Tongcheng Travel Holdings Lt Aktie

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.]

Good day, and thank you for standing by. Welcome to Tongcheng Travel 2025 Second Quarter and Interim 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.

Please go ahead, Ms. Yeung.

Thank you. Good morning and good evening, everyone. Welcome to Tongcheng Travel's 2025 Second Quarter and Interim 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. Heping 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 second quarter. [indiscernible] Will brief us on the company's strategy. 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 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 in most 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 declared in accordance with IFRS. For a detailed discussion of non-IFRS financial measures, please refer to our discussion -- disclosure documents in the IR section of our website.

Now let me introduce our CEO, 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 2nd quarter earnings call. In the second quarter of 2025, China's travel industry maintained its trajectory of high-quality development with robust market demand driving strong growth across the sector. During the May Day holiday, sustained consumer enthusiasm through [ due ] improvements in both the scale and quality of the industry.

Even the changing market environment, we proactively seized market opportunities, actively propelled our domestic and international expansion strategy and strategically deepen our industrial chain exploration. For our domestic business, we focus on the mass market, consolidating our position through diversified product offerings and acute user insights. For our outbound business, we actively expanded the supply of our outbound growth engine.

Regarding our industry chain deployment, we assertively explore the potential of the travel industry chain to capture more growth opportunities and drive the company's future development. Over the past quarter, the company delivered a steady year-over-year growth in both revenue and adjusted net profit, reaffirming our ability to accurately capture market demand and execute strategies with operational excellence.

With the summer travel season underway, consumer demand has continued to diversify with an increasing focus on experience-oriented consumption. Building on this trend, we spare no effort to seize new growth opportunities, enhance our products and services and strive to address the diverse needs of our user segments. Leveraging our profound industry expertise, extensive product offerings and advanced technology, we will continue to drive product upgrades and technological innovation, enhancing user experience while propelling technological advancement across the industry. facing new opportunities and evolving landscape in the industry.

As China's leading integrated travel platform, we will proactively respond to market dynamics and refine our operational strategies. With our robust organizational capabilities, we're positioned to navigate challenges and embrace opportunities, thereby achieving long-term sustainable development while generating greater value for our stakeholders. Next, I will hand over the call to Joyce. She will share with you our business and operational highlights of the second quarter of 2025. Joyce, please go ahead.

Thank you. Over the past quarter, China's travel market continued to show its vitality. And it was marked by a growing appetite for experiential travel with younger consumers seeking unique and immersive experience, both domestically and internationally. Capitalizing on this tailwind, we advanced our growth strategy with discipline and focus and delivered another quarter of strong results, underscoring the entrenched strength of our platform and the unwavering dedication of our team in a dynamic market environment.

As a key growth driver for the company, our accommodation business maintained robust growth momentum in the second quarter and recorded new highs in its daily room nights sold. Growth was fueled by increasing diverse range of travel scenarios such as weekend gateways, concerts and sports events in addition to traditional holidays and business trips.

During the quarter, we intensified our efforts to expand our presence in lower-tier cities by targeting high-value users, which reflect increased market share and further solidify our competitiveness in these regions. In the meantime, we reinforced our value for money proposition for targeted users through our membership program, enabling our users, especially high-tier members to seamlessly redeem their points as cash on our platform, which significantly increased purchase frequency.

As for our international accommodation business, it remains focused on deepening its cooperation with global suppliers and strengthen its presence in regions which are popular among Chinese travelers. Over the quarter, Hong Kong, Macau, Japan and Southeast Asia countries remain the most popular destinations on our platform. After years of rapid expansion, our transportation business has solidified its position as a key player in the industry, achieving a prominent market share, especially in the Southwestern region.

Over the last quarter, our transportation sector continued to display its resilience and posted steady growth. In the air ticketing business, we focused on expanding our reach among younger users by launching a variety of interactive activities that would further strengthen our influence within this key demographic. In the meantime, our growth strategies for international air ticketing segment has paid off, successfully increasing mind share and strengthen user loyalty among our target audience. In addition, consistent efforts were made to improve the monetization capabilities for international operations, ensuring a balanced and sustainable growth trajectory between volume and revenue.

During the second quarter, our international air ticketing volume reached a historical high, delivering nearly 30% year-over-year growth. In the train ticketing business, we remain steadfast in prioritizing user value by continuously enhancing and refining our intelligent Huixing system designed to provide more accessible, efficient and user-centric travel solutions tailored to meet diverse user needs. Throughout the quarter, monetization capabilities of the segment further improved, supported by our refined and targeted operational strategies.

The hotel management business is one of the key initiatives where we have been investing to seek a segment growth driver for the company. Following years of strategic expansion, we have built a wide ranging portfolio of hotel brands, spanning from economy to upscale, supported by robust operational enablers such as CMS, centralized reservation system and a hotel supplies platform. In the past quarter, our hotel management business sustained its healthy expansion trajectory with the total number of hotels in operation exceeding 2,700 by the end of June and nearly 1,500 in the pipeline.

According to the 2024 list of the top hotel groups in China released by the China Hospitality Association, we have ascended to #8 in terms of room count, underscoring our leadership and influence in the industry. In April, we announced the acquisition of a 100% stake in Wanda Hotel Management. While the deal is still in process, we are confident that the addition of Wanda Hotel Management will further diversify our brand metrics, strengthen our market presence and accelerate the sustainable growth within the segment.

We remain fully devoted to expanding our asset-light hotel management business through franchise-based partnerships with an aim to achieve leadership in China's hotel industry. Traffic growth has been the cornerstone for our success. Over the past decade, we have cultivated profound and enduring partnership with Tencent. Through Weixin ecosystem, we have reached a broad and diverse user base across China and it remains a vital channel for our user engagement and interaction. During the last quarter, we continued to improve our operation efficiency within ecosystem while enhancing our engagement with users.

At the same time, our stand-alone app continues to be a core pillar for acquiring new users. By targeting younger demographics, we launched a series of entertaining marketing campaigns centered on trending social events, further reinforcing our mind share among target users. As a result, its DAU during the quarter continued to exhibit strong growth, reaching a record high before the May Day holiday. Additionally, we intensified our effort to explore social media platform for us to reach younger experience-driven travelers.

Through collaborations with influencers and the creation of high-quality engaging content, we amplified our brand visibility and broadened our user reach. By delivering tangible value and exclusive benefit to our users, we are deepening user loyalty while simultaneously enhancing user value on our platform. In the second quarter, we made a significant upgrade to our service, particularly for high-value users.

We set an exclusive hotline and a dedicated customer service team to enhance responsiveness to user inquiries and ensure proper and efficient resolution of their issues. In the meantime, we expanded user privileges and benefits such as exclusive discounts and free cancellations. These efforts continued to be a marked improvement in user retention and loyalty. Additionally, we capitalized on high-impact culture events such as Su Super League, and amateur football tournament within Jiangsu province that has drawn nationwide attention and ignite a widespread enthusiasm for sports, so as to deepen engagement with the younger cohorts, further enhancing our brand appeal to experience-driven travelers.

Through effective and innovative user engagement, our 12-month annual paying users for the quarter maintained healthy growth momentum and climbed to a new high of more than 250 million by the end of June, representing a 10% year-over-year increase. Meanwhile, the cumulative number of passengers served our platform reached 2 billion, suggesting a stable user purchase frequency of 8 times per year. Furthermore, our MPUs for the second quarter also displayed solid growth of 9% and rose to 46.4 million. On top of that, our 12-month rolling ARPU further increased to RMB 33 in the quarter -- RMB 73 in the quarter, representing a 40% year-over-year growth.

We remain fully dedicated to transforming our business through the adoption of bounded technologies such as generative AI. Back in March, we launched our AI-powered itinerary planner DeepTrip, which combines the supply chain capabilities on platform with the reasoning capabilities of DeepSeek. Over the past quarter, we advanced its application in some business scenarios to improve our operational efficiency. For tailor-made tours, we integrated DeepTrip into the workflow to streamline the consulting phase, which enable users to access comprehensive destination information more easily, thus reducing consulting time and enhancing user experience.

Meanwhile, we leveraged DeepTrip to deliver marketing activities to users inquiring about travel itineraries that facilitate their decision-making process. Furthermore, we continue to iterate its functions based on deeper user insights. By allowing users to upload self-developed travel itineraries, DeepTrip provides instant access to relevant travel resources, significantly reducing search time and supporting quick reservation. In customer service, generative AI now handling more than 60% of our online consultations ready to accommodation reservation and more than 70% of Internet phone consulting workload with further enhanced accuracy and efficiency.

Besides, we've also deployed several AI agents to assist our customer service staff, reducing the handling time by 10%. Looking ahead, we will continue to explore AI application in our business process and accelerate the transformation of our operations. All this highlights of our commitment to leveraging technology to drive growth, improve user experience and optimize operational efficiency. I will stop here and give the call to our CFO, Julian. He will share with you the detailed financials in the second quarter. Julian, please.

Thank you, Joyce. Good evening, everyone. Over the past quarter, consumer demand continued to diversify with a wide array of travel scenarios emerging to energize the Chinese travel market. Against this backdrop, we closely monitor industry dynamics, accurately captured user needs and continuously enhance our products and services to improve user experience and strengthen user engagement. This operational excellence translated into solid momentum for our core OTA business, which once again outpaced the industry. In the second quarter of 2025, we delivered outstanding results for both top line and bottom line. We reported net revenue of RMB 4.7 billion, marking a 10.0% year-over-year increase from the same period of 2024.

During this quarter, our adjusted net profit rose to RMB 775 million, reflecting an 18.0% year-over-year growth with adjusted net margin expanding to 16.6% compared to 15.5% in the same period of last year. This uplift was principally fueled by efficient marketing initiatives and optimized operations for our -- of our core OTA business. Despite extreme weather conditions in some regions that significantly impacted Chinese travel industry in June. Our core OTA business maintained steady growth, achieving a 13.7% year-over-year increase to RMB 4.0 billion during the second quarter of 2025.

Our accommodation reservation business achieved RMB 1.4 billion for the second quarter of 2025, representing a 15.2% increase from the same period in 2024. We actively tapped into emerging accommodation reservation scenarios to capture market opportunities, driving sustained year-over-year growth in hotel room nights sold during the second quarter. Amid vigorous outbound travel demand, we enhanced the marketing investment efficiency of our international accommodation business, achieving an effective balance between business expansion and profitability improvement.

During the second quarter, our users demonstrated preferences for high-quality hotel products, which drove a year-over-year growth in our ADR as well, continuously outperforming the industry trend. Concurrently, the blended take rate maintained its upward trajectory through more precise and disciplined marketing strategies. These combined factors collectively contributed to the outstanding growth of our accommodation revenue. Our transportation ticketing revenue for the second quarter reached RMB 1.9 billion, marking a 7.9% year-over-year increase compared with the same period of last year.

During the past quarter, we continued to refine our VAS offerings to improve monetization and remain committed to enhancing the efficiency of our user subsidy strategies. Additionally, our international air ticketing business maintained strong growth momentum, now accounting for more than 6% of our total transportation ticketing revenue with a year-over-year increase of almost 2 percentage points, demonstrating the effectiveness of our global expansion strategy. Other business segments continued to expand with revenue reaching RMB 755 million in the second quarter, marking a growth of 27.5% year-over-year.

The performance was principally attributable to the exceptional development demonstrated by our hotel management and Black Whale membership business. Our tourism business achieved a revenue of RMB 662 million, representing an 8.0% decrease from the same period in 2024. This decline was primarily attributable to our strategic reduction of prepurchase visits to mitigate operational risk. Furthermore, persistent safety concerns in Southeast Asia regions continue to exert downward pressure on travel demand. In terms of the profitability, our gross profit increased by 10.6% year-over-year to RMB 3.0 billion, with gross margin rising slightly to 65.0% for the second quarter of 2025. Our operating profit for the core OTA business achieved RMB 1.1 billion with 26.7% margin in the second quarter of 2025, increasing from 24.3% year-over-year.

This improvement demonstrates the market effectiveness of our initiatives to enhance the ROI of our sales and marketing investments and the operational efficiency. The operating profit for the tourism business achieved RMB 4.4 million with 0.7% margin. Our adjusted EBITDA increased by 29.7% and reached RMB 1.2 billion with a 25.4% margin compared to a 21.5% margin in the same period last year. Adjusted net profit grew by 18.0% to RMB 775 million with a 16.6% margin compared to a 15.5% margin in the second quarter of last year. Service development and administrative expenses in the second quarter of 2025 increased by 2.1% from the same period of 2024.

Excluding share-based compensation charges, service development and administrative expenses in total accounted for 15.4% of revenue in the second quarter compared with 15.9% of revenue in the same period of last year. Selling and marketing expenses in the second quarter of 2025 increased by 2.4% for the same period of 2024. Excluding share-based compensation charges, selling and marketing expenses accounted for 32.8% of revenue in the second quarter compared with 35.1% of revenue in the same period of last year. As of June 30, 2025, the balance of cash, cash equivalents, restricted cash and short-term investment was RMB 13.5 billion.

The Chinese travel market saw robust growth in the first half of 2025 with innovative and diversified consumption scenarios infusing sustained vitality into the market. As we entered July, travel demand continued to heat up and the market is poised to usher in the peak summer travel season. Notably, tourist preferences are shifting beyond traditional leisure-focused itineraries towards deeper experiential engagement and cultural immersion. Such changes catalyze emerging travel scenarios, unlocking new growth drivers for our business expansion.

Looking ahead to the second half of the year, we are well positioned to deliver steady year-over-year growth in both top line and bottom line. driven by our acute operational capabilities and disciplined strategic execution. We remain highly committed to growing our core OTA business by expanding its market share and enhancing its brand awareness. While solidifying our domestic market position, we will further expand outbound business to seize global opportunities.

In parallel with business expansion, we will rigorously monitor the ROI of our sales and marketing investments, striking an optimal balance between revenue growth and profit margin expansion to fortify the foundation for long-term sustainable development. Furthermore, we will uphold our strategic focus across the industry chain, advancing our hotel management business to capture new opportunities, new growth opportunities. Finally, we remain dedicated to elevating our ESG performance, striving to deliver greater value to society and all stakeholders. With that, operator, we are ready to take questions now.

[Operator Instructions] We will now take our first question from the line of Wei Xiong from UBS. Sure.

I have 2 questions. First is regarding our accommodation business. Could management provide more color regarding the volume growth, ADR and take rate and how these metrics are trending? And also considering the domestic hotel market, still faces the oversupply issue and our ADR and take rate seems to be quite resilient. Could management elaborate what are the drivers behind? And how should we think about the industry outlook next year?

And second, we can see the company keeps exploring new business opportunities beyond the Core OTA business. I wonder how do we balance the strategic resource allocation between Core OTA and pursuing a diverse business portfolio. And in terms of future M&A plans, which areas are we paying close attention to? And what are the key criteria to evaluate such opportunities?

Thanks for the question, Wei. I will address the first question, and I think Joyce will throw some more colors on the second one. Yes, as you mentioned, we have achieved a very successful execution for the accommodation in the first half year and achieved outstanding results as well. But for the hotel industry, I think as you know, of the industry information, the domestic ADR has largely stabilized year-over-year in the past quarter, the quarter 2. Our domestic ADR already turned positive in the second quarter as well and expected to continue to grow in the coming quarters.

This kind of improvement is driven by 2 factors. One is the -- of course, the recovery of ADR across the industry since quarter 2. And the second one is more important, the shift in user behavior, in our platform, as users increasingly prefer high higher-quality products, which have resulted in a shift from a 2-star below hotels to 3-star over [ both ] hotel bookings. For example, in quarter 2, the proportion of our 3-star hotel bookings on our platform increased by 4 percentage points year-over-year. Given the trend, we expected that the growth in ADR will be a positive factor contributing to accommodation segment revenue growth for the second quarter and also for the second half of this year.

Meanwhile, we have adopted a more disciplined and targeted approach for user subsidies. We have already done this for at least 1 year. This approach has helped us to maintain our net take rate at a decent level, ensuring a balanced focus on both expansion of top line and profitability. So our outstanding performance in accommodation business in the first half of 2025 demonstrated that the pricing pressures of the industry have rather limited impact on our revenue as ADR on our platform remains relatively resilient, thanks to our extensive exposure in the mass market and also our ability to swiftly seize the market opportunities.

And the second question, I think, Joyce, please.

Sure. Thank you, Wei, for the question. You would say that as a company still in the growth space, the capital allocation remains a focus on both organic and inorganic expansion to strengthen our competitive position and long-term value creation. So I believe that investing business pension, product innovation and platform development to deliver sustainable shareholder value over time.

I would like to emphasize that our OTA business remains the foundation and strategic focus of our operations, while we continued to deepen our OTA capabilities in the domestic market, expanding our outbound business. For domestically, we'll continue to invest in new technologies, introduce innovative product services, expanding into new markets and enhancing operational efficiencies. And we are also expanding into business that is complementary to our corporation such as outbound travel and hotel management.

To achieve this, we posing organic growth opportunities, including strategic investments in other companies on mergers and acquisitions . In terms of our M&A strategy, we will remain selective and focused on evaluating strategic investment and acquisition opportunities that enhance our Core OTA traffic user base and overseas supply chains with a valuable and synergy effects.

And the offline tourist attractions are now our primary focus. They are small in scale and are made solely for the purpose of value transformation. So in terms of the criteria, I would say that the first investments will be highly selective and based on our strategic logic, financial discipline and the long-term shareholder value creation. Thank you.

Our next question comes from Brian Gong from Citi.

First one is, I think you might notice that during the summer break, year-on-year growth on domestic airlines ticketing in volume which seems a little bit slow. And what reasons could result in a low growth in management's view? And do you think the travel demand is weakening? How should we think about the fourth quarter overall travel demand?

And the second question is, can management share more details on our performance on outbound travel during the summer break, and also the overall outbound travel demand?

Okay. Thank you. The question, Brian. Yes, as you mentioned, the China travel market continued to demonstrate its resiliency in the past few months. For hotel industry, actually, the decline. As we mentioned, the decline in ADR has been narrowed down over the past few months, signifying a more stable demand and supply industry environment for accommodation. But for domestic air travel industry, air ticket price stabilized, whereas the industry volume growth normalized from mid- to high single-digit growth in April and May to drop to low single digits in June.

Especially in the summer vacation, after experiencing 2 exceptional strong summer holiday season in 2023 and 2024, driven by pent-up demand released after, I think, COVID-19 pandemic. The industry has already returned to a normalized growth trajectory in the summer air tickets.

Recently, at the same situation in June. However, we expect that our OTA business and both for accommodation and transportation, will once again outpace the overall market in several multiple growth because of the successful execution of our strategic priorities, which include improvement in user value or ARPU expansion into outbound travel as well as robust growth of our Hotel Management business.

So -- our business continued to outperform the industry throughout the summer holiday period, like what I mentioned, with particularly strong growth in the accommodation segment, I think, while the hotel ADR has shown and continues to increase since quarter 2, it has consistently outpaced the industry average ADR trend in quarter 3 for our platform like what I mentioned in the past quarters. This success can be attributed to our ability to adapt to shifting user demand as users increasingly prioritize higher quality accommodations when they travel. And we have effectively captured this trend.

Our Transportation Ticketing business continue -- also continue to outpace the industry growth with improving monetization during the summer holiday. Besides our targeted and effective marketing initiatives allowed us to engage our covers as well with improved efficiency, enable us to capture market opportunity and strengthen our competitive position in the Outbound Business segment.

I think Joyce will give you more color on the outbound. And I would like to address the domestic one first. We remain positive about the future China's travel industry as we look ahead to the second half of 2025. Traveler preferences are evolving, prioritizing unique and meaningful travel experience over spending money on traditional physical group products.

At the same time, people are now seeking more unique experiences. Beyond just visiting popular destination, they are keen on traveling for specialized activities like concerts, music festivals and sporting events in this summer. This shift clearly positions travel as more than just a treat. It is becoming an integral part of more than lifestyle choices.

Besides the Chinese government continue to recognize tourism as a key driver for economic growth, actively rolling out policies that support its long-term sustainable development. Altogether, these changes underscore the tremendous opportunities available in China's travel market. Looking forward to the next few quarters, over the second half of this year, we plan to firmly adhere to our strategy of capturing new business opportunities while focusing on steady growth with healthy profitability.

One of our priorities will be still increasing the ARPU by improving cross-selling efforts encouraging more frequent purchases and providing more comprehensive value-added products and services to address long-term needs. At the same time, we will adopt a more disciplined approach with our sales and marketing spending making sure it delivers optimal returns for every dollar.

For Outbound Travel performance, I think Joyce may give you more information.

In terms of our outbound business, in the past few quarters, we have achieved significant growth in both international air ticketing and combination volumes, driven by the competitive pricing strategies and market initiatives. Notably, as mentioned, in the second quarter, our international air ticketing volume reached a record high, achieving nearly 30% year-over-year growth. Now with a deeper understanding of our outbound traveler's behavior, we have shifted our focus towards executing more precise and efficient promotional strategies. Building on this progress, we have implemented a margin improvement program for our bond business, focusing on marketing and promotional effects with a strong access on ROI.

As such, with respect to the outbound business to break even and turn profitable this year. Currently, the revenue for our outbound air ticketing business has already accounted for over 6% of our total transportation ticketing revenue. We're also starting to explore the opportunity of cross-selling from our outbound air tickets to commendation that drive both revenue and profit growth. And at the same time, we will continue to enhance our outbound travel offerings through strategic partnerships with leading global OTAs, hotels, airlines and private overseas CSPs.

Additionally, we will also plan to increase our investment in research and development to strengthen the service capabilities and ensure a seamless booking experience for outbound travelers. Anticipate rapid growth in the Outbound segment with its contribution to total revenue projected to continue to improve within this time frame. We are confident that this segment will become a major growth driver of the company, offering higher margins than our domestic business in the long run. Thank you.

Our next question comes from J. We Li from Citic.

I have 2 questions. Firstly how [indiscernible] investment in the OTA market? Will these investments change the competitive landscape of the industry? Secondly, as we said, the company's profit margin has been steadily rising. How do you expect to the short-term and long-term margins of OTAs?

Thank you, Joe. For the competitive landscape, as we have mentioned several times before, as leading OTA, we have an extensive network of industry resources and well established ties with our TSPs, which takes significant time for newcomers to replicate. Managing hotel supply efficiently requires comprehensive systems and seamless communication with hotels, particularly amidst the price fluctuations and limited room availability.

With over 20 years of experience in the industry, our established hotel supply chain and a strong relationship with TSPs allow us to maintain the advantages position against new enterers. The purchase of trunk products and service tend to be low frequency and enforce longer, more complicated decision-making process. Therefore, conversion [indiscernible] Into paying customers can be particularly challenging as demands a deeper understanding of user preference and behaviors. That's why it's unclear whether the e-commerce platforms can effectively convert their users to buyers of OTA products.

So as the OTA, we focus on delivering unparalleled service and exceptional user experience. The prioritized investments in our products and services, continuously innovating value-added solutions tailored to evolving market demand and user preference.

Additionally, our dedicated customer service team is devoted to swiftly addressing user needs. We believe these are the areas where new entrants are difficult to replicate. We strongly believe that the Chinese travel market presents a notably bright future, so it's possible that some companies may want to enter this market. Still, we want to emphasize that the OTA market is highly complex and requires substantial time and resources to build the competitive advantages.

As such, we expect the competition landscape to remain relatively stable in the near term. We are currently maintaining our original strategy of improving our sales and marketing efficiency and our profit expectations for this year unchanged. Nevertheless, we will also close monitor the market situation and making any necessary adjustments accordingly if needed.

Then, I think Julian will address the second question.

Yes. In terms of the margin, actually, the margin of our OTA business is expected to show steady year-over-year improvement, both for short term and long term. That's very confident. There are many for 3 drivers. One is the reduction in our sales and marketing expense ratio along with the ARPU improvement, thanks to the enhanced their ROI and more targeted marketing investments. And the second reason is the ratios for COGS and G&A expenses are expected to decline as a result of increased operational efficiency and the benefit of scale.

And the third reason the margin improvement from our new initiatives, such as outbound business and hotel management business because we have already initiated the profit improvement execution since the second half -- since the first half of this year. So these initiatives are expected to further drive overall margin expansion for our OTA operations in the future. Thank you.

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

Management please share the latest development plan of the Hotel Management business. What is the revenue contribution from the past quarter? What is the ultimate goal for this business and the investor when should we expect this business to contribute profit to the company?

Thank you for the questions. By the end of June, as I mentioned, we have already operated 2,700 hotels with more than 1,500 stores in the pipeline already making us one of the top 10 hotel management group in China. We have a brand portfolio of like 12 major hotel brands ranging from [indiscernible] Hotels to middle to high-end hotels.

And in 2025, in the end of this year, we have continued to grow the Hotel Management business and target to over 3,000 hotels in operation. And I think we have addressed our competitive strength before, so I will move to the revenue contribution. The revenue from the hotel chain management have increased by overall 6% and have already accounted for over 25% of our other revenue in the second quarter.

The revenue of the hotel chain business mainly consisted of the franchise brand usage fee, management fee renovation, consulting fee, et cetera, and also these hotels and our management will use our payment system, which will contribute to our revenue and strengthen our market position in the PMS industry. We are running the business mainly by franchise models, pursue synergy and mutual benefit with hotels. At this early stage, our focus remains on enhancing quality strengthen brand recognition and expand our network. With increasing scale and improvement in operational efficiency, we believe the revenue of our Hotel Management business will continue to achieve strong growth in the following 3 years.

And again, we would like to address the ultimate goal of our positioning of the hotel management business. So as a comprehensive travel platform, we are committed to enhancing our influence across industry chain to support our sustainable growth. Hotels representing critical components of the truck industry in China. And we are confident that deepening our presence in this sector will further strengthen our positioning in the travel industry. We're already seeing inverse opportunity in the hotel management industry which we believe has a potential to become a major growth driver for the company, playing a key role in our long-term development. Thank you.

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

My first question is about our stand-alone app. Can management comment our target for this year in terms of the user base as well as the revenue contribution? And my second question is about AI. Can management comment about how the evolution of AI agent, the opportunities and challenges on this front and where the AI agent is more like a cooperation or competition with us in the future?

Okay. Thanks for the question, Thomas. I would like to give you more information about our app development. And then for the AI, I thin joyce may give you a detailed explanation. Over the past year, we have actually diversified our traffic -- traffic service placing a strategic emphasis on expanding our stand-alone app. Due to the user behaviors between the Weixin platform and app-based platforms, there is a minimal overlap between the 2 user bases.

Let's ensure that our shifting existing wise fromefforts to grow the app channel are focused on attracting incremental users rather than simply shifting existing ones from Weixin to app. In the past quarter, we have strengthened partnership with major handset vendors to pre-install our app to selected new devices, and we have also ramped up efforts to acquire users through ABB store promotions and social sharing campaigns, further broadening our reach.

Indonesia, we have also bolstered our brand promotion and marketing strategies to improve user engagement and loyalty by launching creative campaigns and offerings tailored services we have successfully captured the interest of younger generations. These initiatives have led to a steady rise in activation rates and also a promising conversion of new users.

As a result, our ABB achieved a major wealth milestone right before the Mayday holiday with DAU exceeding 4 million, marking a significant achievement in our growth journey. To support the growth of our stand-alone app, we have allocated our sales and marketing budget to acquire app users while maintaining relatively stable overall sales and marketing expenses in the same level.

While the user acquisition cost full app is higher than the position and the payback period is longer, we believe the higher ARPU as stronger user loyalty for app users will yield substantial long-term returns. Our data shows that the app users expect higher purchase frequency and spending with their spending being approximately 2.5x that of the wishing users. So the contribution of our app to revenue has been growing steadily. In quarter 2, our app accounted for over 8% of our Core OTA revenue. We remain committed to this strategy and are confident that the revenue share from our stand-alone app will continue to rise in the future.

In terms of the AI, I think, Joyce, please.

Sure. Thank you for the question. In terms of AI application in the travel industry, I believe we are the pioneer in terms of new technologies. Take DeepTrip as a vivid example, it is a specialized vertical application within the travel domain rather than a stand-alone product that users proactively use. So given the travel planning is rating low frequency activity, we focused on integrating DeepTrip into the border business environment, positioning it as an integration component of the seamless travel ecosystem. And we continue to refining the DeepTrip features based on the DeepSeek insights. By allowing users to upload their own travel itineraries, as I mentioned, it now offer instant access to relevant travel sources and significantly reducing the such time and enabling quick renovations.

As a DeepTrip benefits from our extensive resources, including a comprehensive portfolio of online products, while the general purpose large models can generate travel guides and the open legibility to match recommendations with actual real-time travel resources and availability. So our DeepTrip provides a more practical and actionable solution by directly integrating travel products into the planning and booking process. So our strong connections and a close relationship with supply and enables us to secure the competitive pricing and high-quality products to satisfy the diversify travel need.

And besides, we believe our advanced and extensive travel insights play a crucial role in delivering accurate and personalized recommendations to users. The DeepTrip guides are grounded in real world data and resources found platform. This ensures the travel guide implementations have highest reliability and practical value offering users accurate avian can be implemented. And apart from the application in terms of the user level, I have mentioned the application of the AI has already improved our operational efficiency internally. Thank you.

Thank you. We have now reached the end of the question-and-answer session. I'll now turn the conference back to Ms. Kylie Yeung for closing comments.

Thank you, we're 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.

This concludes today's conference call. Thank you for participating. You may now disconnect your lines.