Hello, and thank you for standing by for Tuniu's 2016 Second Quarter Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. .

I would now like to turn the meeting over to your host for today's conference call, General Manager of Investor Relations and Strategic Investment, Maria. .

Thank you, and welcome to our 2016 second quarter earnings conference call. Joining me on the call today are Donald Yu, Cofounder, Chairman and Chief Executive Officer; Alex Yan, Cofounder [indiscernible] and the Chief Operating Officer; and Conor Yang, Chief Financial Officer..

For today's agenda, management will discuss business updates, operating highlights and the financial performance for the second quarter of 2016. .

Before we continue, I refer you to our safe harbor statement in the earnings press release, which applies to this call as we will make forward-looking statements. Also, this call includes discussions of certain non-GAAP financial measures.

Please refer to our earnings release, which contains a reconciliation of non-GAAP measures to the most directly comparable GAAP measures. Finally, please note that unless otherwise stated, all the figures mentioned during the conference call are in RMB..

I would now like to turn the call over to our Cofounder and CEO, Donald Yu. .

Thanks, Maria. Good day, everyone. Welcome to our 2016 second quarter earnings conference call. We had a solid second quarter performance with total travel GMV and net revenue growing 94.3% and 55.6% year-over-year, respectively.

During this quarter, we continued to strengthen our #1 position in China's online leisure travel market while quickly expanding our travel-dedicated product offerings. .

Our total travel GMV maintained a fast growth momentum during the second quarter, driven by the 500% year-over-year GMV growth.

Our travel-related products, starting this quarter, we disclosed our total travel GMV, which consists of our gross bookings for packaged tour products as well as the GMV, our travel-related products such as transportation ticketing and accommodation reservation.

This metric will more holistically reflect our growth rate going forward as transportation ticketing and accommodation reservation contributions increase. .

Over the years, Tuniu has developed a widely recognized travel brand in China. In addition to the fast growth of our total travel GMV, our dedication to providing superior customer service has resulted in repeat customers contributing 45.3% of our total travel GMV during the quarter.

With this core [indiscernible] at hand, we believe we are well positioned to efficiently expand our product offering..

With the recent combination of 2 OTAs in China, a unique market opportunity has formed as both flyers and customers seek more options to distribute or purchase travel products. Over the years, we have rapidly grown our business to become China's #1 online leisure travel company through consumers' strong demand for our products and services.

As such, we believe the current industry dynamic is the ideal opportunity for Tuniu to leverage our developed brand and customer reach [ph] to fully expand into standardized travel products, such as transportation, ticketing and accommodation reservation. .

Our fully fledged expansion into this product will allow us to further monetize our existing customer base and allow new growth catalysts to our business. .

Now I would like to give an update on our individual product offerings in greater detail. Our transportation ticketing business has rapidly grown across the broad with airline ticketing, rail ticketing and bus ticketing all posting tremendous growth..

Notably, Tuniu had made remarkable progress expanding its coverage of book business and leisure travel airline routes [indiscernible] in the industry. As [indiscernible] end of line our airline ticketing product power more than 4,000 tickets and airports across 234 countries around the world.

As a result of this increased coverage and customer awareness of Tuniu's airline offerings, GMV from transportation ticketing increased to approximately 11x this quantity during the same period last year..

As mentioned earlier, airline companies are actively looking for online partners with high customer service capabilities in order to diversify their sales channels.

In order to facilitate their demand, Tuniu is collaborating with a large number of leading airline companies to launch their flagship stores on Tuniu's platform for both domestic and international routes. As such, we expect to continue expanding our coverage of air routes going forward. .

We continue to closely work with our largest shareholder, HNA Group, to extract synergies between our companies. Both Hainan Airlines and Capital Airlines products are now fully accessible on our platform and have been fully integrated into our packaged tour products.

Additionally, we have been able to access HNA Group's large portfolio of resources to procure competitively priced products from its airline companies..

With years of experience servicing customers for sophisticated packaged tour products, Tuniu's expertise in customer service is industry leading. We believe this is our core advantage in the transportation ticketing market.

Going forward, we will leverage our developed brands and existing customer service expertise to actively expand our transportation ticketing business..

Let's move on to our accommodation reservation business.

Tuniu's accommodation reservation business delivered equally impressive results during the second quarter as it utilized our established leader travel resources to quickly expand its coverage, in the second quarter, accommodation reservation GMV to approximately 8x its amount during the same period last year.

Notably, GMV of high-end results increased 22x year-over-year during the first half of 2016 and continued to sell as [indiscernible] factor of full growth. .

Our accommodation reservation products continue to focus on leisure travelers during the first half of 2016. Over 70% of accommodations were booked for leisure purpose as popular domestic and international travel destinations.

At this definition, customers' bookings accommodations for leisure purpose tend to have higher budgets and mostly booked for 4- or 5-star hotels with high ASPs..

Similar to the airline ticketing industry, hotel flyers are looking for additional online channels to diversify their distribution. As such, we believe this is an ideal time for us to expand our accommodation reservation business by leveraging our leisure travel resources and the packaged tour expertise.

We will be able to rapidly expand our accommodation reservation business..

Now I would like to touch on self-guided tours, which continues to be a growth driver for Tuniu. Total number of sales from self-guided tours increased 85.8% year-over-year in the second quarter. In China, self-guided tours continues to gain momentum with younger travelers and seasoned travelers taking [indiscernible] to explore destinations. .

Transportation ticketing and accommodation reservation are fundamental building blocks for our self-guided tours because they are the true components that travelers generally book before they depart from their place.

Destination-based products and local products such as day tours, attraction tickets and car services are increasingly being booked during the trip.

The fragmented and localized product that Tuniu has accumulated over the years is our core competitive advantage in self-guided tours as we are able to provide a higher degree of customization for our users when compared to offline or other industry peers..

Additionally, we have made strong progress in developing our transportation plus Hotels + X model. Our systems can now leverage our existing customer preference to make smart recommendations for both route and products to our customers..

This smart recommendation system, which is driven by our Big Data technology, helps us monetize our existing customers by pushing the right products at the right time. The transportation plus Hotel + X model will increase user ticketing [ph] to our platform and reinforces our brand as the go-to platform for online leisure travel..

Overall, despite negative impact from Europe, we are confident about the long-term outlook for leisure travel in China. Drivers such as the favorable visa policies for Chinese travelers in countries like the United States and Great Britain unlock new growth opportunities for the market.

As the current market leader in online leisure travel in China, we are well positioned to take advantage of any market opportunity.

As the scale of our business continues to expand, we expect [ph] to benefit from the operating leverage achieved in our packaged tour business, and there's an increasing margin contribution from our travel-related products..

Starting from the second quarter of this year, we will implement cost control measures in order to unlock our profitability potential and Tuniu's brand value. We are pleased with our increasing customer base and the developing reputation as the one-stop online travel agency.

We believe we can rapidly grow our transportation ticketing and accommodation reservation business without significant investment due to our already established brand. Additionally, our core expertise in customer service will differentiate us from other industry peers for transportation ticketing and accommodation reservation.

By leveraging these core assets, we expect to continue expanding our market share in China's online travel market..

I'll now turn the call to Conor Yang, our CFO, for financial highlights. .

Thank you, Donald, and hello, everyone. I will now walk you through our second quarter 2016 financial results in greater detail. Please note that all monetary amounts are in RMB unless otherwise stated. You can find the U.S. dollar equivalent of the numbers in our earnings release..

For the leisure travel GMV for the second quarter increased by 94.3% to CNY 4.5 billion. Packaged tour gross bookings for the second quarter increased by 54.8% year-over-year to CNY 3.3 billion, including 65% from outbound tours. For the second quarter, net revenues were CNY 2.4 billion, representing 55.6% year-over-year growth.

Revenue for organized tours, substantially all of which are recognized on a gross basis, were up 50.9% year-over-year to CNY 2.2 billion and accounted for 93.7% of our total net revenues for the quarter.

The increase was primarily due to the rapid growth in demand for travel to certain international destinations, such as the Middle East, Africa, Southeast Asia, Australia, New Zealand and North America.

The number of trips for organized tours, excluding local tours, increased by 98.1% year-over-year to over 610,000, and the number of trips of local tours increased by 33.3% year-over-year to over 634,000..

Southeast Asia, North America, Middle East and Africa. The number of trips for self-guided tours increased by 85.8% year-over-year to over 420,000 in the second quarter of 2016.

Other revenues were up 247.3% year-over-year to CNY 85.7 million, primarily due to rising service fees received from insurance companies, revenue generated from financial services and commission fees received from other travel-related products. Gross margin for the second quarter of 2016 was 5.1% compared to 4.7% in the same period in 2015.

The increase in gross margin was primarily due to the increased contribution from other revenues as a result of category expansion and the optimization of product cost structure. .

Operating expenses for the second quarter of 2016 were CNY 900.6 million, up 147.5% year-over-year. Excluding share-based compensation and amortization of acquired intangible assets, non-GAAP operating expenses were CNY 842.3 million, representing a year-over-year increase of 139.6%. .

Research and product development expenses for the second quarter of 2016 were CNY 141.3 million, up 129.6% year-over-year.

The increase was primarily due to investment for implementation of additional product categories, such as transportation ticketing, accommodation reservation and financial services, increase in direct procurement-related personnel, improvement of online technology and the rise in technology and product development personnel-related expenses..

Sales and marketing expenses for the second quarter of 2016 were CNY 623.3 million, up 109 -- 169% year-over-year. The increase was primarily due to branding campaigns such as advertisements from certain TV programs during the quarter that were signed last year and offline advertisement campaign. .

In the second half of this year, this portion of expenses will be significantly reduced. The increase of certain marketing expenses was also due to the expansion of our VIP customer service team and amortization of acquired intangible assets from the previously announced transaction with JD.com..

General and administrative expenses were CNY 141.5 million in the second quarter of 2016, up 93.9% year-over-year. The increase was primarily due to an increase in the headcount of our administrative personnel as a result of our business expansion, such as regional service center expansion and product category expansion..

Net loss attributable to ordinary shareholders was CNY 764.8 million in the second quarter of 2016. Non-GAAP net loss attributable to ordinary shareholders, which excluded share-based compensation expenses and amortization of acquired intangible assets, was CNY 706.3 million in the second quarter of 2016. .

As of June 30, 2016, the company has cash and cash equivalents, restricted cash and short-term investments of CNY 5.9 billion. Cash flow generated from operations for the second quarter of 2016 was CNY 141.4 million.

In the second quarter, excluding the impact of the prepayment to HNA Tourism, the cash conversion cycle was negative 29 days compared to negative 37 days in the corresponding period last year. Capital expenditures for the second quarter of this year were CNY 34.8 [ph] million. .

Now let me provide top line guidance for third quarter of 2016. Tuniu currently expects to generate net revenue in the range of RMB 3.9 billion to RMB 4 billion, which represent 30% to 35% growth year-over-year. Please note that this forecast reflects Tuniu's current and preliminary view on the industry and its operations, which is subject to change..

Thank you for listening. We are now ready for questions.

Operator?.

[Operator Instructions] Our first question comes from Eric Wen of Blue Letters (sic) [ Blue Lotus ]. .

[Foreign Language] I want to know more about the composition of our third quarter guidance and the growth rate of each of our business and also the factors that influence the third quarter guidance. And the second question is, I want to get more color on the take rate of our new business in airline ticketing and hotel booking. .

Well, yes. Our guidance for the third quarter was 30% to 35% year-over-year, but this is on U.S. GAAP revenue. In terms of the different segment of growth, current trend is like we have experienced a higher growth rate from self-guided tours versus localized tours. So when you translate to U.S. GAAP revenue, mostly it's organized tours.

So you can expect that the rate we are announcing for the forecast is pretty much in the organized tours growth rate. And self-guided tours growth rate, which recognized on net basis, will be higher than that, definitely higher than that.

And also, the other revenue, especially the travel-related part of such as air ticketing, hotel reservation, definitely will be growing at like triple-digit growth rate. And you might wondering why the guidance is not as high as in the past.

Firstly, as I mentioned, that organized tour, this is reflecting mostly organized tours growth rate, but we also have experienced a very strong growth rate from self-guided tours, especially also the -- our air ticketing, transportation and accommodation growth rate, that, in total, are our old customers.

That's why starting from this quarter, we have also that the 3 now [ph] that our total travel-related GMV growth rate. And the take rate for airline and hotel. Airline, including the insurance, is roughly between like slightly above 2% to 3%, between 2% to 3% in total.

And the hotel sector, we are currently -- have about 6 to -- at about 7%, more or less. Going forward, the hotel, as we continue to expand, the take rate might increase. Thank you, Eric. .

Okay. [Foreign Language] Now I just want to clarify that the third quarter guidance from the GMV perspective, how the growth rate look like. .

Yes, as I said -- right, right -- right, right, right. Organized tour is probably in the range of -- in line with our guidance. In self-guided tours, GMV will be higher than that. And the travel-related product GMV will be growing at, again, at least, triple-digit growth rate. Thank you. .

Our next question comes from Alvin Jiang of Deutsche Bank. .

I have a quick question on the margins. Can you give us some more color on the margin outlook for the coming quarter and also for the next year, especially considering you are investing and expanding into the new business like air tickets and hotels? [Foreign Language].

[Foreign Language].

[Foreign Language].

On the packaged tour take rate that, in the past, we've been maintaining a very competitive pricing strategy, and this time, we also have a very high growth rate. Going forward, we believe that the take rate of a packaged tour will gradually increase.

And as we have achieved the #1 market share, then we think that for this business, we'll maintain a stable growth. In the meantime, continue to increase the take rate gross margin. In terms of air ticketing and hotels that we have an open platform strategy that happen to many suppliers' inventory for this business.

And in the hotel sector that we're especially focusing on the 4-star, 5-star range of the hotel in the leisure travel destinations. And we particularly have a higher margin than average hotel booking. So overall, I think these 2 sectors will continue to improve. In terms of when you translate into the U.S.

GAAP gross margin, you can see for the last 2 quarters, we have an improved -- continue to improve our gross margin and especially the composition of the other revenue has increasing very quickly that current second quarter, we have increased like it's over 240% year-over-year on the other revenues.

That will be a important contributor going forward for the U.S. GAAP gross margin improvement. So we also expect that going forward, that and the reported gross margin will continue to improve. Thank you. .

Okay. So how about if we included all the expense, OpEx, how about the margin trends for operating margin? [Foreign Language].

Yes. As we also stated in our earnings release and also the script earlier that second quarter, we have encountered a pretty large loss. And we have invested in our branding over the last 2-plus years, and we believe it is time that we should leverage this investment.

So we have also taken, starting from the second half of this year, cost control measures. We'll be focusing on improving gross margin as well as decreasing the operating expenses as a percentage of our revenue. So we're expecting going forward, the loss, as a percentage of revenue, will definitely improve. Thank you. .

Our next question comes from Natalie Wu of CICC. .

A quick question on the GMV contribution. So if I calculated GMV contribution from organized tours and self-guided tours, actually, the mix had been shifting towards self-guided tours since the last third quarter. However, the contributions from self-guided tours dropped this quarter from 39% to 35%.

So just wondering what's the reason behind and how should we expect the contribution from self-guided tours in the next quarter and also in the longer term? Is there any specific target behind your next quarter's guidance, say, 40% GMV contribution from self-guided tours or something? And I also have a quick follow-up on the prior question -- on the prior answer on the hotel take rate.

You mentioned that the current take rate for the hotel business is 7%.

So just wondering, is it a gross take rate or net take rate?.

Gross take rate. Yes, that will be a gross take rate. And Natalie, to answer your question -- yes, compared to organized tour and self-guided tour, that you are right that we have seen that higher growth rate coming out from our self-guided tours overall.

The percentage of contribution, GMV, from self-guided tour slightly below previous quarter, that is due to seasonality. Typically, in the first quarter, the self-guided tour percentage is higher. And -- but overall, the growth rate right now is self-guided tour, its growth rate is higher than organized tour.

And going forward, we believe that will continue to be the trend, and that's why we are very focusing right now on the air ticketing, hotel, transportation ticketing, hotel reservations, to cope with this self-guided tour as a trend as well as we have streamlined a lot of our product offering in the destinations.

So for example, lots of destination-based tours, lots of business -- our customers right now, they might purchase their own air ticket, but they fly to a destination that they purchase our product for like a 3-day tour or 4-day tour, for example, in Kunming, in Yunnan. So this kind of a tour becomes very popular.

We have lots of product offer for that as well as the destination-based products. So we're expecting this trend will continue to grow faster. Thank you. .

So just a quick follow-up.

What should we expect the GMV contribution from self-guided tours for the next quarter? Say 40% [ph], can we expect that?.

This quarter, it's about 30... .

35%. .

About 39% -- 33%, 34%, right. So third quarter, it really depends. Overall, as I said, this is the trend. But on the organized tours, one of our largest destination, which is Europe, that continue to have a negative impact from this terrorist event. For example, during the second quarter, also terrorist attack in Belgium.

That's an important contribution of our organized tour. If everything is peaceful over there, that portion of business might gradually recover and will contribute a higher percentage. So yes -- so kind of 2 sides. Overall, that self-guided tour might -- should grow faster.

And that self-guided tour, whilst Europe is recover, the situation will be better than the current status. .

So is our current guidance... .

Right now, we are not considering the recovery from Europe. So that's the guidance of -- we have given today, 30% to 35% of the net revenues. .

Our next question comes from Amanda Chen of Morgan Stanley. .

[Foreign Language] customer. I will translate it myself. So we consider this quarter, the air ticketing and the hotel revenue is growing quite fast. So I'm just wondering how much of the revenue is contributed by consumer who bought the packaged tour products before. That's my first question. .

[Foreign Language].

In the second quarter of our business, that 45.3% GMV was contributed by our own customers. And this is overall as a company. But in terms of the air ticketing, hotel GMV, will be -- it's pretty similar to this number but slightly higher. We did not really put a lot of advertising for air ticketing and hotel reservations.

And so I think that's why the most of the -- this business coming out from existing customers and pretty much in line with the whole company. Thank you. .

Got it. And my second question is regarding your organized tour. If we look at the revenue -- sorry, the gross booking value for organized tour, it seems that the ARPU is declining a little bit over half the quarter.

So may we know the reasons behind because of the price war or because the demand is kind of weak so you have to cut price to clean your kind of inventory?.

Yes, we -- firstly, that we did not cut price for organized tour. The reason overall, as the customer number is growing a lot faster than our GMV, that means the ASP is declining. There's a few -- several factors.

Firstly, that the European business still has a impact, and Europe has the highest ASP among the organized tour products that customers, instead of going to Europe, they go to other places with the lower ASP. And secondarily, that there are certain trends right now that a customer that travel -- maybe they book their ticket by themself, right.

Then for example, in -- within China, they fly to Yunnan and once -- and then they purchase our destination-based tour. For example, they purchase our 4-days tour, organized tour in Yunnan. So for that kind of product, package actually is without transportation, so it's just a local tour ASP.

It's lower than the package with the air ticket, and that is -- we see a pretty increasing trend on this. So we're also happy to see the total customer numbers increasing a lot faster. So that's the reason, overall, the organized tour ASP is not as high as before. .

Got it. Very clear. And the final question is regarding the hotel. A quick follow-up is on your take rate. You said the 7% is gross take rate. So how about the net take rate? That's first.

And the second, can you share with us more metrics, for example, how much GMV is from 4-, 5-star hotel? How much is from outbound -- is from international hotel? And also, what's the ASP for now?.

Sorry, Amanda, what's your first question regarding to take rate?.

Yes, the net -- you just said the gross take rate is 7%, right? 7%. So how about the net take rate after you deducted the coupon paid to consumers. .

Well, actually, we did not using coupon as promotion strategy. So it's pretty much that's our take rate. We did not -- right, right, there's no couponing activities for hotels. And in terms of the -- we have -- majority of our gross hotel book reservation is for like higher stars of hotels. So ASP, we believe, is kind of highest among the peers.

We have a... .

[Foreign Language].

Right. .

[Foreign Language].

[indiscernible] like it's between RMB 400 to RMB 500 per night if you compare to our peers our OTAs, which is high. .

No, no, [Foreign Language].

[Foreign Language].

Right, so about 40% to 50% of our customers for hotel reservation is -- they're booking for 4- to 5-star hotels. .

No. [Foreign Language].

[Foreign Language].

[Foreign Language].

Currently [indiscernible] the national hotel reservation is about 10% of our hotel reservation. .

Our next question comes from Evan Zhou of Credit Suisse. .

Have a quick follow-up on our profitability. I think you've been making some comment on our effort on cost control, improving gross margin.

So I was wondering do we have a ballpark for P&L and cash flow profitability outlook into maybe probably second half next year? I think that, that was kind of the original cash flow breakeven target that we used to have. So I was wondering is that target still hold? And also, second is regarding our use of cash.

You actually announced roughly USD 150 million of share repurchase program. So wondering, like, is this a decent chunk of cash that will be put into use in this program? So I was wondering, like, any -- not advertised before cash flow situation.

So any kind of the colors that you can provide on the cash flow trend or outlook into the following quarters, that'll be very helpful. .

Right. This is the first time we have spoken about taking cost control measures. In the past, when over -- we have been experiencing a very high growth stage. And in the meantime, we -- operating expenses has increased a lot.

And it's time to kind of leverage our investment, the regional expansion, the branding campaign as well as the category expansion.

So we will take a very effective control on the -- all the operating expenses going forward in the next 2 years, especially coming out fourth quarter and then -- and next year, you will see a very significant improvement on the loss. And today, we have announced this USD 150 million cash share buyback.

We actually are very confident about our cash level to cope with our plan that -- for the cost reduction. And yes, that's why we are taking this action. .

Our next question comes from Juan Lin of 86Research. .

I have a follow-up question on Europe.

Although Europe, your -- the recovery of the tours to Europe has not been factored into your guidance, at this point of time, have you seen -- already seen any improvements for Europe tours or whether Europe weakness is going to be a full year phenomenon rather than just 2 quarters impact? And then with that, what is your observation on the tour bookings for the October holiday, whether it is still as strong as the previous years? This is my first question.

And second question is the margin for accommodation reservation and the transportation ticketing business.

What is kind of margin for these 2 products? And at what scale do we expect these new products -- new business to turn profitable? And what is the long-term margin target for accommodation reservation and transportation ticketing?.

[Foreign Language].

[Foreign Language].

And for Europe, that we have seen so far, there's no sign of recovery back to its normal level. Believe probably more clear sign will be like end of this year or beginning of next year. And for the national holiday, it's just the beginning for bookings, so hard for us to comment on that. I think your last question is the [Foreign Language].

[Foreign Language].

For the hotels... .

[Foreign Language].

[Foreign Language] For the hotel, right now, we're using open platform. So the take rate is about 7%. Going forward, when we continue to increase our size, we will start to do in certain area on the direct procurement, especially focusing on the high-end, like 4- to 5-star hotel.

And we expect that by doing so, the take rate should improve from the current level. In terms of air ticketing, the take rate is pretty standard, like for us, about 2% to 3%, including insurance right now.

And going forward, we will continue to expand into areas such as like focusing on like business class, first class, which has higher margin, as well as the oversea air ticketing, which also have a higher margin. So by balancing different product mix, hopefully, can improve the overall take rate of air ticketing. Okay. .

[Foreign Language].

[Foreign Language].

All right. On the -- for the July 1, the new policy from airline company in China has certain impact on the take rate and -- towards our proportion of business in the overseas air ticketing. But overall, that currently, what we announced that about 2% -- 2% to 3% take rate, mostly it's under the consideration of the new policy.

And this will actually is helpful overall for whole industry going forward. And in terms of the oversea proportion of the air ticketing, currently, we have about between 10% to 20% of the air ticketing that is -- sell for oversea outbound area. .

[Foreign Language].

Right, right, right. When -- just one comment on the earlier question that the percentage of the overseas hotel reservation. Earlier, when we said that 10%, that's the -- it does not really including, like, Taiwan, Hong Kong and Macau. It's including all the overseas. Overall hotel bookings for us is about 20%. .

Our next question comes from Wendy Huang of Macquarie. .

I think, firstly, you have already mentioned the domestic and the international breakdown for both hotel and air ticketing. I just wonder if you have this kind of breakdown for your overall GMV and revenue. .

Right. The overall GMV for this second quarter is 65% of our GMV coming out from outbound and 35% for domestic. .

How about revenue then?.

Because revenue mostly is for like organized tour, and actually, it's very similar proportion, yes. .

Okay.

And also the -- can I just confirm that in your prepared remark, you mentioned that you have already obtained the license -- the direct sales license from all the airlines or just from Hainan and the Capital airlines?.

[Foreign Language].

Wendy, can you [indiscernible]... .

[Foreign Language].

[Foreign Language].

Right. Right, what we're referring to really is like a flagship store from different major airlines that we have attend [ph], like Hainan Airline, Capital Airline and many few others. Yes, so definitely, this year, all these major airlines in China will have like direct flagship stores linked with our air ticketing platform. Thank you. .

Follow-up on that.

Do you have the booking -- air ticketing booking volume breakdown from Hainan, Capital Airlines, that you have special relationship versus the 3 other major airlines?.

Actually, everyone is very clear about these 4 airlines, the market share in China. And with us, that Hainan actually rank the top among these 4 in our market share. And the rest of the airlines is very similar to their own market share in China, yes. So Hainan is currently slightly higher than the other 3. .

Okay. And also, I think many people already asked about your Q3 revenue guidance. I just want to -- I don't confirm that you are guiding the revenue growth to decelerate from 56% this quarter to 30% to 35% in Q3.

Was that mainly due to the -- some weakness in some regions or mainly due to dilution impact from the new customers?.

Yes, there's several factors. Firstly, I -- the overall of our business momentum is still quite strong.

The GMV is going well, well above the reported GAAP revenue because reported GAAP revenue is mostly like organized tours, which recognize on gross basis, and as we have experienced a higher growth rate coming out from self-guided tours, that is only booking as a net for our revenue.

So if -- for example, if you see our second quarter, we have a lot higher growth rate for self-guided tours as well as the other revenues, which is including the air ticketing, hotel booking, that is also catering for self-guided tour customers.

And the other factor is, as I mentioned, that we'll start to take like more cost control measures to -- especially like, offline campaign for branding [indiscernible] on -- from the second half of this year.

So we hope that in our site, once we have reached #1 market share in this online leisure travel, we will maintain more reasonable growth rate, in the meantime, have a better cost control overall to improve the loss percentage of -- as the percentage of revenue and eventually going to breakeven, yes, in the future. .

When you say implementing the cost controls in the half, do you have a dollar amount budget in mind? And also, I think, in the past quarter, the operating loss actually doubled year-over-year, although the revenue actually only increased by 56% year-over-year.

So with this kind of cost control to be in place, when shall we actually expect the -- Tuniu to become self-funded?.

Well, we have -- internally, we have a very clear plan and target path to profitability. However, we do not provide the -- give guidance on -- detail on this. And in the second quarter, yes, our operating expense is growing a lot, and our overall GMV actually also growing like 90-something percent.

And one of the reason the second quarter especially high on marketing is we have a precommitted contract on the popular TV program, the Running Man, which cost a lot, that we signed for that last year, but it's broadcast in the second quarter. So that is the reason this advertising expense is very high this quarter.

But going forward, that part of offline campaign will be greatly reduced. And yes, I think we'll maintain above-industry growth rate on the overall GMV, total GMV. In the meantime, we'll manage on the cost expenses side going forward. .

Is there [indiscernible] that [indiscernible] is moving factor here.

Do you mind sharing the kind of dollar amount spending on that print ad [ph] campaign so that we can actually -- modeling actually in the second half?.

Right. In the second quarter, overall offline [indiscernible] is close to 50 -- close to half of what we have spent on the sales and marketing, so on the advertising second quarter.

And of course, the sales marketing, in this -- out of this RMB 600-something million sales and marketing expenses, there are -- we have a -- other than advertising, which is about RMB 500-plus million, the rest composing of like VIP customer maintenance -- VIP customer teams as well as certain personnel-related expenses. .

That's very helpful and clear. Lastly, housekeeping.

Do you have the number of the hotels that you have signed in China and overseas, respectively?.

Currently, we are using smart kind of platform cabin to many suppliers or other OTAs for hotel supply. We have not signed directly in the largest scale. However, in our package tour area and especially lots of destination-based hotel, we have signed quite number of those.

And we'll leverage our procurement power on the packaged tours to also -- even this for the hotel reservation channel. And as Alex mentioned earlier -- and once we reach a certain scale in hotel reservation, then we will go next step to more direct procurement in the hotel sector, especially focusing on like the 4-star, 5-star hotel, high-end hotels.

Thank you. .

Then what's the coverage through the open platform then?.

Sorry, Wendy, what's your... .

Sorry, that's my last one.

Just the -- then what's your hotel coverage through the open platform then?.

[Foreign Language].

And this concludes our question-and-answer... .

Sorry, I'll just answer that, that the hotel coverage is about [ph] 600,000 hotels domestic as well as international hotels, Wendy. .

All right. This concludes our question-and-answer session. I would now like to turn the conference back over to Conor Yang for any closing remarks. .

Once again, thank you for joining us today. Please do not hesitate to contact us if you have further questions. Thank you for your continued support, and we look forward to speaking with you in the coming months. .

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines. Have a good day..