Continuously tapping into the consumption potential of non-first-tier cities
Over the past decade, white-collar workers and the new middle class in first-tier cities have led the trend in China’s tourism consumption. However, over the next ten years, tourism consumption by residents of non-first-tier cities will be the core growth driver of the tourism market, as well as a key area for the further penetration of online travel services.
Compared to first-tier cities, the timeline for non-first-tier cities to surpass a per capita GDP of $10,000 was slightly later. However, after excluding rigid expenses like housing and education, non-first-tier city residents have a higher proportion of their income available for leisure and lifestyle spending. In cities where the pressure of daily life is lower, the slower pace of work also supports more frequent leisure travel.
Tongcheng Travel detected this market opportunity earlier than its competitors and began its strategic deployment targeting non-first-tier cities in 2019.
The tourism market in non-first-tier cities is not simply about “consumption downgrade” or “low-end demand.” In fact, this market is characterized by more diverse layers of tourism consumption, and the tourism resources are more dispersed. To integrate these resources and precisely match them with demand requires not only technological innovation in the industry but also fine-tuned operations and services. Tongcheng Travel clearly understands this well.
In recent years, Tongcheng Travel has partnered with Henan Airport Group, Hunan Airport Management Group, and others to jointly innovate on air-rail combined transportation products, optimizing “first-time travel” services to make travel more convenient for residents of non-first-tier cities. In 2023, Tongcheng Travel also launched the “Tongcheng Hotel List,” covering over 500 cities across China, including most county-level cities, providing consumption references for travelers from lower-tier cities. Additionally, Tongcheng Travel introduced high-quality, cost-effective travel products such as “Hotels Under 100 Yuan Every Night” and “Daily Flight Deals Starting at 10% Off” to offer price-sensitive users a superior travel experience.
Since 2023, the new tourism demand in non-first-tier cities has surged, allowing Tongcheng Travel, which had made early investments in this market, to capitalize on the opportunities. Data shows that as of September 30, 2023, 87% of Tongcheng Travel’s registered users reside in non-first-tier cities. Leveraging its advantages in these cities, Tongcheng Travel achieved revenue of 3.3 billion yuan in the third quarter of 2023, a 61.1% year-on-year increase, with adjusted net profit reaching 620 million yuan, a 146.5% year-on-year growth.
Growth in user value drives long-term development
China’s economy, after years of large-scale development, is now facing a restructuring of corporate value in the digital era. As we enter the second half of 2023, value and quality have become new perspectives for evaluating a company’s long-term development.
Uncovering and enhancing user value is not only a common goal for internet companies but also a long-term driving force for their development. Content platforms are entering the transaction market, while physical e-commerce platforms are using content to boost user engagement. Tongcheng Travel, on the other hand, began with “essential” travel products such as air tickets and hotels, gradually expanding to cover a wider range of travel-related consumption categories and scenarios.
Through technological innovation, Tongcheng Travel has integrated high-frequency urban transportation scenarios like buses and subways, increasing user activity and consumption frequency, and boosting user loyalty. In September 2023, Tongcheng Ride-Hailing launched international car service coverage across 36 overseas countries and regions, serving over 70 major destination cities, and offering services like Chinese-speaking airport pickup and RMB settlements to solve the challenges of booking rides abroad.
In October 2023, Tongcheng Travel upgraded its Black Whale membership program, offering users access to resources such as popular concert tickets combined with cultural tourism packages, further increasing the number of paid members.
Additionally, leveraging Tongcheng Travel’s industry resources and technological innovation capabilities, Tongcheng Business Travel has built an all-in-one corporate travel service platform, providing customized and refined business travel services for companies.
In the third quarter of 2023, Tongcheng Travel’s other revenue sources, including business travel services, membership services, and user value-added services, saw a year-on-year growth of 102.8%, surpassing 490 million yuan, making it the company’s fastest-growing revenue segment. These new value-added services for users are also a key reason behind the rising proportion of paid users on the platform.
Ultimately, the platform must start with the new needs of users and align corporate value with user value to maintain its attractiveness and achieve long-term development. Whether Tongcheng Travel can continue to embrace a long-term perspective will directly impact the development landscape of the online travel industry in the next decade.
