Good day, ladies and gentlemen, and welcome to Ctrip.com International Limited's Fourth Quarter and Full Year 2014 Earnings Conference Call. My name is Patrick and I'll be your moderator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Ms. Michelle Qi, Senior IR Manager. Please proceed.

Thank you, Patrick. Thank you all for attending Ctrip’s fourth quarter and full year 2014 earnings conference call. Joining me on the call today, we have Mr. James Liang, Chairman of the Board and Chief Executive Officer; Mr. Min Fan, Vice Chairman of the Board and President; Ms. Jane Sun, Chief Operating Officer; Ms. Jenny Wu, Chief Strategy Officer; and Ms. Cindy Wang, Chief Financial Officer. We may during this call discuss our future outlook and performance which are forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the views expressed today. A number of potential risks and uncertainties are outlined in Ctrip’s public filings with the Securities and Exchange Commission. Ctrip does not undertake any obligation to update any forward-looking statements except as required under applicable law. James, Min, Jane, Jenny and Cindy will share our strategy and business updates, operating highlights and financial performance for the fourth quarter and full year 2014, as well as outlook for the first quarter of 2015. We will also have a Q&A session towards the end of this call. With that, I would turn to James for our business update. James, please.

Thanks, Michelle. Thanks everyone for joining us today. 2014 has been another year of investment for Ctrip. We focused on strengthening our core competencies in technology, service, product and open platform. We stepped up our investments in the last 15 -- sorry. We stepped up our investment in 15 new initiatives to take the leadership in key travel-related verticals, yet we still delivered our profit to our shareholders. Our accelerated market share gains has demonstrated the effectiveness of our efforts. Back in 2012 we had an ambitious target to grow our total transaction value over 10 times to RMB700 billion by 2020. In 2014 our total transaction value reached RMB152 billion, more than doubled its size two years ago. We are on the fast track to achieve this goal earlier than expected. In 2015 Ctrip will focus on both investments and efficiency. Going forward, we will fully leverage our scalable model to increase value for our shareholders. Our efforts will be concentrated on best technology to support 10 times growth target, our best services to achieve the highest customer loyalty and our best product and prices through open platform. Ctrip technology has vigorously evolved over the past three years. We have built more than and highly scalable web service architecture to support our rapid business expansion, to empower business innovation and to improve operational efficiency. On the mobile front, we are already one of the leading players in mobile app design and functionality, with more than 600 million downloads of Ctrip mobile app by the end of 2014. Right before the Chinese New Year holiday, the Ctrip mobile app has -- was selected as the only travel app out of the top five lifestyle mobile apps recommended by Apple App Store in China. We also developed our first app for…

Thanks, James, and congratulations to Jane. Thanks everyone. This is Min. In 2014, China's travelers took 109 million outbound travels, reached another history high. We're very proud that the volume of outbound travel bookings reached over 20 million during the year, which reflects our strong position in the international travel market. And our [inaudible] goals, building from -- to greater. Our quest to enhance our market leadership and remain competitive never stops. To further extend our leading position in the international travel market, in terms of product coverage, information efficiency and service quality, we have formed strategic partnerships with international leaders and invest in several vertical market leaders. In January 2015 we invested in Travel Fusion, a leading GDF [ph] company for low-cost carriers. We are excited to work with the Travel Fusion team and believe this strategic relationship will not only help our international travel business but also enhance the efficiency and effectiveness of our IT systems by leveraging Travel Fusion's advanced technology. SkySea Cruises, the joint venture between Ctrip and Royal Caribbean Cruises has renamed its first vessel Golden Era. Golden Era will provide Chinese service which is tailored for Chinese customers and will launch its first sail on May 15th. Marketing initiatives are already underway and we are encouraged by the positive market response. We're witnessing the start of Chinese outbound travel change [ph] and we are fully prepared to capture explosive growth from this booming industry trend. With that, I turn to Jane for the operation highlights.

Thanks, James; thanks, Fan-zong. And thanks to everyone. I'm pleased to share the updates about Ctrip's main business with you. At the end of the year 2014, Ctrip has tripled its domestic hotel coverage to more than 220,000 hotels and almost doubled its international hotel coverage to more than 520,000 hotels from a year ago. We continue to extend our accommodation volume versus our competitors. Total volume grew 53% year over year in the fourth quarter of 2014 on a strong base. We have continued to grow in the mid to high-end hotel market. Along with the competitive prices, we hold industry service standards high, especially for our mid to high-end travelers. Our efforts have been rewarded as customers value our comprehensive services and they remain loyal Ctrip. Our domestic high-end hotel and international hotel has maintained remarkable growth momentum and accelerated market share gains. At the same time, we continue to penetrate the mass travel market with more diversified accommodation offerings and competitive prices. Our hostel channel cover more than 180,000 hostels and other accommodations by the end of 2014, growing from 50,000 in the third quarter. We also work to improve service efficiency for both customers and our partners. For example, our property management system hotel manager provides a win-win solution. This cloud-based multi-device property management system is offered to all hostels and small hotel operators for free. It effectively connects hotel operators with customers. Within six months' time, over 30,000 hostel and small hotels have adopted this system. The total volume of transportation tickets grew 102 year over year in the fourth quarter of 2014. Air ticketing volume growth further accelerated to reach a record high since 2008. Working hand in hand with our industry partners, the Ctrip air ticketing platform expanded to the global stage with…

Thanks, Jane. Thanks everyone. For 4Q, total revenues of RMB2 billion grew 32% year on year. For the full year, total revenues of RMB7.8 billion grew 36% year on year. On our accommodation reservation business, revenues were RMB842 million in 4Q, up 31% year on year, driven by an increase of 53% in room nights. For the full year, revenues were RMB3.2 billion, up 45% year on year, accounting for 41% of the total. Transportation ticketing, revenues for 4Q were RMB774 million, up 34% year on year, driven by an increase of 102% in ticketing volume. For the full year, revenues were RMB3 billion, up 36% year on year, accounting for 38% of the total. On packaged tour, revenues for 4Q were RMB233 million, up 20% year on year, driven by an increase of 54% in volume. For the full year, revenues were RMB1.1 billion, up 13% year on year, accounting for 14% of the total. On our corporate travel, revenues for 4Q were RMB108 million, up 38% year on year, driven by an increased corporate travel demand. For the full year, revenues were RMB373 million, up 40% year on year, accounting for 5% of the total. For 4Q, net revenues were RMB1.9 billion, up 33% year on year. For the full year, net revenues were RMB7.3 billion, up 36% year on year. Gross margin was 69% for 4Q and 71% for the full year. Product development expenses for 4Q of RMB789 million increased 137% year on year, primarily due to an increase in HR related expenses. On non-GAAP basis, that is excluding share-based compensation charges, product development expenses accounted for 39% of the net revenues, versus 21% a year ago and 26% a quarter ago. For the full year, product development expenses were RMB2.3 billion, up 86% year on…

[Operator Instructions] We do ask that all analysts limit themselves to one initial question and one follow-up questions. And your first question comes from the line of Wendy Huang. Please proceed, your line is open.

Thanks, management, and congratulations on the very strong outlook. So I wonder if you can provide some color on the cost and operating expenses as far as the hotel coupon stuff. So, how will that actually affect the bottom-line outlook for the next two quarters as well as the whole year? And also the related part on that is, there has been lots of talk about how Ctrip, its surrounding [ph] different business units, so what's your kind of key KPI for these units for 2015? Thank you.

Okay. For the coupon, the hotel coupon impact, you know we have this coupon with us for almost three years and our populations from 3Q 2013 to 3Q 2014. Coupon expenses as a percentage of hotel commission revenues had been relatively stable, around 18%, but trended up to 21% in 4Q due to the intensified competition. And for the 1Q this year, we expect the coupon volume [ph] to be relatively stable whereas coupon expenses to be about 20% of our hotel commission revenues. And that means on a year-on-year basis we expect hotel coupons will cost roughly 2% actual decline for revenue per room night, but it's -- the impact is largely -- will be stable on the sequential basis. And for the coupon strategy, we want to reiterate that we will always stick to our principle of decisively matching competitors, to ensure our customers can enjoy the best price. With Ctrip's scale, cash-generating capability, and solid execution, at the current coupon level, it's very much affordable for Ctrip, although we still hit our margin, the coupon programs will exceed our expectations. Together with our efforts in fundamental competitiveness of product, service and price, we have gained accelerated volume growth. And despite, as you'll see, despite the high volume base, we still delivered over 50% volume growth in 4Q and expect to continue this trend in 1Q. And then as Jane mentioned, by absolute amount in hotel room nights, we actually have been consistently widening our market share gap versus our competitors.

And Wendy, to echo with Jenny, I think although our strategy is very decisive to match up to the highest coupon rate in the market, the quality of our customer is very high. Therefore, only 20% of the customers will redeem their coupons. So that is demonstration of our strong earnings power for our business model and the strong quality of our customer. Regarding your second question, for the small business unit, we value -- we give them the KPI the same way as we evaluate our whole company. Basically we strive for a very aggressive market share gain and also we measure them on the bottom line, from a long-term perspective. So if they can achieve a target for market share gain, as well as the bottom line, the team will be well-rewarded.

Thank you.

Thanks, Wendy.

Your next question comes from the line of Vivian Hao with Deutsche Bank. Please proceed.

Hi James, Min, Jane and Jenny. Thank you for taking my questions. I've got two questions here. First of all can you give us the outbound volume in your hotel and in air segment contributions to your current segment? My second question is, what is your rationale and strategy for the recent of your prepaid and postpaid hotel system? And what will be the future dynamics going forward? Thank you.

Okay. I will take the first one. And for the outbound volume for hotel, the contribution is still small, it's roughly 5%. But we see a very strong growth, continued growth. And for the air ticketing, the volume -- outbound volume -- outbound travel volume contribution is roughly 15% to 20%. And we're a clear leader in that segment and I believe like [ph] three times our close competitor. And continue to see the very robust growth.

And the second question is our rationale between combining the prepaid versus postpaid teams. I think it's an effort for both. When we combine the two teams, our negotiation power is enhanced, because we're able to offer our hotel partners comprehensive products that we will be able to help them to promote, including prepaid, postpaid, packaged, secret [ph] hotel, last-minute, and coupon. So with all these variety of products, we're offering very good selection for the hotels to market our platform to drive the revenue maximization. Secondly, the combination of these two teams will also increase our efficiency from our operation perspective. So it's two-fold, revenue-driven and also efficiency-driven.

Okay. Thank you.

Thanks, Vivian.

Your next question comes from the line of Dick Wei with Credit Suisse. Please proceed.

Hi. Thank you for taking my questions. I have two questions. The first one, if you can give more clarity on the Q1 guidance, maybe by growth by segment and volumes, as well as some of the pricing changes in the first quarter And second question is maybe more on the competitive landscape for 2015. I wonder, do we expect some of the accelerated competition, and what's kind of the outstanding and operating margin that we think we could achieve at this point in time? Thank you.

Sure. I will take the first question and then James for the industry landscape. Okay. For 1Q, we expect our net revenue to grow 40% to 50% year on year. And to give you some breakdown here. For the revenue growth, will be 40% to 50% year on year, largely across each business line. And the volume growth for both hotel and air ticketing will be 50% to 60% year on year. And the transportation ticketing volume altogether will be roughly 80% to 90%. And for the hotel coupon, the impact will be like 2% to 3%. And the platinum exchange will impact the commission per room night for the rest of the impact. So you will see there is still a little gap between the volume growth and revenue growth. But we expect this kind of thing will be much less stable on a sequential basis from 1Q to 2Q. And for the air ticketing, we see the air ticketing price largely stable and the commission cut to impact our overall commission rate. So its impact will be roughly 10% to 15%. And on the margin side, we expect non-GAAP operating loss will be much narrowed to be less than RMB100 million in 1Q. This implies negative 5% of non-GAAP OP margin. And for the non-GAAP net income, we will be close to breaking even. And we believe this margin improvement is driven by accelerated revenue growth and largely our organic growth, and also the effective levers we adopt since November last year in improving our cost control and operational efficiency. And since we're already at close to the end of 1Q, we also want to help analysts and investors to know our business a little better, so we would like to talk about the 2Q also. And for…

Okay. I think Jenny has answered this question pretty well. So in the last year, especially last two quarters, we invested a great deal in technology and products. So we have built up a very strong capability into penetrating the low end. So, Chinese travel market has always been very competitive and Ctrip as being the leader and everybody is very envious of Ctrip's market share and profitability, so they've been very -- investing very aggressively in last few years. I think they will continue to invest. But Ctrip last two quarters have built such a strong team and technology leadership, I think in the coming quarters Ctrip will be able to penetrate the low-end markets very aggressively just like our competitors, while maintaining high profitability and growth in the higher-end market where Ctrip has always been enjoying very strong leadership. So I think Ctrip can achieve -- actually it's already showing us on our Q1 numbers, Ctrip is seeing accelerated growth in almost all our product, major product lines, not just the transaction value but also on revenue. And I think over the long run you'll see very healthy margin as well. So we are very positive about our recent development and our -- the kind of returns we're expecting with the heavy investments we made in the last two quarters. Thank you.

Thank you.

Great. Thank you very much.

Your next question comes from the line of George Meng with Morgan Stanley. Please proceed.

Hi. Good morning everyone. Thank you very much for taking my question. I have two questions. The first one is regarding your mobile strategy. So you mentioned you accumulated mobile downloads of app now 600 million. I just wondered do you have like an active user counts on the mobile? And also in terms of your mobile marketing efficiency, roughly do you have a number of your mobile user acquisition cost, and what's the trend here? That's my first question, thanks.

Yeah. The active mobile, the number is roughly 200 million, and the acquisition cost for Ctrip and our team is savvy in utilizing our resources and to do the very effective cross-selling and very well-planned overall marketing plans. And as I talked to you before, Ctrip, you can consist -- Ctrip is mobile default company and Ctrip is mobile internet company. So everything we are doing, not [ph] including some marketing campaign, all is centered around this mobile. And even we just promote a certain specific product, we will insert line to let people know, if you download our app, if you use our mobile apps, you will enjoy extra benefits or discounts. So I think for the overall sales and marketing expenses, in this way, you can consider it's all mobile related. Our team has been working very hard to closely monitor the ROI and returns for each channel, to make sure we can maximize the return. And Jane, do you want to add more color here?

Yes, sure. I think mobile three years ago, we put our focus on mobile and transformed the whole Company into a mobile-based company. So all the talents, all the sales and marketing efforts are focusing on mobile. So this is our very strong investment area. And we will make sure the ROI in mobile technology as well as sales and marketing will drive the top line as well as bottom line growth.

Got it. And a follow-up question on that is also on sales and marketing but more on the PC end. I know you are now transforming to an all-mobile company, but still you can still acquire traffic on PC. And considering your major competitor is now -- basically they are utilizing less of the PC or search engine traffic now, are you willing to -- are you planning to maybe ramp up your SCM [ph] spending a little bit to take advantage of that, or are you basically focusing on mobile so that's why you won't spend incrementally on search engine or on PC in general? Thanks.

I think we monitor the market very carefully. For each channel, we break it down to details, and each detailed channel is measured by ROI. So if ROI is very attractive and we can expect exceeding our expectation, we'll increase these investments. But for certain channel, if the ROI below our targets, then we will draw back a little bit. So, yeah, if there is an opportunity, regardless which area, our model will tell us which area we need to increase the dollar amount, which area we need to decrease the dollar amount. The very scientific measurement of the sales and marketing is one of the reasons why we can continuously drive our profit. So we'll keep it up.

Got it. Got it.

-- add a little color here. George, you know, our mobile internet strategy has been very effective. And now it's only our default platform and also help us successfully attract a lot of new customers. And you'll note over 40% of our new customers actually now come to our mobile apps directly. And our reliance on other online channels and relative expenses can be expected to like be placed gradually.

Got it. Can you comment briefly on the different ROI of different promotional channels? I know you have a very rigorous calculation of ROI, but just roughly or qualitatively, you know, which channels are trending up in terms of ROI and which channels do have a lower ROI?

We have a lot of channels to track to. It can -- we strive for ROI very positive, but for certain area, if it is new area, we're willing to lower our ROI. So it varies depending on the region, depending on channel, depending on our customers.

Okay, got it. That's very helpful. Thanks a lot.

Thanks.

Your next question comes from the line of Alicia Yap with Barclays. Please proceed.

Hi. Good morning everyone. Thanks for taking my questions. I have two questions. Number one, regarding Travel Fusion, so, how should we think about where are the synergies and the benefits that we'll bring along from this business? And how significant is Travel Fusion contribute to our future volume, revenues and even market share, going forward? And did our first quarter guidance include any of these business combinations? And then second question, regarding your mobile. I wanted to ask, out of the 55% volume from the air and also 70% from the hotel volume booked on mobile, is that purely from the actual completion done on mobile or does that include, let's say, for example, user, they're stuck in the middle and then they dial into the call center where the customer service rep helps to complete? Or is it purely on mobile? Thank you.

Thanks, Alicia. First of all, Travel Fusion is a pure technology company, very small, very lean, highly efficient, with advanced technology. That is the whole purpose for us to get to merge with them. Secondly, their target market is low-cost area. So we forecast going forward for international travel the low-cost carrier will attract a lot of volume, that that will strengthen our competitiveness in the air business. Since it's a technology company, the revenue is very small and de minimis. So it is in the guidance but very immaterial. Second, would you please repeat your second question?

Yes.

For the second question --

I know that. And Alicia, you know the majority is the transaction actually for people to start from mobile apps and complete its -- at that platform. And indeed there's small -- very small percentage of people that will also like eventually go to our call center to complete the transaction. But the percentage is very small. And after like two years, hard working and we see a lot of customers, they become more like --

I think the number we have is the transactions actually completed on mobile, not just --

Yes --

But that includes the transactions that are completed on call center with some information that were collected or something.

True.

Yes. You're right. As we improve the user interface in mobile, there is less need for the customers to use call centers. So, everything can be very loosely finished on our mobile platform.

So just to clarify I heard the answer correctly, so you mean all the volume that you announce is actually all completed on the mobile platform, but that it's also including a very small percentage that could be with the help of the call center?

You're right.

Okay, great. Thank you.

There is like single digit.

Your next question comes from the line of Fei Feng with Goldman Sachs. Please proceed, your line is open.

Hi, good morning. Thank you for taking my question. On the balance sheet, the advances from customers grew 61% year on year. I think that seemed to be a gradually moderating or decelerating trend from the previous quarters. Can you maybe elaborate on the drivers behind the trend? Is it indicative of a moderating gross volume or revenue trend in air ticketing or prepaid hotel segment going into 2015? Then I have a follow-up question. Thank you.

No. That advance from customer is basically for the customer direct deposit for their packaged tours, and it's largely related according to the seasonality. And in 1Q it's Chinese New Year, so we see more people to do this, booking and do the deposit with us, yes. So it will fluctuate on the -- largely driven by the seasonality.

Got it. Thank you, Jenny. And also you highlighted strong volume from mobile and online. Can you maybe give us an update of your call center headcount and also is there any opportunity to reduce or reallocate some of the call center staff? Thanks.

Sure.

Sure. So for call center, on average, on per room basis, each per room booking we can make 20% more than the per room from mobile and online platform. And also on per order basis, each order we get from call center is 20% -- has 20% higher volume than the average online and mobile booking. And also we do not have to give cash rebate on call center. So if you combine all these factors together, the call center right now is the most profitable sales channel for our Company. And these customers are high-quality customers, less price sensitive, looking for high level of the services. So it is the crown jewel of the customers that we serve, work very hard to serve them well. Our technology investment in call center is very strong, so, for example, in air ticketing business, although the volume increased about 50%, our call center staff cost decreased year over year, headcount decreased as well. So the strong investment in technology will enable us to achieve greater efficiency for this call center.

That's very helpful, Jane. Thank you.

Thank you.

Your next question comes from the line of Juan Lin with 86Research. Please proceed, your line is open.

Hi, good morning everyone, this is Juan. I have two questions. The first one is, could you please break down the Q4 transportation volume growth into air ticket booking and non-air ticket booking?

Okay. For the air volume, in 4Q it grew over 40%. And we are very happy to see, you know, Ctrip used to grow our volume like two to three times industry average. And given our already very high comparison basis in 4Q, we again achieved the record high growth. And now our volume growth is roughly over four times the industry average. And we see even faster volume growth in 1Q and now expect the air ticketing volume growth will be over 50% in 1Q. And we are very happy to see this acceleration. And for the non-air-ticketing volume, it's largely train ticketing. In 4Q our team did a fantastic job and they again delivered like 300% growth. And in 1Q and we expect we can deliver roughly close to 100% growth. And for our bus ticketing, it's obviously tremendous growth, but like this is very small. Yeah. And we see it's both bus ticketing and train ticketing is emerging as the clear leader in their own verticals. And it's very -- it will continue to help us to ramp up the user acquisition and to cover more customers and to provide them more comprehensive products. Thank you.

Thank you, Jenny. Just a quick follow-up on that. For your air ticket booking, around how much does it come from your open platform and what do you see the trend going forward in 2015?

Yeah, it has been continue to be like over 60%.

Thank you, Jenny. And my second question is that, also on transportation business, I see a significant pickup in ARPU over the third quarter, I think initially is around ARPU growth for transportation business. What is the reason behind that? I think it's much stronger than the normal seasonal pattern.

Yes. So as I said, so the technology we invested in the last two quarters allow us to get lots of the cheaper prices through open platform. So we now have competitive -- even more competitive on the prices in air ticketing and in many other products as well, through our open platform centered strategy. So we were able to grow, especially in the low end of the market, as quickly as our competitors and even more quickly. So we are seeing accelerated growth in the air ticketing business, especially the lower end of the market. The other is that we were able to build up our technology so that our service efficiency in air ticketing has been greatly enhanced. So we were able to still making money or have positive margin of these low-end businesses, with the increased efficiency in our service capability. So that's the reason we're able to grow, where we quickly -- actually we're seeing a sequential acceleration for our air ticketing business, and many other businesses as well, low-end business, yeah. Thank you.

Thank you very much, James.

Your next question comes from the line of Michael Olson with Piper Jaffray. Please proceed.

Hey, good morning. A couple of questions. First, could you talk about your partnership with Priceline and what kinds of benefits you're getting from that at this point? Is it primarily that your customers are able to access Priceline's international hotel inventory or is there something else that's providing some benefit from that partnership?

Yes. Priceline is a very successful company and we have high respect for them. Through our cooperation, the two teams work very well to share our knowledge on how to serve the international travel business needs. So we have various cooperation for the Priceline group. Our customer was able to utilize their network to fulfill their needs. And in return, into China, we are also working with them to give them better support on the China business. So it's a very good business partnership between two teams.

Okay, thanks. And then for all the -- thanks for all the detail that you gave on Q1 and Q2, but if you look longer term, last quarter I think you suggested that you still expect a long-term operating margin in the 20% to 30% range. Is that still your expectation that you'll be able to achieve those levels long term? And if so, what do you think the timing of that could be when you reach those levels? Is it like 2016 or sometime after that?

The long-term margin is obviously very much related our scale and also the competitiveness -- competitive landscape in China. And we believe that eventually industry -- consequently [ph] in this competition is a lot of irrational here and over-competitive. But no industry can continue this kind of growth over the long run. So this is on industry side, we expect the industry competition will gradually go back to the rational path, and Ctrip, we're working very hard to try to drive the industry to go back to the healthy growth path also. And for Ctrip internally, we are working very hard to gain market share and to improve our operation efficiency. We always say that we need to do right things in right ways. To be more specific, the right thing that we work consistently to evaluate the areas that we need to do the investment and to make sure we can build the high entry barriers over the long run. On the other hand, we work closely on our internal control to make sure Ctrip team will not lose any penny. And we work very hard on these two things. And if we really can do a better job on carry out these two goals, and obviously our margin will continue to expand over the long run. So by 2020, if our market share, as James' ambition, and we can have like 30% market share, that's -- our margin could be like 20% to 30% and probably even higher. So we are working very hard towards that goal.

Well, Ctrip I think is -- we're very confident Ctrip will have much higher net margin than our competitors. Well, that's not so hard to achieve when our competitors have negative 50% net margin. So, just I think you -- part of the reason obviously Ctrip have a very dominant position in the high-end part of the business, international air tickets and five-star, four-star hotels, and Ctrip continue to see still healthy growth in this very profitable business. So, Ctrip will have a much higher margin than our competitors, many times over the margin than our competitors. And hopefully at some point our competitors will have a positive margin, so, many times of that will be a very healthy margin. Thank you.

Thank you.

Thank you.

Your next question comes from the line of Ida Yu with CICC. Please proceed.

Hi. Thank you for taking my questions. I just have two questions here. The first one, regarding your guidance. As Jenny mentioned that hotel volume is expected to grow 50% to 60% in Q1. Can you break down into like how much is from the prepaid and how much is from the original model? And what is the change in compared with a year ago? And my second question is about the leisure travel. So as we see that the package tour revenue continued to maintain pretty low over the -- I mean as a percentage of revenue, I assume pretty low, so why -- we all understand this market has been grow really robust in the coming years, so what is Ctrip's plan to develop into this market and what is your expectations of this part of business to contribute the top line growth in 2015? Thank you.

Sure, thanks. For prepaid versus cash rebate, prepaid is relatively a newer business, so their base is smaller and it has been delivering three-digit growth over the past quarters and it will continue its strong growth in the future. Regarding vacation package, we totally agree with you. I think this relatively, the base is very small, potential is huge, Chinese customers earning more money, willing to travel for their travel abroad. So for right now, our target is grow market share, that's our priority. Once we have established a strong brand name in the vacation package area, then we will increase our earnings power in this area, and revenue will follow. So definitely we agree with you, this is an area with stronger potential.

Okay, thank you.

Thanks.

Your next question comes from the line of Eddie Leung with Merrill Lynch. Please proceed.

Hi, good morning. Thank you for taking my questions, fairly quick questions. The first one is, could you share more color with us on the condition rate trend that you have seen for air and hotel, especially given certain policy changes from some of your business partners, how should we think about that going forward? And then secondly, could you remind us your headcount plan and your total staff at the moment? Because I remember last couple of quarters you guys added quite a number of staff, so just wondering for 2015 what's the headcount plan. Thanks.

Sure. Thanks, Andy. For commission, as everybody knows, the airline has cut the commission rate. However, that helps us to consolidate the market. The smaller traditional travel agencies with lower efficiency, some of them are out of the game. So for us, it's -- if you combine the growth in the volume versus the decrease in commission rate, it's a huge win for us. So we will fully utilize our scalable platform to take advantage of this change. Regarding the hotel, it's relatively stable quarter over quarter. And your second question, is on the headcount --

On the headcount, I think, as I said, the last two quarters is where we have increased the investment level very rapidly, especially on technology. I think with the increased headcount we made, we hired, we are able to develop these new platforms such as open platform, such as the new -- 15 new initiatives that we've started. But I think in the future, we are pretty happy with the kind of the technology investments or the rate of investment we made in the -- we are making in these areas. So I think the headcount going forward in R&D will be quite modest. We'll -- on the product development, we also increased very rapidly in the last two quarters, especially to the lower end of the market. I think in the future also, I think the headcount will be quite -- increase will be quite modest. On the service front, actually we think we actually will decrease our headcount a little bit, even with much higher volume that we're servicing. So overall we're seeing this year our headcount will grow very modestly.

Got that. Thank you, Jane and James.

Thanks.

For all remaining questions, in the interest of time, we do ask that you limit yourself to one question. Your next question comes from the line of Tian Hou with T.H. Capital. Please proceed.

Yeah, morning, management. I just have a question related to your guidance, and one thing I realized in the last several months, towards the end of 2014, you did announce some acquisitions of wholesalers, hotel wholesalers. I wonder in your guidance, the first one is, for the wholesalers, how do you recognize their revenue? And in the Q1 guidance, how much of that comes from those acquisitions? That's the question.

Sure. Thanks. The wholesaler is extremely small. The reason we invest in them is strengthening our competitiveness in product offering. But very small. We recognize their revenue on net basis, the same way as Ctrip, because they do not take any inventory risk. The total amount is less than 1%.

Okay, thank you.

Thanks.

Your next question comes from the line of Chong Thomas with Citigroup. Please proceed.

Hi. Good morning everyone. Thanks for taking my questions. I have two questions. The first question is regarding the cruise business. Can management provide us some update about your expectation for this year and next year as well as the impact to earnings? And secondly, regarding the revenue mix over the long term, can management provide us some color between the mix between the hotel, the air ticketing, as well as the packaged tours business? Thanks.

Okay, I will take the first one. On cruise business, we believe the cruise business is in its infancy stage in China. The way cruise ship offers its product is very suitable for Chinese people habit. So we are very positive in this area. In our cruise booking, during our cruise booking process, we noticed there is huge surge in the order for cruise business. That is why we invest in the first vessel of the cruise business. And it is a joint venture between Royal Caribbean and Ctrip. Our team works very closely to make sure it represents very good Chinese-style international cruise ship. So it's -- we only have 35% in equity, so we're accounted as equity income below the line, and the impact is immaterial at this stage.

For the product revenue mix, you'll see all our teams are working very hard and we expect the very robust growth across every business line. And so we do not expect that much change in business mix. And for the packaged tours, we expect higher growth this year. And so just will be very modest change here.

Hello?

Your next question comes from the line of Yu-Heng Fan with China Renaissance. Please proceed.

Hi, good morning. I have a question regarding your GMV mix. Other than the RMB13 billion GMV from the package tours, can you further break down your GMV by hotel, air ticketing, train, bus, et cetera? And also, in order to maintain your 30% CAGR in GMV growth for the next couple of years, other than your ongoing share gain in your existing business and the more visible like cruise and car service, what other verticals you are planning for the next couple of years? Thank you.

For our packaged tour, it is total package we offer. So in the RMB13 billion, the most expensive portion is the air ticketing for overseas. And the second most expensive piece is hotel. And then the local ticketing service is ancillary services. So out of the RMB13 billion, the majority are in the air and hotel business. But we accounted in a separate line as vacation package line, and it is independent from the regular FIT [ph] hotel and FIT [ph] air ticketing business. And this business line going forward have a very strong potential to grow faster, because the base is relatively smaller.

And can you break down the rest of your GMV other than your taxi tour? You have RMB152 billion GMV for 2014. Can you maybe have a breakdown?

Sure. Again I think our 40% of the revenue comes from air ticket and GMV [ph] is higher because we take lower commission. And then the second is hotel, we take also low commission. And then we also have different small business units. So, based on all the products combined, there are many of them. But the majority comes from hotel and air ticket.

Ladies and gentlemen, this concludes the Q&A portion of the call. I would now like to turn the call back over to management for any closing remarks.

Thank you everyone for joining us on the call today. A recording of the call will be available at the bureau [ph] and the IR website shortly after the call has been completed. We appreciate your interest in Ctrip and look forward to convening with you again next quarter. Thank you.

Thank you very much.

Thank you.

Thank you.