Thank you for standing by and welcome to the Trip.com Group 2021 Q2 Earnings Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Michelle Qi, Head of Investor Relations. Please go ahead.

Thank you. Thank you, all. Good morning and welcome to Trip.com Group's 2021 Q2 earnings conference call. Joining me today on the call are Mr. James Liang, Executive Chairman of the Board; Ms. Jane Sun, Chief Executive Officer; and Ms. Cindy Wang, Chief Financial Officer. During this call, we will discuss our future outlook and performance, which are forward-looking statements made under the Safe Harbor provision 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 Trip.com Group's public filings with the Securities and Exchange Commission. Trip.com Group does not undertake any obligation to update any forward-looking statements, except as required under applicable law. James, Jane, and Cindy will share our strategy and business updates, operating highlights, and financial performance for the second quarter of 2021 as well as outlook color for the third quarter of 2021. After the prepared remarks, we will have a Q&A session. With that, I will turn the call over to James. James, please.

Thank you, Michelle. Thank you everyone for joining us on the call today. Although speaking the Chinese domestic travel market was encouraging this quarter. We have witnessed a strong recovery momentum. The pent-up demand unleashed following the relaxation of travel restrictions. Despite the regional and temporary effect of COVID surge. Overall travel activities in the country continue along the growth trajectory. The vaccination rate in China is still ramping up more than a billion Chinese citizens are now fully vaccinated. With a larger vaccinated population, we're confident to anticipate a more stable momentum and credible demand. During the past quarter, we continue to dive deep into the Chinese domestic market to meet the evolving needs and demands of domestic travelers. We continue to make this progress a major focus area, such as content, product, service technology in the supply chain. Jane will share more details on this in her section. We are delighted to embrace the recent regulatory change in our domestic market as we believe they will favor fair competition and promote innovation in the industry. This could help foster a sustainable and healthier market. Trip.com Group has now benefited from an organized and regulated environment to calculate our growth in efficient manner over the past 22 years. We proactively communicate with authorities and abide by the rules. We believe the new regulations will benefit all players in the industry. Trip.com Group also pledged to give back more to the society to seek the government's call for common prosperity. Over the past quarter, we launched a five-year rural revitalization initiative to boost the local tourism and support low-income communities. The initiative aims at building 10 country retreats of five-star hotel quality, empowering 100 rural villages and creating 10,000 rural tourism talents for the industry. We believe rural tourism is…

Thanks, James. Good morning, everyone. I would like to start with a brief overview of our performance in the past quarter and update our strategic focuses. First, overall performance overview. In the second quarter, our total net revenue increased by 86% year-over-year, and 43% quarter-over-quarter, driven by strong recovery momentum of China's domestic market. Despite regional resurgence of COVID cases in Guangdong, our domestic revenue increased by 80% year-over-year, and has surpassed the pre-COVID 2019 level. Both our domestic hotel and air ticket GMV increased by about 150% year-over-year, and their bookings increased by double digits when we compared with the same period pre-COVID in 2019. Now, withstanding the effect of Guangdong cases in June, the rest of the country was largely unaffected and has demonstrated a strong growth momentum. Domestic hotel and air ticket bookings in non-Guangdong areas were up for approximately 30% compared to the same period in pre-COVID 2019. Our corporate travel management business and other revenues also continue to ride and grow by double digits compared to the same period pre-COVID in 2019. As we further penetrated the second-tier cities, we are glad to see total hotel bookings. Our feature platform increased significantly growing by more than 50% in Q2, when we compared to the same period in 2019. Vacation travel continues to serve as a major driver for domestic recovery, with local hotel booking growing nearly 80%, both versus pre-COVID in 2019 and the cross selling ratio from transportation to hotel also improved by more than 20% versus pre-COVID 2019. Second, our major focus on domestic market. Throughout the second quarter, we continued to stick with our focus on domestic market in terms of supply chain content capabilities, service quality and technology advancement in order to lay out a solid foundation for new growth drivers…

Thanks, Jane. Good morning, everyone. For the second quarter of 2021 Trip.com Group reported net revenue of RMB 5.9 billion, representing an 86% increase year-over-year, and 43% increase quarter-over-quarter, primarily due to a strong recovery momentum of the China's domestic market, despite regional and temporary impacts of the pandemic and travel restrictions in the Guangdong Province. Accommodation reservation revenue for the second quarter of 2021 was RMB 2.5 billion representing a 96% increase year-over-year and a 55% decrease quarter-over-quarter recovering to 72% of the 2019 level. This was from [indiscernible] to the strong release of pent-up in domestic travel demand following the lifting of restrictions. Despite regional COVID outbreaks, hotel booking in the domestic China also saw double-digit growth when compared with the same period in 2019. Transportation ticketing revenue for the second quarter of 2021 was RMB 2.1 billion, representing an 80% increase year-over-year and 37% increase quarter-over-quarter recovery to 61%. of the 2019 levels, among which domestic air ticket booking revenue doubled year-over-year increased by double-digit when compared to the same period in 2019. Packaged tour revenue for the second quarter of 2021 was RMB 367 million, representing a 182% increase year-over-year and 117% increase quarter-over-quarter recovering to 35% of the 2019 level. This was contributed by a modest recovery of the domestic China market. Domestic attraction ticketing booking tripled year-over-year and nearly doubled when compared to the same period in 2019. Corporate travel revenue for the second quarter of 2021 was RMB 390 million, representing a 141% increase year-over-year and 55% increase quarter-over-quarter. This segment continues to gain momentum, which revenue growth growing by 26% when compared to the same period in 2019 mainly driven by strong growth of accommodation bookings. Revenues from other business for the second quarter of 2021 was RMB 614 million, representing a…

Thank you. [Operator Instructions] Your first question comes from Ronald Keung of Goldman Sachs. Please go ahead.

Thank you, thank you, James, Jane, Cindy, and Michelle. My question is more on the international recovery; just want to hear what is our strategy for international, particularly how we see the recovery trajectory. Firstly, for Pure International that you've shared some encouraging signs for Skyscanner and I believe Trip.com, and then how we think about the outbound, which at this point will -- has been slower than the Pure International, just want to hear our strategy there? Thank you.

We're still pushing ahead with our local focus, global vision strategy. China domestic travel market is generally riding our growth trajectory despite short-term COVID interruptions. We believe the continuing growth in domestic markets will gradually make up for the muted outbound travel. At the same time, thanks to rising vaccination rates and the relaxed travel restrictions, overseas markets have seen promising recovery. Our overseas brands such as Skyscanner and Trip.com showed quick sequential improvements in recent weeks. Europe and APAC together accounts for about 60% of the world's total air traffic, we therefore have a huge growth potential in these overseas markets. Currently, we've already exhibit a strong competitiveness in domestic China and Asian air markets. Meanwhile, our overseas brands will continue to upgrade products and services offering to strengthen our competitiveness in our European markets. Our focused efforts will enable us to gain additional market share and a solid foundation for sustainable growth beyond COVID in the long run. With the vaccination rates continue to rise globally, we have full confidence in the resumption of international travel. In the lead time, our team continue to enhance the fundamentals in terms of price product service and app user experience for overseas users. With that, we will be best positioned to capture the pent-up travel demand when international travel reopens.

Thank you, James.

Thank you.

Thank you. Your next question comes from Alex Yao of JPMorgan. Please go ahead.

Thank you, management. I have a couple of questions on the content operation. How do you guys incubate the content supply ecosystem and then what's the progress on advertising monetization on content operation? Thank you.

Thank you, Alex. We have been making quite good progress on our content ecosystem development by following on our three step strategy. First, we have further enriched the content offerings on our platform. Our total content bookings in second quarter nearly doubled compared with the previous quarter. And the number of sites, KOLs also increased nearly 50% sequentially in the second quarter. And second, we are encouraged to see better user engagement through content platform. For example, in the second quarter, we are glad to see an average of 35% of our app unique visitors viewed content related channels with the peak value reached over 40% during the holiday. Meanwhile, our diverse content format as they may increase in traction from new users, the search -- and the search. Our content to transaction conversion was on the rise as we continue to improve infrastructure development. We are happy to see that over 180 leading travel business have signed up travel Star Hub channel, which is our new travel marketing hub launched in April. Top Star Hub players have seen their conversion rates improving. As we are the leading travel transaction platform in China and many of our users have already got strong travel desire and when they come to our platform, our strong product development capabilities make content to transaction conversion more easier and frictionless. We have built a technology and product team for our content strategy, which were mainly leveraging our efforts in infrastructure, and we will carefully evaluate the future investment for the long-term -- for this long-term opportunity. Thank you.

Thank you. Your next question comes from Alex Poon of Morgan Stanley. Please go ahead.

Thank you, management for taking my question. My question is regarding our margins. Can management break down the non-GAAP operating margin of 11.7% in second quarter into China business, Skyscanner and Trip.com separately? And assuming our China business that revenue stays around the same level, can our China margin continue to improve on the same revenue level? And for Skyscanner, at what level of revenue of 2019 level Skyscanner margin can go back to 20% margin level in 2019? Thank you.

Thank you, Alex. With regard to the margin, we think we -- we still talk -- we are still targeting a very healthy 20% to 30% normalized margin level. But as the second quarter for the domestic travel business since it's almost fully recovered, so we have already maintained a very healthy margin for the domestic business, while for the international part, for example, Skyscanner, as they are still suffering some losses, but as we already see some pent-up demand and normalized travel demand, especially starting from Europe and U.S. market, we already see very healthy sequential increase for our Pure International business. I think as well as the travel demand will recover or gradually recover, our international business including Skyscanner will -- going back to a normalized margin level. Thank you.

Thank you. Your next question comes from Thomas Chong of Jefferies. Please go ahead.

Hi, good morning. Thanks management for taking my questions. I have a question regarding the hotel business. Can management comment about the competitive landscape in the lower tier cities? And how we should think about the overseas accommodation as well in the second half, any qualitative color will be great? Thank you.

Yes, for the hotel platform, we further penetrate into the second tier and lower tier cities, many of the contributors work well together. Our transportation business also cross-sell into our lower tier cities very significantly. The cross-sell ratio during this year have increased compared to pre-COVID level by 20%. We also have seen Generation Z have used our product significantly coming from all the cities around China. Into the overseas hotels with the recovery in Europe and United States, we have seen the vaccination rate also increases. And recently, U.S. have announced to open to many of the European countries, and with that our air transportation, our business unit will further increase the volume, which will also help us to lift our sales for overall products. Our competitiveness in providing the comprehensive product offerings, as well as a high service level with app usage will enable us to gain market share in the growing market overseas. Thank you.

Thank you. Your next question comes from Yulin Zhong of Haitong International. Please go ahead.

Thanks. Thanks, James, Jane, Cindy, and Michelle for taking my question. My question is regarding the regulation. Could you share with us any thoughts on the regulatory environment and any potential regulatory pressure to your sector or your company, for example, on your collaboration with hotels, your take-rate, and your cross-sale rate, et cetera? Thank you.

Thank you. We believe the tightened regulations will bring positive impact to the Internet industry, especially in the long run in terms of forbidding malpractices, encouraging innovation and fostering a sustainable and healthy environment. Trip.com Group has long benefited from an authorized and regulated environment to cultivate our overgrowth in an efficient manner in the past 22 years. We strongly support the proposed regulations in the market, which we believe we will event -- which will eventually create value to all the stakeholders. In terms of different potential regulation, at this moment, we are not considered to have a significant impact to our existing business practices. And going forward, we will continuously to follow all the rules and regulations in both domestic China as well as for the international markets. Thank you.

Thank you. Your next question comes from Brian Gong of Citi. Please go ahead.

Yes, thanks, management for taking my question. So my question is about competitive landscape. With recent regulatory change and there's some regional resurgence of cases, do you see any material change on competitive landscape and any behavioral change for our key competitor? Thank you.

Yes, I think we fully support the new rules and regulation. As Cindy said, our company has grown in the past two decades in a very healthy and a regulated environment. And going forward, we believe the new policy and regulation will further fostering a very healthy growth in the industry. So I think everyone is studying these rules and regulation very carefully. And we believe in a new environment that will enable everyone to operate in a very transparent and a fair environment which we have confidence in. Thank you.

Okay, thank you.

Thank you. There are no further questions at this time. I'll now hand it back to Michelle Qi for closing remarks.

Thank you. Thanks, everyone for joining us today. You can find the transcript and webcast of today's call on investors.trip.com. We look forward to speaking with you on the third quarter 2021 earnings call. Thank you, and have a good day.

Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.