Tongcheng Travel Holdings Ltd

HKEX:780

Earnings Call Transcript 2023-Q1

[Operator]

Good day, and thank you for standing by. Welcome to Tongcheng Travel 2023 First Quarter Results Announcement. [Operator Instructions]

Please be advised that today's conference is being recorded. I'd now like to hand the call over to your first speaker today, Ms. Kylie Yeung, Investor Relations Director. Thank you. Please go ahead.

[Kylie Yeung, executive]

Thank you. Good evening, and good morning, everyone. Welcome to Tongcheng Travel's 2023 First Quarter Results Conference Call. I'm Kylie Yeung, Investor Relations Director of the company.

Joining us today on the conference call are our Sales Executive Director and CEO, Mr. Heping Ma; our CFO, Mr. Julian Fan; and our VP and Head of Capital Markets, Ms. Joyce Li.

For today's call, our management team will provide a review of the company's performance in the first quarter. Heping will share with us our overall 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 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, Hep. Hep, please go ahead.

[Heping Ma, executive]

Thank you, Kylie. Good evening, everyone. Welcome to our earnings call for the first quarter of 2023. 2023 marks a fresh new start of China's travel industry.

For the past quarter, we were thrilled to see the biggest rebound and growth in 3 years with various travel demand in tremendous release with industry recovery in full swing. We acted swiftly and precisely to seize every user demand and our enhanced market presence and influence.

Over the quarter, both our MAUs and MPUs adjusted another historic high. While our revenue and business volume witnessed stunning growth from last year's low trough.

Turning to the second quarter. There is no sign of cool down in travel through and the demand for travel continues to show traveling momentum.

In the past Labor Day holiday, both our accommodation and transportation businesses saw its new highest in volumes, with room nights soared almost 3x the size of that in 2019.

We hope the blooming trend of our business will continue into the rest of this year given that travel demand on our platform has been resilient and more diversified over the past 3 years.

In my previous speech in March, I force right expressed my confidence for 2023. Two months later, today, I'd say my confidence for the year has turned into convection in view of the impressive progress we've made so far.

For the year ahead, we will continuously push forward with our goal to have our core business, further expanded with industry-leading growth while patiently building our second growth engine to lay foundation for long-term sustainable growth.

At the same time, we will continue to broaden our footprint along the travel industry by consistent investment and partnership, so as to establish deeper roots in the industry.

With that, I will hand over the call to Joyce for more details of our operational highlights in the first quarter. Joyce, please?

[Joyce Li, executive]

Thank you, Hep. We had a marvelous start into the year of 2023, with our business hitting record highs in the first quarter as travel sentiment and demand have been in full swing after 3 years of restrictions.

Aiming the high enthusiasm for travel, we took initiative and seized every opportunity to spend our footprint in the travel industry.

As in the past 3 years, we took the lead in industry recovery in the quarter, continuously demonstrating our excellence in business strategy and execution.

For our accommodation business, we have established stronger presence in lower-tier cities through consistent investments over the past 3 years. The business showed a great vitality over the last quarter and recorded historical highs both in revenue and volume. With room night sales registering an extraordinary growth of more than 130% when comparing with 2019.

Over exhilarating period, we continue to penetrate to low-tier cities and peripheral areas for higher-tier cities while persistently capturing opportunities of various occasions for hotel stays as users demand has become more diverse after pandemic.

Tactically, we have placed much more importance on cross-sell this year to drive fast growth of the business and additional efforts were built up in the last quarter to market our hotel products and services to users from a transportation business.

As a result, our 15-day cross-selling rate for the quarter climbed to tax net. Besides value-added products and services rounding hotel booking and state maintained a meaningful contribution to the business. As we consistently offer the compensation bet to make users stay at hotels more convenient and comfort.

Transportation business is a pillar of the company, and it takes up a large share of both revenue and profit. Over the past 3 years, we have solidified our market position in the industry and have gained shares by tapping into under-penetrated markets.

For the past quarter, the business achieved new peaks, both in revenue and volume. As for the air ticketing business, we continue to optimize user mix by bringing more college students as well as frequent travelers.

More thrilling, we restart our international business upon China's border reopening. We increased efforts to seek cooperation with more overseas air ticketing suppliers as well as long-term market activities to reconnect with the users.

For the transiting business, its volume fully recovered to 2019 level and increased substantially from last year's low. Aiming a robust recovery, we stay true to our face and remain focused on improving users' travel experience by providing more suitable and accessible travel solutions.

By including more travel occasions and more transportation means, our Huixing system continued to play a crucial role in satisfying users demand.

In addition, our bus ticketing business has made a gradual progress in enhancing monetization. During the quarter, we centered on adjusting the geographical coverage of an equipment to improve efficiency while streaming in line online transaction process to in-house projectory. As such, its monetization rate has improved quarter-by-quarter.

Furthermore, we aim to broaden our footprint along the travel industry and further enhance our influence. Through incubation acquisition, we have built a comprehensive portfolio of hotel brands ranging from medium to high stars. As of the end of March, we have had nearly 900 hotels in operation across the country.

On the other side, we have also tapped into [indiscernible] business by acquisition of travel agency companies, which will also serve as a setting stone for us to stand up our international business.

Turning to our user side. We seize on the booming momentum and increased efforts to interact with the users at multiple channels such to further diversify our traffic sources and expanding our user base.

Among all our channels, Tencent ecosystem remained a static type pillar. Under the backdrop of substantial recovery, we made bold efforts to increase various scenarios and to reach out to more users. We initiated cooperation with the Tencent docs to have engaging interaction with the younger users. We also extend our service in wishing search, covering hotel booking, air, train and bus ticketing as well as tourist traction ticketing to provide users with easier and convenient access.

Besides, we maintained a cooperation with the handset vendors and the location-based apps to have wider reach to users.

On top of that, our offline acquisition initiatives, in particular, the public transit remain an effective vehicle for us to grow user base and further penetrate low-tier cities and contribute about 15% to our MPUs in the first quarter.

As such, both our average MAUs and MPUs set another new highs for the past quarter. Our MAUs for the quarter increased by 13.9% year-over-year to $286.1 million. While our MPUs displayed a much fast growth of 13.6% and it rose to $41.4 million. Our paying ratio also increased to 14.5%. To our satisfaction, our 12-month rolling users as of the end of March, expanded to 201 million from 188 million as of the end of 2022, demonstrating our excellent operational capability.

Since our brand upgrade in early 2020, we've been making consistent efforts to improve mind share of our brand among younger generations.

In the past quarter, we rolled out an experiential marketing campaign, named Spring Awaking through which we joined the head with tourism bureaus and received a collection of NFTs themed with city flowers, so as to enhance our brand exposure.

In April, we worked with Guilin Tourism Bureau and co-launched drilling marketplace in Guilin, which is featured with innovator experience, such as intangible cultural heritages, outdoor sports and handicrafts in an effort to extend the ultimate boundary of travel experience, along with the younger tourists.

Besides, we were the first OT in China that integrate e-sport into our user engagement plan and e-sport event has served a key role in building effective communication with our target users.

Over the last quarter, we continued to sponsor a professional e-sports game and had our brand high exposure among younger cohorts. With such efforts, we aim to build and form an engaging brand personality, targeting younger population.

This year, we placed more emphasis on user value rather than new user acquisition. Over the last period, we increased efforts in cross-selling strategy, which has been effective means to enhance user value. At the same time, we upgraded our membership program and established new user hierarchy based on their consumption patterns and the contribution type platform, so to further delve into their potential values.

Besides, we continue to push ahead with our Black Whale membership program and further enrich benefits from the daily consumption occasions as part of efforts to improve user ARPU. As of the end of March, the cumulative number of Black Whale members exceeded 25 million and it generated impressive growth in terms of revenue.

We value our users, and are devoted to provide them with seamless and accountable travel experience by embracing new technologies. To further enhance efficiency and user satisfaction we, together with business partners, took initiative of the quarter to explore the possibility of GPT application in our customer service with an aim to create more accurate, coherent and convenient intelligent customer service. We are also investigating the visibility of AIGC application in other areas of our operations such as product development and content.

Moreover, we consistently consolidated more travel scenarios into our intelligent Huixing system to provide users with more suitable travel solutions.

As always, we are committed to empowering the travel industry through our internet expertise and technologies, aiming to build a highly resilient and efficient travel ecosystem.

In the last quarter, we persistently pushed ahead with our strategy to build a deeper bond with airports and infrastructure cooperation with the [indiscernible] airport. The 2 of us will work together to develop [indiscernible] airport as a hub airport in Southwest Hubei province by leveraging our big data capability and local tourism resources.

Besides we helped regional airports in Mongolia increase the throughput by designing traffic products.

In addition, we build a comprehensive portfolio of hotel PMS brand to help enhance operational efficiency and create additional revenue for hotels covering small and medium chain hotels, individual hotels as well as alternative accommodation.

As always, we are fully aware of the importance of substantial development and are determined to contribute to the travel industry as well as society.

To help us facilitate rural revitalization, we initiated a program named Tongcheng Thousand Villages in February to help village across China due to substantial tourism models and promote green economy by sporting talent, technology, capital and platform.

On top of this, we were selected by the China Consumers Association as the top 10 excellent cases of corporate initiatives in terms of customers experience and their treatment account of our initiatives such as exclusive customer service for the hearing impaired and the Tongcheng [indiscernible] for outdoor workers, which displays our care for customers as well as for society.

Looking ahead, we will remain committed to the activities that contribute to travel industry and the society.

I will stop here and give the call to our CFO, Julian. He will share with you our detailed financial results for the first quarter.

Julian, please go ahead.

[Lei Fan, executive]

Thank you, Joyce. Good evening, everyone. Over the past quarter, since the sharpness of travel restriction measures were broken, we have witnessed a healthy strike in China's travel industry with pent-up demand for travel greatly unleashed. We, once again, outperformed the industry, many thanks to our capability to capture diverse demand from students, to business travelers, from local and short-haul trips to long-haul family tours, which significantly fueled our core business performances and propelled us to achieve better growth.

In the first quarter of 2023, we obtained historic highs for both quarterly top line and bottom line. We reported net revenue of RMB 2.59 billion, representing a 51% year-over-year increase from the same period of 2022 or a 45% year-over-year increase from the same period of 2019.

We are proactively prepared for the Chinese New Year and May Day holiday of 2023 and invested in marketing campaigns and advertisement to seize the gold opportunities that this core period of travel resurgence has presented to us. Thanks to our effective marketing strategies and highly efficient operations, we have achieved substantial improvements in our margin as well. Our adjusted net profit reached RMB 504 million, with 19.5% net margin compared with 2.5% net margin in quarter 4 2022 and 14.3% net margin in quarter 1 2022.

Our accommodation reservation business registered gross growth and achieved RMB 834 million for the first quarter of 2023, representing a 53.6% increase from the same period in 2022 or a 70.5% increase from the same period in 2019.

Our room nights registered more than 60% year-over-year growth or 130% growth versus 2019, mainly attributable to our ability to seize the opportunity amid the encouraging revival of China's travel market and the accurate online and offline marketing strategies.

We continuously explore the long-tail demand for hotel space such as exam rooms as well as booking related to exhibitions, sports events and concerts so as to capture every niche market.

During the past quarter, we also ramped up our efforts in air and train cross-sell execution and online promotions to bring more users to our accommodation segment as well as improving the repurchase rates at ARPU.

In the first quarter of 2023, ADR rose compared with 2022 may be attributable to the floating demand in the hotel industry. The blended take rate decreased compared with 2022, mainly because we distributed more coupons to capture user demand.

Transportation ticketing revenue for the first quarter of 2023 was RMB 1.4 billion, representing a 35.9% increase compared with the same period of 2022 or a 9.8% increase compared with the same period of 2019. We achieved a remarkable feat in the past quarter, our revenue surpassed our pre-COVID level mainly attributable to the record-breaking ticketing volume as a result of a robust travel demand for hometown visits and back to work during and after the Chinese New Year.

We are also focused on the continuous advertisement, advancement of our VAS offerings. For our air ticketing business, we further tapped into under penetrated market and achieved a more than 35% growth in terms of the volume when compared with 2019 levels.

Our train ticketing volume also increased significantly compared with the same period last year and has already reached the 2019 level.

In addition, we attained steady progress in enhancing the monetization of our bus ticketing business, mainly driven by the more precise geographical placement of our smart ticketing equipment and the optimization of our transaction process.

We also expanded the scenario coverage of our car holding service to cater the rising demand for local and short-haul travel. Other business once again achieved excellent growth. The revenue achieved RMB 369 million in the first quarter representing a growth of 134.1% year-over-year or a 945.9% increase from 2019 level, mainly driven by the encouraging growth of our Back Whale membership program as well as the excellent performance in advertisement, the PMS business and PMC business. We are confident that this business will continue to augment the company's growth in the future.

In terms of the profitability, our gross margin was 75.0% for the first quarter of 2023, increased from 72.5% for the same period in 2022 and 70.1% for the previous quarter. The persistent enhancement of gross margin was mainly driven by our streamline operations, intelligent customer service capability and revenue mix shift in the preceding quarters.

In the first quarter of 2023, our adjusted EBITDA achieved RMB 732 million with 28.3% margin improved from 25.5% year-over-year and 16.3% quarter-over-quarter.

Adjusted net profit achieved RMB 504 million with margin improved to 19.5% from 14.3% in quarter 1 2022, and 2.5% in the previous quarter. The increase in revenue led to a significant improvement in our adjusted net margin after the pandemic as we have already optimized the cost structure over the last few years.

Service development and administrative expenses in the first quarter of 2023 increased by 11.7% from the same period of 2022. Excluding share-based compensation targets, service development and administrative center in total accounting for 20.3% of revenue in the first quarter compared with 26.8% of revenue in the same period of 2022 and 31.0% of revenue in previous quarter.

Selling and marketing expenses in the first quarter of 2023 increased by 51.7% from the same period of 2022, excluding share-based compensation targets, selling and marketing expenses accounted for 37.0% of revenue in the first quarter compared with 36.5% of revenue in the same period of 2022 and 42.8% of revenue in the previous quarter.

As of March 31, 2023, the balance of cash, cash equivalents, restricted cash and short-term investment was RMB 6.9 billion. China's travel market had exhibited robust growth and has exceeded the pre-pandemic level.

In April and May, we continue to witness the true unleashing of travel enthusiasm, with the average travel demand being released. The past May Day holiday witnessed that the booming of the travel market with people flocking to tourist attractions across the nation.

According to official government data, the number of domestic tourists during the holidays registered significant growth year-over-year and even it has a 2019 level.

Our business once again outshined the market. Our hotel room night registered more than 150% growth compared with the 2019 level and our air ticketing volume grew by more than 30% compared with the 2019 levels.

We maintain optimistic and are very confident in accomplishing remarkable results again. After 3 years, cultivation and accumulation, we have secured a supreme position to exploit travel opportunities in every scenario and thereby reinforce and expand our market share.

The significant rebalancing in the beginning of this year has once again demonstrated the necessity of travel activities, no matter for business, leisure or family-friends gathering, we remain very confident that our strategic priorities and initiatives will enable us to lead industry's growth with admirable profitability. We aspire to make travel a smart and joyful experience while creating more value for society and our stakeholders, including our users, suppliers, employees and shareholders.

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

[Operator]

[Operator Instructions] First question comes from the line of Alex Poon from Morgan Stanley.

[Chun Poon, analyst]

Congratulations management on super strong results and the travel outlook. My question is related to the competition landscape. Because of a very, very strong demand, are we seeing the price war subsidies coupon and coming back from our competitors. And a related question is our sales and marketing expenses, because of a very, very strong revenue growth, would you still stick to the 40% revenue guidance or because of very strong revenue, we would see leverage and translate into higher margin for the rest of the year?

[Joyce Li, executive]

Thank you, Alex for your question. I will take the first one, and Julian win address the second question.

First is about the competition. Actually, from our observation as the market rebounded with many players in the market have gradually increased the opening level in certain markets, especially everyone has been keeping so low due to the covenant year. But we think that the market competition is still very healthy.

We also believe that the market competition will remain housing in the near term because there are so huge opportunities, but only a few major OTAs in the travel market. and our market positioning and the user base are clearly differentiated. Besides, we have not observed any new entrants to the market that could pose a competitive threat to the major OTAs in China. So we think that it's not necessary to have fierce price war.

And additionally, we will ensure that our products and services remain competitive in the market by utilizing our flexible cost structure like operational model and dynamic pricing strategies.

With our strategy to first penetrate low-tier cities and our efforts to make in the past few years, we have already established a so strong presence and solid competitive vantage in the low-tier cities, which are still having relatively low online penetration of hotel bookings and bus ticketing, et cetera.

So we'll be more aggressive to develop and gain market share with an aim to be the leading travel branding in low-tier cities. And with our cost-effective traffic sources, live operational model and strong execution capability, we're well positioned to capture the recovery opportunities from all kinds of travel demand, including long-haul and short-holiday travel, business travel, vacations and hometown visits by the migrant workers and students.

[Lei Fan, executive]

For the sales and marketing dollar and bottom line guidance for next quarter and for the rest of the year. Before I provide more color on that, I would like to explain more on the quarter 1 bottom line and cost structure as well. As you can see that we are delighted to see that the quarter 1 bottom line exceeded our expectations, the net margin of 19.5% in the capital quarter, representing a level comparable to that of the year 2019 level.

GP margin improved to 75% and adjusted EBITDA margin improved to 28%, mainly driven by the operational leverage caused by increase in business scale. Our service development and GA and G&A spending of the revenue decreased compared with 2019 and also 2021 level. Of course, 2022 was not a good reference due to impact by COVID in the whole year.

While sales marketing spending increased when compared with 2019, as we invested more to aggressively capture the market share for the past 3 years and also to capture new business opportunities, but it's slightly optimized from 2021 level, mainly driven by our accurate investment and ROI improvement.

In the following quarters, actually we believe the operational leverage will continuously benefit our net market because our scale is still rocket up -- revenue scale is still rocket up in the next quarter and the rest of the year.

Meanwhile, sales and marketing investment may be controlled at around 40% level for Tongcheng branding investment, domestic market penetrations and international business development. But still, we would like to tightly control the ROI at a satisfied level and not be balance the top line growth and profitability.

In terms of how we spend our sales and marketing in dollars, I would provide more colors. This year, our strategic priority to enhance our user value rather than solely pursuing user volume growth that we have mentioned a lot of times as we have already got a substantial base of our paying users. Nowadays, we have accumulated 400 million paying users in our history and also 200 million for a year.

As we mentioned, we would like to invest in more promotion on our existing users and drive improvement in frequency and ARPU this year. So we will persist in investing in target promotions and improving our ability to provide precise recommendations to our existing users, thereby enhancing cross-selling from our transportation business to accommodation business. This should lead to higher revenue per order and better rate for our overall business. And we aim to further engage with users at core previously acquired from off-line scenario such as those who we acquired from the hotel product work and also the bus ticketing equipment.

To achieve this, we plan to optimize our sales and marketing strategies by offering target promotions that motivate these users to make direct online purchases. We also continue to invest in promoting the VAS products and services that are tailored to our users' travel needs.

For instance, we are continuing to encourage the use of our Huixing system, which offers intelligent travel solutions to our users while generating revenue for us as well. So we will also launch new promotions for our innovative products and services in different scenarios and enhance user value. So I hope that is helpful for your questions. Thank you.

[Operator]

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

[Brian Gong, analyst]

Congratulations on very solid results. I have 2 questions. First, can management share a little bit more about our performance in April and May, respectively, especially after Labor Day, how do we see the travel demand. Does it go back to normalize the level with seasonality or it become even weaker after the pent-up demount released during the Labor Day.

And second question is, as Julian mentioned, Labor Day industry traffic and revenue performed pretty well, but average spending per traveler actually was lower than pre-pandemic level probably like still soft consumption power. So want to know management's view on the impact from this on our platform and have raising similar trends for our users on our platform.

[Lei Fan, executive]

So first, I would like to give you some color on the April and May, especially for the several weeks after Labor Day, how would the performance look like? In the past, Labor Day holidays, as we can see that the industry has experienced a very strong recovery with industry traffic -- travel traffic reached around 280 million, representing a 71% year-over-year growth or nearly 20% growth when compared with 2019 level. So that is the industry level, which are significantly improved from 89% in Chinese New Year this year.

As mentioned in our prepared remarks, our business performance, again outpaced the industry recovery very far. After the Labor Day holiday, people have continued to exhibit great enthusiasm for travel. Of course, the absolute performance in the mid-May dropped compared with Labor Day due to seasonality, but the growth momentum was even stronger compared with both same period in 2022 and 2019.

For example, many people go for vacation on 20th of May, another Chinese Valentine Day holiday to celebrations. The total room night sold on 19th and 20th May on our platform increased drastically by over 120% and 250% when compared with the last year and 2019, respectively, even stronger than our Labor Day behavior. So it is also very encouraging that the room nights sold on 20th May this year hit historical top 4, just a weekend hit the historical top 4 for single day's performance for our room net sold. So that is the -- how was the latest market situation after the Labor Day.

So in terms of the behavior change and the impact to our performance, I think Joyce will give you more color on that.

[Joyce Li, executive]

In terms of the consumption power, you mentioned, as well as we can see, the travel demand in China has remained strong since Chinese New Year, and this trend has continued throughout the first quarter and up to now, as Julian has mentioned. We think that the Chinese travel industry has demonstrated a remarkable rebound over the past few months. Even the ADR of hotel rooms and air ticket price surged significantly, but people [indiscernible] are still extremely strong as we all can notice.

So this gives us very strong confidence in the vitality of the Chinese travel industry, especially in low-tier cities market.

As we noticed from the user side, maybe some of our users in low-tier cities are not making very luxury travels, but increased related affordable travels. We believe this is not too much impact on their desire to travel.

Besides the Chinese government has demonstrated a strong commitment for the travel industry. So it has also been actively promoting the domestic tourism as a mean of economic development, which will help to drive growth in the industry, as we also can see from the recent cases.

So with this stand firm on the upward trend of China travel industry in the long run, and we'll continue to strengthen our core competitive agents regarding our execution capability, product capability and brand influence for our long-term sustainable growth.

[Operator]

Next up, we have the line from Li Yu from CLSA.

[Unknown Analyst]

Congratulations on the strong results. And 2 questions from my side. First, a follow up. Could you please share more on the user behavior change you observed after reopening, for example, the travel frequency and the format of traveling and how would that contribute to a sustainable long-term growth in the demand, for example, in the rest of this year and the year beyond.

And the second question is that I noticed revenue had a stellar growth in 1Q driven by value-added services. What are our edges in providing the value-added services to travel industry. And do you think that the triple-digit growth in the first quarter to continue in the upcoming quarters?

[Joyce Li, executive]

The question concerning the user behavior is very important and interesting question for us. As we mentioned before, we can see that both short-haul and the long-haul travel have been recovered remarkably well in the past few months. From our data, our accommodation room in first quarter increased over 100% when compared with same period in 2019 as we mentioned.

It's driven by the rise in travel demand, including long-haul and short-haul travel. We can see that the growing trend of local hotel demand continued in the second quarter 2023.

The local hotel now accounted for nearly 15% of our total hotel room night implying a significant increase from around 30% from the same period in 2019.

So what do we think is that the pandemic has fundamentally changed the behavior and consumption pattern travelers, especially the younger users. Now the younger users are very interesting in the shorter more adhoc and frequent trips which contribute significantly to the shortfall and staycation demand.

On the other hand, we have been more aggressively grafting opportunities in different hotel booking scenarios in the past few years. [indiscernible] rooms and staycations during special dates or festivals. That's why also we can achieve so great performance in the special holidays we mentioned before.

Additionally, we have also placed more emphasis on capturing the increasing combination demand related to different large scale activities, such as exhibitions, cultural, sport events, music festivals and concerts, which is the occasion scenarios usually constitute to the off-line user scenarios before. That we believe that both short-haul and long-haul demand will continue to increase.

[Lei Fan, executive]

Yes, in terms of the other revenues, actually, other revenue has already become a very significant contribution to our revenues. Back to 2019, the other revenue just take like 2% of our total revenue. But nowadays, it has already taken 14% of our total revenue. And we are very confident that the contribution or the portion will increase in next quarter and the rest of the year.

Inside other revenues, I think there is -- I had to separate it to 2 parts. There's 2 very important parts in our other revenue. The one is a Black Whale membership card and the other is business side services including the advertisement, our PMS, our hotel management and also PMC business.

For the Black Whale membership card, as we mentioned, the accumulated number of the Black Whale member cards grew rapidly -- very rapidly and it further increased to more than 25 million by the end of March of 2023. And the ARPU and average number of order of these Black Whale members are around 1.5 to 2x of those for general members. The Black Whale membership card has been highly effective tool for increasing our average revenue per user and providing benefits and premium services to our loyal customers.

In the past quarter, the Black Whale membership card doubled when compared with quarter 1, 2022. But actually, there's still a lot of potential space to develop because considering our sizable user base, we are very confident in the substantial growth and the considerable growth potential of Black Whale membership. So we have also enhanced the membership privileges and also cooperated with more partners to better cater to our users' needs and increase their engagement in our loyalty program.

And also for the business side services, just like what I mentioned, the advertisement PMS, PMC and hotel management, I think that is in a very early stage, and the revenue contribution will increase in the future for sure.

For advertisement business, we can leverage on our huge traffic and extensive user base to help our merchants to reach out their target customers. For the PMS business, we use advanced technology and innovation to assist the individual and small chain hotels in their daily operations, inventory management, revenue management and marketing, et cetera. This business has generated stable income for our company and strengthened our relationship with the suppliers.

For the hotel management business, actually, we have just completed all the acquisitions in the past year and see great potential and synergies with our existing business.

So for sure, we will continue to explore this business in the rest of the year, especially advertisement, hotel PMS and hotel management business. We are also very confident that this business will make further contribution to the growth of the company in the coming quarters. Thank you for the question.

[Operator]

In the interest of time, we will now take the last question. The last question comes from the line of Thomas Chong from Jefferies.

[Thomas Chong, analyst]

Congratulations on a very strong set of results. My question is about our group tour strategies. Can management comment about our strategies in the next couple of years after doing the recent acquisitions? And on the other hand, how should we think about the use of cash in coming years? Are we going to explore more opportunities in outbound travel or even in the international travel side?

[Joyce Li, executive]

Thank you, Thomas, for your questions. I think I can address the question concerning our international travel business. During the Labor Day holiday, the international flat volume for the industry recovered to 40% to 2019 level. The recovery of our international business outperformed inventory significantly. Our international hotel booking fees at 2019 levels and the International air ticketing booking recorded to 2019 levels. While the demand for the outbond travel is robust, we believe that international travel industry need some time to review its supply and by hiring and training more staff to meet the growing market demand.

Currently, there is a significant shortage of labor and supply oversee to travel market, which is limiting the availability of travel products and services and adversely affecting the quality of service. In addition there is a rising hotel ADRs and air ticketing prices may also dampen the traveler's desire to make outbound travel plans.

Before COVID, the international business contributed approximately 5% of our revenue. Over the past few years, we have established a significant user base of around 200 million any users, which transforms a cornerstone of our international business, as these users will also have outbound travel demand in the future.

So the potential, I think, has been proven by our performance in the Labor Day holidays. So to prepare for international business development, we are now focusing on establishing the relationship with different supply chains for international markets including different major international OTA for accommodation business and a variety of international airlines in the past few years.

We are also establishing more business connections with different kinds of overseas TSPs. We'll continue to explore and develop new product services for our potential outbound travel users.

We also launched promotions of international products to capture the recovery opportunities especially now for our user base, a lot of them are younger generations.

In 2023, we will put more effort in developing international air ticketing and hotel business as well as packaged tour business.

[Lei Fan, executive]

In terms of the use of cash and also our strategy in the rest of the year, first of all, the use of cash, we think that most parts that we use our cash is on the sales and marketing dollar. But actually, that is the operational level because all the sales and marketing dollar we spend will drive hyper growth in the revenue. And it takes like 37% to 40% as we mentioned a lot of times, that is our sales and marketing level.

In terms of the other potential business merger and acquisition and also our potential space of revenue growth we may keep an eye on the M&A for the [indiscernible] in some opportunities in the international development -- international business development in the rest of the year.

For the long-term -- mid- to long-term strategy or the rest of the year strategy, I think the strategy has not changed as a leading OTA in China for us, we have already accumulated extensive industry experience and a vast user base. This places in advanced roles positioned to capture future market opportunities more aggressively.

First of all, in the past 3 years, we have successfully captured new demand in COVID period, such as short-haul leisure travel and business travel, [indiscernible], et cetera, which keeps a strong -- a very strong growth momentum after COVID as well, just like what you see of our quarter 1 performance.

Thus we have further expanded the market share and strengthened the market position of our accommodation and transportation ticketing business. These mature business will continue to be the main growth driver of our companies in the future.

Meanwhile, we have enriched our product lines to build a wider range of travel needs or the long-tail needs, including the attracting tickets, bus ticketing, car holding, city metro ticketing that is a short-haul transportation and also the alternative for lodging and beverage value-aided productive services. This improvement will help enhance the purchase preference and much sufficient of our platform.

In terms of the users, we have a large user base successfully with APU reached 201 million in the past quarter. In the -- additionally, we have been cultivating the younger generation as we have substantial travel enthusiasm and significant consumption power.

Our large user base will support the future growth of the company as well. I think lastly, we aim to enhance the digitalization and efficiency of the industry while providing superior series and products to our users, leveraging our technology advantages, industry knowledge to huge user base. Our 2B service, just like what I mentioned in the previous questions, and products are fruitful and start to contribute very important portions to the revenue and profit. For example, our advertisement business, PMS, PMC hotel chain business like what I mentioned in the previous question. which have already contributed around 15% of our total revenue. But this is still in a very early stage and have ample room to grow.

Meanwhile, since this year, we have decided to start the exploration and the development of the packaged tour businesses and international travel business, so as to establish the more future growth drivers. So that may be the M&A opportunities that we will pursue. Thank you for the questions.

[Operator]

Thank you for the questions. I would now like to hand the conference back to the Tongcheng's team for closing remarks.

[Joyce Li, executive]

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.

[Operator]

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