. During this period, we focused on addressing users' evolving demand for higher-quality hotels, resulting in a meaningful increase in the proportion of high-quality accommodation on our platform, with more than 20% growth in its room nights sold. In the meantime, we will reinforce our value for money proposition to further solidify our presence in the mass market. Our upgraded membership program has been instrumental in enhancing user engagement, enabling users to freely redeem their points on our platform. This, combined with the fast response to user inquiries has greatly increased user purchase frequency and strengthen user loyalty. In our international accommodation business, we remain focused on strengthening cooperation with third-party partners and expanding our product service offerings. These efforts were designed to better meet the diverse needs of our users and drive further growth in the segment.

As for our transportation business, it demonstrated solid growth during the third quarter, supported by enhanced monetization capabilities. Throughout the quarter, we prioritized improving user experience and deepening connections with targeted users. Leveraging our acquisition capabilities and further integrating live transportation options, we provided users with more seamless, feasible and convenient travel solutions. Through engaging and entertaining marketing campaigns, we aim to strengthen mind share among younger demographics and enhance our brand positioning as an experience-driven platform rather than merely a ticketing service provider.

In the past quarter, we launched an AI-driven interactive game that allow users to discover travel destinations tailored to their disposition. Such entertaining initiatives has successfully enhanced our brand appeal among younger users over the past years.

In terms of our international air ticketing business, we're focusing on strengthening user loyalty and fortifying our market position by implementing a disciplined incentive policy and improving operational efficiency. We maintain a balanced approach to growth in both volume and value. These efforts contributed to healthy volume growth and further improvement in the monetization capability of this segment, aligned with our long-term growth strategy.

We see significant growth potential in China's hotel industry and have been actively investing in the hotel management business since 2021, which we believe will serve as a key growth driver for the company. Over the third quarter, our efforts were focusing on expanding our geographic network, while prioritizing quality growth, to optimize operations, we streamed our brand portfolio and concentrated resources on several major brands so as to precisely target segmented markets.

At the end of September, the total number of hotels in operation has risen to nearly 3,000 with 1,500 in the pipeline. In mid-October, we completed acquisition of Wanda Hotel Management. The companies are processing multiple upscale hotel brands with a strong presence and influence in the Tier 2 and below cities along with the network of 239 hotels, both domestically and internationally at the end of September.

We believe Wanda Hotel's valuable brand equity combined with profound industry expertise, while diversifying our brand portfolio and accelerate the growth and expansion of our hotel management segment, further strengthening our competitive positioning in this industry. Besides the addition of Wanda Hotel will also have positive financial impact on the company.

By implementing innovative and effective user engagement initiatives, we have built an extensive and steadily expanding user base across China. For the past 3 months, our 12-month annual paying sustained its growth trajectory and recorded another historical high of 253 million, representing a year-over-year growth of 8.8%. In the meantime, the cumulative number of passengers served on our platform over the past 12 months exceeded 2 billion, indicating stable annual pay purchase frequency of 8x per year -- per user.

Furthermore, our MPUs for the quarter also reached a record high of 47.7 million, suggesting a year-over-year growth of 2.8%. Besides our annual ARPU by the end of September increased by 6% year-over-year to more than RMB [ 17.4 ]. The Weixin ecosystem remained a crucial traffic channel during the period, where we focus on enhancing operational efficiency as well as maximizing user value. At the same time, our standalone app, a key driver for acquiring new users maintained strong growth momentum during the last quarter with its DAU hitting an all-time high of nearly 5 million before the National Day holiday.

By introducing innovative products, and launching engaging marketing activities, our standalone app has attracted a significant number of younger users. Additionally, social media platforms have become an increasingly important channel for user engagement, particularly among the younger experience-oriented travelers. So collaboration with influencers and the distribution of creative content, we strengthened user mind share and has broadened user reach within this high potential demographics.

To further amplify the brand visibility and a deeper engagement with top users, we have made consistent investments in brand equity. This summer, we collaborated with Tencent Music and exclusively sponsored 3-day music festival in Macau, effectively capturing the attention of younger audience and significantly boosting brand exposure among them.

Additionally, we appointed a popular stand-up comedian as our brand ambassador to reinforce our valuable money proposition and strengthen our positioning as a dynamic and entertaining platform. These efforts have not only elevated our brand presence, but also positioned us as a preferred choice for value-conscious, experience-driven travelers, driving user loyalty.

As a technology-driven travel platform, we proactively embrace cutting-edge technologies and seek to upgrade our business capabilities and deliver enhanced value to our users. In March, we launched our AI-driven travel planner DeepTrip, which generates viable and personalized travel itineraries for users by leveraging the reasoning capabilities of DeepSeek and the supply chain advantage of our platform. Since its debut, it has more than 5 million users in total with a steadily increasing number of orders placed directly through the portal.

In the foreseeable future, we will remain focused on iterating DeepTrip's functionalities and expand its application across our business processes, in an effort to cultivate user mind share and strengthen user trust.

In the area of customer service, we have made meaningful progress in integrating AI technology to enhance operational efficiency and improve user experience. By embedding AI tools into every stage of the customer service process, we have eased the workload of our customer service staff and shortened handling time. These AI-powered capabilities allow our staff to better understand user inquiries and provide timely, accurate response to address user concerns, ultimately enhancing user satisfaction.

We will continue our investments in AI capabilities to deliver seamless and efficient service while fostering long-term user loyalty. We remain deeply committed to advancing our ESG performance to align with the highest global standards and best practices. Through years of dedicated efforts, we have achieved exceptional results in ESG performance, earning significant international recognition.

Notably, our MSCI ESG rating has achieved the highest level of AAA, placing us among the top 5% of companies globally in our industry. In addition, our CSA score has improved consistently over the past 3 years and was awarded industry mover by S&P Global. These achievements underscore our commitment to ESG principles and demonstrating our ability to continuously enhance our ESG performance, establishing us as an ESG leader among global peers.

I will stop here to hand over the call to our CFO, Julian. He will walk with you through our financial highlights for the third quarter. Julian, over to you.

Thank you, Joyce. Good evening, everyone. In the past quarter, China's travel industry maintained robust growth with travel demand demonstrating strong momentum. During the summer peak season, we observed steady increases in diversified travel scenarios, including family trips, graduation trips and educational tours, leveraging our precise understanding of user needs and agile operational capabilities, we successfully captured emerging opportunities across various travel scenarios, driving impressive growth in our Core OTA business.

In the third quarter of 2025, we achieved outstanding results for both top line and bottom line. We reported a net revenue of RMB 5.5 billion, marking a 10.4% year-over-year increase from the same period of 2024, thanks to our effective marketing investment and enhanced operational efficiency of our OTA business. We achieved a remarkable adjusted net profit of RMB 1,060 million reflecting a 16.5% year-over-year growth, with adjusted net margin expanding to 19.2% compared to 18.2% in the same period of last year.

Our Core OTA business revenue registered an excellent growth of 14.9% year-over-year and recorded RMB 4.6 billion, supported by growth across our accommodation reservation, transportation, ticketing and other business segments. Our accommodation reservation business achieved RMB 1.6 billion in revenue for the third quarter of 2025, representing a 14.7% increase from the same period in 2024. The revenue growth was mainly attributable to the increase in hotel room nights sold as well as the slight increase in ADR.

For the domestic accommodation business, we rapidly responded to emerging user demands and actively explored new consumption scenarios to capitalize on new growth opportunities. For the international accommodation business, we continue to deepen cooperation with global suppliers and strengthen our footprint in outbound designations favored by Chinese travelers, in order to solidify user mind share, driven by changes of consumer preferences on our platform and our proactive adjustments to user subsidy strategies, our ADR sustained a year-over-year increase and once again outperformed the industry.

Additionally, during the third quarter, our blended take rate maintained at a relatively high level which was similar to that of the same period last year, mainly fueled by our precise and disciplined marketing strategies.

Our transportation ticketing revenue for the third quarter reached RMB 2.2 billion, marking a 9.0% year-over-year increase compared with the same period of 2024. During the past quarter, we continued to optimize our VAF offerings and enhance user experience to improve the monetization capabilities of the segment. The revenue growth is a testament to our profound user insights and operational refinement. Furthermore, supported by enhanced user mind share along with our disciplined operational approach, our international air ticketing business maintained stellar growth momentum and accounted for around 6% of our total transportation ticketing revenue, up about 2 percentage points year-over-year.

Other business segments continued to expand rapidly with revenue reaching RMB 821 million in the third quarter, marking a growth of 34.9% year-over-year. This growth was primarily fueled by the outstanding performance of our hotel management business. Our tourism business achieved a revenue of RMB 900 million, representing an 8% decrease from the same period in 2024. This decline was mainly caused by travelers persistent safety concerns regarding travel to Southeast Asia since the beginning of this year and our strategic scaling back of prepurchased business to reduce operational risks.

In terms of profitability, our gross profit increased by 14.4% year-over-year to RMB 3.6 billion with gross margin rising to 65.7% for the third quarter of 2025. Our operating profit for the Core OTA business achieved RMB 1.4 billion, with margin increasing to 31.2% in the third quarter of 2025. The margin improvement was primarily attributable to our efforts to enhance the ROI of sales marketing investments and improve operational efficiency.

The operating profit for the tourism business reached RMB 12.4 million with 1.4% margin. Our adjusted EBITDA increased by 14.5% and reached RMB 1.45 billion, with a 27.4% margin compared to 26.4% margin in the same period last year. Adjusted net profit grew by 16.5% to RMB 1,060 million with a 19.2% margin, up from 18.2% in the third quarter of 2024, demonstrating consistent year-over-year margin improvement.

Service development and administrative expenses in the third quarter of 2025 decreased by 3.2% from the same period of 2024. Excluding share-based compensation charges, service development and administrative expenses in total accounted for 13.8% of revenue in the third quarter compared with 14.7% of revenue in the same period of 2024.

Selling and marketing expenses in the third quarter of 2025 increased by 16.9% from the same period of 2024, excluding share-based compensation charges, selling and marketing expenses accounted for 31.0% of revenue in the third quarter compared with 29.2% of revenue in the same period of 2024.

As of September 30, 2025, the balance of cash, cash equivalents, restricted cash and short-term investment was RMB 13.6 billion. In the first 3 quarters of 2025, the Chinese travel market continues its upward trajectory with travel enthusiasm flourishing. During the National Day holiday, a nationwide increase in travel activity was observed, further demonstrating the resilience of travel market. According to official government data, both the summer and National Day holidays recorded solid year-over-year growth in a number of domestic tourists indicating that travel is one of the key contributors to high-quality economic development.

Heading into the fourth quarter, we remain committed to capitalizing on market opportunities, navigating challenges with agility and efficiency, and managing risks with discipline and prudence. We are dedicated to balancing market expansion and profitability, aiming for robust growth in both top line and bottom line.

Looking ahead, we will unwaveringly focus on our Core OTA business. In this context, we will enhance user value and operational efficiency in our domestic business while actively expanding outbound business and strengthening our global market presence. Concurrently, we will continue expanding our presence across the travel industry, strategically advancing the development of our hotel management business to unlock more growth potential. Through this strategic initiative, we are posted to further solidify our industry-leading position, while maintaining sustainable growth and decent profitability, which we believe will deliver greater value to all stakeholders.

With that, operator, we are ready to take questions now. Thank you.

[Operator Instructions] Our first question comes from the line of Qiuting Wang from CICC.

Congratulations on the solid performance. I have 2 questions regarding for your future growth engines. The first one is about international business, what is your expected growth rate in the following years? And what are the key growth drivers? And how will the company balance monetization rate and volume growth? And what is the better margin for next year?

And the second one is about hotel management business, how many hotels are expected to be opened in the next 2 or 3 years? And what measures will be taken to effectively manage these hotels? And after the acquisition with Wanda Hotel Management, what will -- how will the company achieve synergy with your Core OTA business?

Thank you, Qiuting, for the questions. I will take these 2 questions. And the first is concerning our international business, mainly the outbound business, we would say that outbound business has been our growth driver for our Core OTA business right now. For our outbound accommodation business, we have continued to deepen the partnerships with global suppliers and strengthen our presence in regions levered by Chinese travelers. Destinations like Hong Kong, Macau and Asian regions continued to attract high demand and performed exceptionally well on our platform.

Our outbound air ticketing business maintained a steady growth momentum. This has been supported by our competitive pricing strategy focused on expanding user mind share combined with a disciplined marketing approach aimed at maximizing efficiency and return on investment. These efforts positioning us well to capture the increasing demand and deepen our market presence in the outbound travel segment. In third quarter, our international air ticketing business accounted for around 6% of our total transportation ticketing revenue, representing nearly 2-percentage-point increase year-over-year.

And in 2025, we introduced a margin improvement program for outbound business, as we mentioned, concentrating on marketing and promotional efficiency. As a result, our outbound business turned profitable in the third quarter.

Looking ahead, we will continue to enhance our outbound travel offerings through strategic partnerships with the leading global OTAs, wholesalers, airlines and overseas TSPs. We plan to increase investments in research and development to improve service capabilities and ensure a seamless booking experience, but also exploring cross-selling opportunities from outbound air tickets to accommodation to drive further revenue and profit growth.

In the next 2 to 3 years, expanded business volume and user base growth remains our key prioritized with a strong focus on profitability. We anticipate rapid growth in outbound segment, targeting a revenue contribution of 10% to 15%, making it a major growth driver with higher margins than our domestic business. Overall, we are on track for breakeven this year with international business poised to positive impact margins and become a significant revenue contributor in the future.

And in terms of the hotel management business, as a comprehensive travel platform, we are dedicated to expanding our influence throughout industry trend to ensure sustainable growth. Hotels play a vital role in China's travel ecosystem and deepen our involvement in hotel management will further solidify our positioning in this travel industry.

We have seen significant potential for our hotel management business to become our second growth driver, playing a vital role in our long-term strategy. Our objective is to become a key player in China's hotel industry by offering a diverse range of brands that create exceptional value for hotel owners and travelers like.

In 2024, already ranked 8 in China's hotel group scale ranking, measured by the number of rooms in our hotel portfolio. In the last month, we have successfully completed the acquisition of Wanda Hotel Management company, and now we are progressing with the integration and transition. Wanda Hotel Management has a comprehensive portfolio in 9 major upscale hotel brands with strong marketing trends, as we mentioned. So together with eLong Hotel management platform, we are currently operating over 3,000 hotels.

Given its stable and mature development as well as strong brand influence in the market, the Wanda brand will be retained. This will allow the brand to complement our existing hotel portfolio and strengthen our overall offerings. The core management team and the key staff of that company largely remain in place, continuing to oversee and execute strategic development and operations.

From a financial perspective, as I mentioned, the hotel business we acquired has decent profitability. Although the acquisition impact only around 3 months this year, it is expected to contribute positively to our revenue and profit. We believe the acquisition will accelerate growth of our hotel management business, supporting further expansion and strengthening of the company. We are confident that our clear strategy road map and clear operational capabilities will drive long-term sustainable growth and create great value for all stakeholders.

Our next question comes from the line of Yang Liu from Morgan Stanley.

Congratulations on the solid results. I have 2 questions here. The first is -- question is about the management's view on the future hotel ADR trend and also Tongcheng's take rates for hotels given that the recent high-frequency data suggest some improvement from the value chain, do you think this will translate to even better ADR trends for Tongcheng?

And the second question is regarding the competition in domestic market, we noticed that certain peers announced a pretty good GMV data since the fourth quarter this year. Does there -- any bring -- any incremental competitive pressure to Tongcheng and that company need to fight back or need to do anything to retain its market position?

Liu, thank you for the question. For the hotel industry, actually, we mentioned a lot of times that the domestic ADR has largely stabilized year-on-year in quarter 3 and our domestic ADR already turned positive since quarter 2 and the trend continued in quarter 3. This great improvement is driven by 2 factors. The one is the recovery of the ADR across the industry. And the second is the shift in user behavior in our platform, as users increasingly prefer high-quality products, which has resulted in shift from 2-star hotel to 3-star or above hotel bookings in our platform.

In quarter 3, the proportion of higher quality accommodation bookings on our platform increased meaningfully with more than 20% -- more than 20% growth in the room night sales. Given this trend, we expect that the growth in ADR will be a positive factor contributing to accommodation segment's revenue growth this year and also for the next few quarters.

At the same time, we have adopted a more disciplined and targeted approach for user subsidies. This approach has also helped us to maintain our net take rate at a very decent level, ensuring a balanced focus on both expansion and the profitability. Our outstanding performance in accommodation business in the past few quarters demonstrated that the pricing pressures of the industry had a rather limited impact on our revenue as ADR on our platform remains relatively resilient, thanks to our extensive exposure in the mass market and our ability to swiftly seize market opportunities.

So in the future, we think the trend of ADR improvement are still ongoing because there's a lot of space will be released for the high-quality hotel booking along with the user value and user maturity improved in our platform. In terms of the competition landscape, I think you will have, Joyce.

Thank you, Julian. In terms of competition landscape, as we mentioned a lot of times before, we believe established OTAs with deeper supply chains, user understanding and service capabilities maintain strong defensive moat. First, for the new entries in the OTA market, supply chain will be one of the major challenges for them. As a leading OTA with over 20 years of industry experience, we have an extensive hotel supply chain and deeply established relationships with TSPs. Efficiently managing hotels supplies requires complex systems and close communication with hotels, especially when handling the price fluctuation and room availability constraints.

This strong supply chain advantages are difficult for new entries to replicate quickly. Secondly, purchase of travel product services tend to be relatively low frequency and involve longer, more complicated decision-making process. Therefore, converting users into paying customers in OTA space is particularly challenging, as it requires thorough understanding of users' preference and behaviors.

And thirdly, our focus on OTAs on delivering superior service and user experience, heavily investing in innovative value-added products tailored to market demand, coupled with a dedicated customer service team, addressing user needs rapidly. These competitive ages are not easily matched by newcomers. Besides, we have upgraded our membership program to enhance user engagement by providing faster response to inquiries and allowing users to redeem their points as cash on our platform. These enhancements aim to boost purchase frequency and deepen user loyalty.

The OTA market is complex and requires significant time, resources and experience to build sustainable competitive advantages. We expect near-term competition to remain relatively stable, and our current strategy continues to focus on improving operational efficiency with the profit expectations unchanged. So we remain vigilant to make adjustments as market dynamics evolve. Thank you.

Our next question comes from the line of Brian Gong from Citi.

Congratulations on the solid results. Two questions. First, management just talked about ADR and wondering how should we think about room night growth in the first quarter and any initial color for next year? And the second question is our take rate on transportation has been persistently improving this year. But I heard that airline ticketing pricing has been under pressure. And it seems airline companies also lowered commission fees to some extent. Not sure if this will impact our transportation revenue growth ahead.

Thank you for the question, Brian. I would like to give you some color for the Q4 performance first and then provide more color on the transportation side from the airline companies. As mentioned throughout this year, the company remains focused on striking the balance between top line and bottom line as well as enhancing user value and ARPU.

In quarter 4, actually, the margin improvement will remain our key priority, while we simultaneously pursue maximum growth and market share gains, both for accommodation and transportation. For accommodation business, we believe that the growth will be driven by both volume expansion and also the ADR improvement like what I imagined. Our volume is expected to continue outpacing the market growth. While our ADR will be benefited from the ongoing upgrade in hotel store mix driven by the shift in user preference like I mentioned in previous question.

For transportation, actually, the ATV has already turned positive in quarter 3 because we monitor that there's more demand released in the long haul in the summer vacation and also the October holidays because the October holidays, we have 8 days holidays this year. So actually, for the industry, the ATV has already turned positive. And also the ATV has also turned positive in our platform as well. We don't have any pressure for the commission decrease from the airline companies. We don't have any information from that.

For the fourth quarter, the transportation business volume growth will be still in line with the market. The market is only single digits. While the take rate still have some space to improve, driven by cross-sell and VS will continue to contribute the revenue growth.

In the long run for the transportation business, actually, we will continue to emphasize innovation in our products and services to meet the diverse needs in our users during their travel journeys, thereby increasing the monetization of our transportation business. As our platform progresses towards becoming a fully integrated one-stop travel solution, we are starting to explore opportunities for cross-selling from long-haul transportation to a broader area of short-haul options with our Huixing and AI capabilities.

Our goal is to develop comprehensive travel combo solutions that extend beyond selling individual tickets, which will help enhance the monetization capability and drive revenue growth in the future for our transportation segment. And in terms of the color for next year, actually, it's still too early to say because of the booking window is shortened lately. So we may give you more information on that, I think, in next call, February, March next year. I think that will be more accurate than now. So thank you for the questions.

Our next question comes from the line of Wei Xiong from UBS.

Congrats on the solid quarter. First, I want to ask about the margin trend. So after our encouraging effort to improve cost efficiency this year, how should we think about the room for margin expansion next year as well as the drivers behind? And second, just regarding AI because given the technology advancement, we do see investor discussion on the potential AI disruption to vertical platforms like OTA. So I want to get your latest thoughts on the topic as well as our strategy to navigate such potential risk.

Thank you for the question, Xiong. In terms of the margin expansion, actually, as we discussed, as always, our strategy for 2025 and beyond is to balance the revenue growth with profitability improvement. Margin improvement remains a key priority while we continue to pursue maximum growth and market share gains.

In the second half of 2025, the quarter 3 and quarter 4, the net margins for both the company and our Core OTA business will improve year-over-year, mainly driven by gross margin expansion and operational leverage. The broad applications of AI have significantly improved automation and efficiency across customer service and tech development processes such as coding, further supporting our margin performance.

Looking ahead, we still see a lot of room for our service development and G&A expenses ratio to trend down in second half of 2025 and 2026, as overall operating efficiency continues to improve. This efficiency gain will remain an important long-term driver of margin expansion, while on selling and marketing expenses in the second half of 2025, specifically, we expect the ratio to stay broadly stable compared with last year, since we have already realized savings in G&A and delivered solid margin improvement.

We will maintain an appropriate level of marketing investment to support growth and strengthen our marketing position and to seek more market share and opportunities. That said, we will continue to strengthen our ROI and efficiency of sales and marketing spending over the long term to ensure sustainable margin improvement for our business in the next 2 to 3 years. So that is my comments on margin expansion. In terms of the AI, Joyce, please.

Sure. First of all I would say that the development of AI technology will largely benefit OTA like us. As we mentioned lot times before, we have remained dedicated to developing our technology, which has been instrumental in improving our operational efficiency and enhancing the user experience. I think DeepTrip is a vivid example of how we embrace this advancement of AI technology. And I would say that we have keep investing in the implement of DeepTrip's functionality and it has already overcome the limitation of traditional travel recommendations and delivers reliable and actionable insights to users. It offers ample access to a wide range of options on our platform and support seamless closed bookings.

Moving forward, DeepTrip will continue to evolve through the generative updates to meet users' needs more effectively. And I think DeepTrip's benefits from our extensive resources, including a comprehensive portfolio of online travel products and services. While general purpose large models can generate travel guides, they offer less ability to match recommendations with actual real-time travel resources availability. DeepTrip provides a more practical and actionable solution by directly integrating Tongcheng products into the planning and booking process.

Our strong connections and close relationships with supply end enable us to secure competitive pricing and high-quality products to satisfy diverse travel needs. And secondly, I think AI technology has helped improve our operational efficiency and reduce manual work. Julian also have touched on that. Currently, generative AI has reduced our coding workload by 20%. Generative AI also handles over 60% of our accommodation related to online consultations and more than 70% of Internet phone inquiries. It delivers improved accuracy and efficiency.

We have made significant progress in integrating AI into our customer service operations, embedding AI robots across entire service process to lighten staff workload and shorten the response times. This enables our team to better understand user inquiries and provide timely, accurate answers, resulting in a 10% reduction in handling time. So we will continue investing in AI to deliver seamless, efficient service and foster long-term use loyalty. In parallel, AI will also help us identify new application scenarios, product innovations or traffic opportunities, supporting both revenue expansion and efficiency-driven profitability improvement in the future. Thank you.

Our next question comes from the line of Thomas Chong from Jefferies.

My question is about the impact coming from a recent Japan incident. And how is the latest market situation right now? And how does that affect the business performance, if any?

Thank you, Thomas. Currently, we expect that there will be slight impact on our business. But we strongly believe that people's devise for outbound travel remains very strong. So they will be willing to explore other destinations. And we believe for OTA users, it is quite easy for them to change the travel plan and destinations but the impact on the group tools of our tourism business may be a little more obvious, and we will closely monitor further policy developments and adjust our product mix and marketing strategies accordingly to mitigate the impact. Overall, we do not expect a material impact on our full year performance at this stage. Thank you.

Thank you. There are no further questions at this time. So I'll hand the call back to Kylie for closing remarks.

Thank you. We are closing the call now. If you wish to check out our presentation and other financial information, please visit the section of our company website. Thank you, and see you next quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]