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Introduction

Ctrip.com International Q4 2005 Earnings Conference Call Transcript (CTRP):

Executives

Miss Yin Yin, Senior Director of Finance Mr. James Liang, Chairman Mr. Min Fan, Chief Executive Officer Miss Jane Sun, Chief Financial Officer

Analysts

Safa Rashtchy, Piper Jaffrey Jason Breuschke, Citigroup Richard Gee, Morgan Stanley Kit Lowe, Goldman Sachs William Bean, Deutsche Bank Ashish Bedani, Gilford Securities Chang He, Foreign Technology Research Lu Sun, Lehman Brothers Andy Coulier, New York Global Securities

Miss Yin Yin, Senior Director of Finance

Thank you for attending Ctrip’s earnings call for the 4th Quarter and Full-Year 2005 Unaudited Financial Results. Joining on the call today are Mr. James Liang, Chairman, Mr. Min Fan Chief Executive Officer, and Miss Jane Sun, Chief Financial Officer. Before we begin I would like to read an important statement. We may during this call discuss our future outlook and performance which our forward looking statements may understate harbor positions of the US private securities litigation reformat of 1995. Forward looking statements involving apparent 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 future public filings with the security and exchange commission. This does not undertake any obligation to update any forward looking statements, except as required under applicable law. James will give an update on our business during 2005; Fan will give the outlook for 2006, followed by Jane who will discuss more details on our financial performance. With that I will turn over to James.

Mr. James Liang, Chairman

I am delighted to report record performance across all our businesses in the 4th Quarter and Full-Year 2005. During the 4th Quarter our year-on-year growth has not slowed but accelerated compared to the year before and we saw pick up in both visa travel and business travel during the Quarter. In 2005, our net active customer base grew by about 60% to $1.7 million as more travelers adopt Ctrip’s services to book hotels, air tickets, and package tours. On average approximately 57,000 new customers transacted with Ctrip amounting the Quarter compared to 54,000 in the previous Quarter. This compares to approximately 40,000 per month in 2004 and 25,000 per month in 2003. We accelerated with the addition of new customers of many continue to brand building efforts the broadening of our products and service offerings and in the net worth effect of existing customers. In addition, we continue we continue to maintain our highly loyal customer base. Our hotel supply net worth in China increase to about 3,400 hotels by the end of the 4th Quarter in 2005 compared to approximately 2,900 hotels at the end of 2004. In terms of competitive landscape featuring to be the clear dominant market leader in China, we continue to believe innovated products and the superior services quality of three different areas of our business. Before planning to discuss our strategies for 2006, I would like to formally introduce him. Min Fan has been with the company from the earliest of days as one of the co-founders of Ctrip. He possesses a wealth of knowledge in the travel industry in China from over 15-years of experience in the industry. During his tenure at Ctrip, he has held several senior managerial positions at Ctrip including Chief Operating Officer prior to his promotion. I have every confidence that Min Fan is the right man to take Ctrip to the next level of success.

Mr. Min Fan, Chief Executive Officer

Thank you, James for your kind introduction. I am pleased to take over for James who has built one of the largest and best known travel companies in China. This is a truly exciting time for Ctrip and I see tremendous opportunities for China’s travel industry in the next few years. In year 2006, we will continue to strengthen the Ctrip brand. Build on our core contents in technologies, process, and service. For further leverage our skills to maximize customer satisfaction and loyalty and extend customer reach. We will focus on increasing market sharing in the hotel and air sectors to continue to enhance air products, develop markets by setting up more branch office, and set up branding and product development efforts for cities. In the medium to long-term, we also see opportunities in outbound travel business and inbound travel service. Now let me turn to Jane to give our financial results.

Miss Jane Sun, Chief Financial Officer

Thanks, I will cover the financial results of the 4th Quarter of 2005 and the Full-Year of 2005. Our net revenues were RMB154.8 million or US $19.2 million in the 4th Quarter of 2005. Net revenues grew by 57% year-over-year or by 10% quarter-over-quarter. For the Full-Year of 2005, net revenues were RMB521.2 million or US dollar $64.6 million. Revenues from hotel reservations were RMB $103.9 million or US dollar $12.9 million in the 4th Quarter of 2005; up 33% year-over-year and 8% quarter-over-quarter, primarily due to the volume growth accompanied by higher commission per night. The total number of hotel room nights booked was approximately 1.52 million in the 4th Quarter compared to approximately 1.44 million in Q3. In the 4th Quarter, the average commission per room night increased to 68RMB from 66RMB in Q3. The average commission margin on hotel bookings was relatively stable at 14%. For the Full-Year of 2005, hotel revenues were RMB362.9 million or USD $45 million and accounted for 65% of total revenues in 2005 compared to 78% in 2004. Total number of room nights booked was approximately $5.5 million for 2005 verses $4.2 million for 2004. The air ticketing business continues to perform above expectation. Revenues from air ticketing were RMB51.3 million of US dollar $6.4 million in the 4th Quarter of 2005 up 136% year-over-year and 11% quarter-over-quarter. The total number of air tickets sold in the 4th Quarter of 2005 was approximately $1.17 million compared to approximately $1.02 million in Q3 2005 and more than doubled Q4 2004 number. In the 4th Quarter, the average commission margin per ticket sold achieved 5.1% compared to 4.6% in Q3 2005. However, due to the fact that average ticket price decreased by approximately 100RMB to 870RMB as the result of competitive pricing strategy by airlines. The average commission per ticket sold decreased slightly to RMB44 in Q4 2005 from RMB45 in Q3 2005. For the Full-Year of 2005, air ticket revenues were RMB162.6 million or US dollar $20.2 million; an increase of 158% from 2004. Revenues from air ticketing represented 29% of total revenue up from 18% in 2004 as the air ticketing business continued to increase contribution to our top line. Revenues from package tour were RMB7 million or US dollar $.9 million up 106% year-over-year and 7% quarter-over-quarter. As we continue to gain expertise in developing FIT package products and a greater acceptance of our products among leisure travelers. For the Full-Year of 2005, package tour revenues were RMB22.8 million in 2005 a significant increase of 117% from 2004, which was similar to the year-over-year growth in 2004. Gross margin was 81% in the 4th Quarter of 2005, compared to 84% in the same period of 2004, as a result of increased revenue contribution from air ticketing business. Gross margin decreased from 83% compared to Q3 2005 gradually due to the increase in cost of services associated with year-end discretionary bonuses as determined in the 4th Quarter of 2005. For the Full-Year of 2005, gross margin also declined to 83% in 2005 from 85% in 2004 due to the increase of air ticketing revenues. Product expenses increased by 26% from Q3 2005, primarily as the result of hiring additional new staff to extend power supply network as well as year-end discretionary bonuses as determined in the 4th Quarter of 2005. Sales and marketing expenses increased by 13% from Q3 2005, primarily due to hiring of additional new staff, year-end discretionary bonuses as determined in the 4th Quarter of 2005 and a rise in promotional and outside selling expenses. GNA expenses increased by 22% from Q3 2005 mainly due to year-end discretionary bonuses as determined in the 4th Quarter of 2005. Overall, Q4 2005 operating expenses increased by 28% year-over-year much below the revenue growth of 57% year-over-year, reflecting the financial discipline of our company. Operating income was RMB60.6 million or US dollars $7.5 million in the 4th Quarter of 2005 up 84% year-over-year. Operating income decreased slightly by 3% from previous Quarter, primarily due to year-end discretionary bonuses. Operating margins increased substantially to 39% in the 4th Quarter of 2005 compared to 33% in the same period of 2004. Operating margin decreased from 44% in the previous Quarter largely due to year-end discretionary bonuses as determined in the 4th Quarter. For the Full-Year, operating margin was 42% in 2005 up slightly from 41% in 2004. Net income was RMB62.6 million or US dollar $7.8 million in the 4th Quarter of 2005. Net income grew by 57% year-over-year but decreased by 5% quarter-over-quarter. Net margin was 40% in the 4th Quarter of 2005 compared to 42% the same period of 2005. During Q4 of last year, the lower operating margins was offset by a tax refund received during that Quarter in conjunction with a potential tax treatment granted to seek travel information with our subsidiaries. Net margin decreased from previous Quarters 47% mainly due to year-end bonus and a lower subsidy income. For the Full-year of 2005, net margin was 43% up from 40% in 2004. Fully diluted earning per ADS for the 4th Quarter was US dollar $.47¢. Fully diluted earnings for Full-Year of 2005 were US dollar $1.72 per ADS. Cash flow from operating activities were RMB87.8 billion or US dollar $10.9 million in the 4th Quarter of 2005. As of December 31, 2005, the cash bonus was approximately US dollar $92 million representing more than 70% of our total assets. Before I move to discuss business outlook for the First Quarter of 2006, I would like to discuss shared based compensation. Effective in the First Quarter of 2006, the company will account for shared based compensation in accordance to FAS123RR. The company activates the total share based to cost in 2006 to be approximately $89 million. For the purposes of determining year-end discretionary bonuses, management has historically evaluated employees annual performance at the end of year. However, beginning in the First Quarter of 2006, management will evaluate employees performance on a quarterly basis for purposes of expected annual discretionary bonuses awards and accrual such amount on a quarterly basis instead of in the last Quarter of the year. For the First Quarter of 2006, the company expects a solid year-over-year revenue growth of approximately 35%. As the First Quarter of each year is generally the weaker Quarter due to seasonality factors of the travel business, the company revenue in the First Quarter of 2006 to decrease from the 4th Quarter of 2005. For the Full-Year of 2006, the company expects to continue to thrive in healthy travel industry in China at approximately 35% year-over-year revenue growth rate. For the Full-Year of 2006, the company expects the operating margin to remain comparable to 2005 before share based compensation expenses. With that operator please open the line for questions.

Operator

The first question comes from Safa Rashtchy, Piper and Jafrey

Safa Rashtchy

Good Morning, James, Fan, and Jane. Congratulations on a great Quarter; just a quick question. First, I missed the description you had of the other income which was significantly higher if you could just give us what was and how we should be expecting the other income trend in the coming Quarter? And second, if you could give us a broad overview of your outlook, not just for Q1 but industry wise for the prices of hotels as well as the air tickets and the margins, in what direction do you see towards higher margins, lower margins, as well as on prices how do you see those and air ticket prices? Thank you.

Jane Sun

Thanks, Safa. The first question on the other income for Q4 2005, we received some subsidy from government so that’s why the subsidy was a little bit below price Quarter but a little bit higher than our originally planned because we have no control on when the government is going to give us the subsidy. On the margins, because the air ticketing revenue is growing, we expect overall margins will decrease slightly from previous Quarter to approximately 80%.

Safa Rashtchy

If I may clarify my question, I meant more specifically the margins of each business you own, in other words, do you expect the commission you get on the air ticket to gradually improve or otherwise on the same with the hotel?

James Liang

The price of the airline determined by seasonality also by how competitive the airlines or how cooperative these airlines are in a given period. So that Quarter is pretty competitive and the previous Quarter, the seasonality driven, sorry the Q3 the price is higher because of the seasonality is better in Q3, so for the whole year, for this year I think the price, we can only predict that the price will remain pretty similar level as in the last year and our commission rate also remains pretty similar as compared to . In the hotel, you will probably see a slight increase of the price, but overall it’s pretty similar.

Operator

Your next question comes from the line of Jason Breuschke, Citigroup

Jason Breuschke

Thank you, first of all good morning and welcome Jane and congratulations Fan on your new role with the company. I just have two questions as well, first of all, could you maybe comment on the strength of the business. Q4 is traditionally a seasonally weaker business than the 3rd Quarter and yet you posted a surprisingly strong Quarter with accelerating the earlier growth. Is there something going on in the overall market or are you taking share from your competitors or both?

James Liang

The 4th Quarter is seasonally a little bit weaker, it’s maybe 1 or 2% weaker than the 3rd Quarter it’s not that significantly weaker than the Quarter overall. And, acceleration is really in the air ticketing sector. I think the air tickets will continue to see a very strong growth and will continue to take shares away from the traditional air ticket agents because as you know eLong, it’s not really a competitor in the air ticketing space. And also I think, the other factor is probably a minor factor also is that as we have more shares of leisure travel, the weather is getting warmer every year, in the 4th Quarter it’s not as cold as in the early year so the leisure travel picks up a little bit and that will contribute to the hotels, and the airs and packages on our businesses so that also helps us a little bit. I think in the future, so seasonally 3rd Quarter, 4th Quarter is more and more become similar, Q2, Q3, Q4 seasonally is almost the same, except Q1 is seasonally significantly weaker than the other three Quarters.

Jason Breuschke

The other question I had is on the Full-Year guidance, on the back end of the 57% year-over-year growth in the 4th Quarter, you’ve given us what appears to be pretty conservative guidance for the Full-Year, is this because you have a new management team that’s going to be taking over or are you seeing something going on in the market maybe in the second half of the year that we’re not seeing that we should be aware of?

James Liang

Well, the management team has always been conservative, so I think the new management team is also pretty conservative, but obviously the hotel sector is slowing down because we have a larger base, so we have a pretty good idea of how much the hotel business will grow. You know the big question is how much the air ticket business will grow, so we are still very, we have a very high growth rate currently compared to year-to-year over growth, but I think at some point the air ticketing will slow down because we have larger base. So predicting when that will slow down is very difficult business that certainly adds to our conservativeness.

Jason Breuschke

Great, thanks, and congratulations on a great Quarter guys.

Jane Sun

Thanks, Jason.

Operator

And your next question comes from the line of Richard Gee, Morgan Stanley

Richard Gee

Hi James, Min, and James. I have two questions; first question is regarding the guarantee hotel room allotment and can you give us some color on the development on especially with a proportion of the hotel room sales come from and the guarantee hotel room allotment?

Yin Yin

From the hotel, the guaranteed allotment is 70% of the total room from those hotels.

Min Fan

And what daily guarantee among rooms is due increasing, and I think disputes or future disputes that is the leading priority in the hotel industry.

Richard Gee

The second question is regarding your expansion plan into the 2nd tier or even 3rd tier cities; especially given the popular city we see some saturation in terms of the hotel booking business and what is your plan over there?

James Liang

This year we will put more efforts among 2nd tier cities and we can see among 52 cities there could be more high growth in terms of hotel business and also in this year 2nd tier cities we were not only put on sales force, we were also to develop our product line there and also a marketing corporation efforts there. We have 2nd tier cities which can contribute to our total growth.

Operator

And your next question comes from the line of Kit Lowe, Goldman Sachs

Kit Lowe

Hi, thanks for taking my call. My question is coming along the line of the margins, if you could shed some light to help us out on the individual business line operating margin. Given your business going forward air ticketing would becoming increasingly a high portion of your revenue and perhaps going to 2007 the package tour will become a more significant cut of your revenue. I am just trying to fish where you think that margins going to trend on the individual businesses and both on the blended basis?

Jane Sun

Operating margin overall will remain comparable to 2005. It’s very hard to give you operating margin by product line due to the fact that we share lotts of resources. For example, you know T&A product development and M&S; all those resources are shared by all three major product lines. So it’s hard to give you the operating margin by product line. However, I think overall the hotel margin historically had been higher than air ticketing margin.

Kit Lowe

How about on a gross margin basis? Would package tour on a gross margin basis be somewhere in between that of air ticketing and hotel or would that be even lower than air ticketing?

James Liang

Yes, the package tour is between hotel and air and right now the margin is not fully realized it’s potential margin it’s not at the same scale as the hotel and air. But, long-term it will be between hotel and air.

Kit Lowe

Thank you, the only other question I have is in terms of your Capax plan beyond what you talk about and demonstrating new facility you’re are building, but can you give a sense of what you plan to spend in 2006?

James Liang

We’ll have our new building and we’ll have some IT equipment, that’s probably it.

Kit Lowe

So from a, is there an amount that you would guide or is that something that you probably not going to?

Jane Sun

Yes, the new beauty and overall the project is going to cost around $25 million and we spent about $6 million this year. The majority of the remaining balance will be spent in 2006 and probably a little bit in 2007. Beyond that, the next big thing probably is IT, but in comparison to our cash flow I don’t think really a significant amount. We’re pretty on Capax.

Operator

Your next question comes from the line of William Bean, Deutshe Bank

William Bean

Hi guys, I just have a couple of housekeeping issues. How many customer ads to you have in a Quarter?

Jane Sun

57,000 per month.

William Bean

What percentage of your transactions will repeat customers?

James Liang

We have different definitions of repeat customers, but overall the new customers probably accounts for 20% of our total transactions, roughly. So the rest you can say is all on repeat customers.

William Bean

In terms of customers from the top five cities, percentage roughly?

James Liang

Top five cities, probably70-80%.

William Bean

70%?

James Liang and Min Fan

Around 70.

William Bean

How many hotels do you currently have a partnership with?

Yin Yin

About 3,400.

William Bean

Of those, how many guaranteed allotment hotels?

Yin Yin

About 1,500.

William Bean

And then, what percentage of your hotel bookings are from outside China?

Min Fan

Outside China, less than 5%.

William Bean

You have sort of a brand customer, what percentage of customer ads are from sort of word-of-mouth or brand customers?

Yin Yin

About, natural customer is about 30%.

William Bean

Ok, so no change there. How about online transactions verses call center?

Yin Yin

About 30% for online transactions.

William Bean

And eTicket is a percentage of air ticket?

Yin Yin

11%.

William Bean

And outbound air tickets the percentage of total?

James Liang

I don’t have that number.

Yin Yin

Around 30%.

James Liang

Outbound about all the travel approximately about 30.

Min Fan

No, that’s package.

William Bean

Oh, that’s package.

James Liang

All our packages are 30% of all packages.

William Bean

Thanks guys, that was a lot I’ll give somebody else a chance. Thanks.

Operator

The next questions comes from Ashish Bedani, Gilford Securities

Ashish Bedani

Good morning, nice Quarter. The air ticketing revenue, do you expect that to decline quarter-on-quarter as well or should that buck the trend like in the prior year?

Jane Sun

Air ticketing revenue, your question is it going to decrease?

James Liang

First Quarter?

Jane Sun

First Quarter, no what I think you are projecting of increase.

Ashish Bedani

So sequentially that should be up?

Jane Sun

Sequentially, no year-over-year it’s going to be increased. Compared to for, it’s hard to say because, Q1 is a slower Quarter.

Ashish Bedani

Even for air ticketing you expect sequential decline?

James Liang

Hotel, is much weaker compared to air ticket because Chinese Holidays people will take airplane flight to go home but not staying in a hotel. Much more obtrusive.

Jane Sun

It is definitely year-over-year increase and compared to last year it’s hard to say because last Quarter the volume was very high.

Ashish Bedani

Just moving toward a different subject, would you break out the 4th Quarter bonus, discretionary bonus in both 2005 as well as last year and is this spread across multiple line items or is it?

Jane Sun

Yes. Sure. The bonus for 2005 is about $1 million US dollars which equivalents to $.5¢, and the blind line break down is about 40% above the line in gross margin and 60% in operating expenses. Trait even spread among self and marketing, T&A, and product development. Percentage wise I want to say maybe 2% of the revenue for Q4 in gross margins and 3% of the revenue below the line.

Ashish Bedani

And last year what was the dollar amount in the 4th Quarter? The million dollars in the 4th Quarter this year compares with what figure last year?

Jane Sun

About 6 million RMB, so a little bit below $1 million US dollars.

Ashish Bedani

Ok that’s helpful, and then a couple of housekeeping items, what was the depreciation and amortization for the Full-Year?

Jane Sun

I think that is listed in our financials.

Ashish Bedani

And the tax rate as one goes forward over the next year or two, could you provide some sort of arrange for modeling purposes?

Jane Sun

Sure, in general it’s very difficult to pin point a tax rate as it depends on a mix of the revenue from air ticketing, of hotel or package tour, as well as the source of the revenue from our three and any addition items that you have oversees expenses or customer reward expenses or stock compensation are not recognized in the PRC gap and changes in these items will also affect tax rates, so we conservatively estimate the affective tax rate to be about 13-15% this year.

Ashish Bedani

13-15, 1, 5 right?

Jane Sun

That’s right.

Ashish Bedani

For the coming year?

Jane Sun

For the coming year, because the tax authority is going through a lot of policy changes and reforms, so if no policy changes takes place for the coming year, probably 13-15% still apply but again we don’t have any control on the policy change from the government.

Operator

Your next question comes from the line of Chang He, Foreign Technology Research.

Change He

Good morning, Min and Jim. I guess most of the questions are answered, I maybe just ask one more time regarding the growth rate. You know your earlier management always guided about 40% year-of-year growth and now you are guiding for 35%, so my question for you is how you really see some slow down or you basically try to be conservative like you did for over many, many Quarters?

Min Fan

Because we have a larger base on a percentage basis it’s definitely going to slow down and we are pretty sure it is going to slow down and we are pretty sure how much we are going to slow down in the hotel sector end business. In air ticketing, right now it’s still growing pretty rapidly and we have a very significant shares probably already at 8-10% market sharing in some of the series selection in Shanghai. So, at some point it will slow down, but it really, the worst that we seen very high wealth rate in other cities.

James Liang

The question we have is such a dynamic business we to the standard deviation of prediction is our choice.

Min Fan

Change He

For the month of the Quarter you know, when going into the Quarter there are a lot of worries about the Bird Flu and looks like the report basically is just wonderful, so what I want to ask you is do you see any impact from Bird Flu or anything like that?

James Liang

No, not at all I mean there’s a lot parts of Bird Flu and still it’s confined to you know, non-human, bird-to-human or bird-to-bird transmission so and not a human-to-human transmission could come…

Min Fan

And also this is happening far all the way…

James Liang

So no impact.

Operator

Your next question comes from the line of Lu Sun, Lehman Brothers

Lu Sun

Good morning everyone and congratulations on a great results. I have two questions, number one is on your hotel business it seems like the room rates for your hotels for the hotel booking actually increased in the 4th Quarter, do you think this trend will continue going into 2006 given the robust economic growth in China? And secondly, could you elaborate a little bit on your new business initiative, such as in the corporate travel or even inbound travel?

Min Fan

For the hotel business in last Quarter we did pick up a lot, and still as you know right now the base of our hotel business is quite big. So, this year the hotel business growth rate will be slowed down and I think it’s can be understand and also as you know among 1st tier cities we pretty much handle pretty high max here, so the 1st tier cities will be slowed down little bit. So, in general this year hotel business we can still see growth, but with a lower than last year sticker.

Lu Sun

What about the room rates? Do you think the room rates will continue to go up and hence your commission per room will also go up you know gradually?

Min Fan

Yes, for the room rate I think among 1st tier cities, the room rate can be increased a little bit, but if we will get more production from 2nd tier cities, so the room rate among 2nd tier cities would be lower than the 1st tier cities, so I think this may be upset by this production so I think in this year still the room rate will be quite similar and also the commission rate, commission per room night. For your second question, I think for this year we will do something in the copy travel business and in fact we have done this part of business before and we still will see how far we can go in this field. And for the other like inbound travel, I think, it’s the long-term business we’re not developed right now.

Operator

The next question comes from the line of Andy Coulier, New York Global Securities

Andy Coulier

Congratulations on a good Quarter. When you describe your sales and marketing expenses for tier 2 and tier 3 of cities and are you focusing that mainly in the tier 2 cities such as Nanjing or are you actually trying to go further inland from the smaller areas?

James Liang

Our sales market in 2nd cities made up of airports, promotion, outside promotion, and then we have airports in you know promotion in around 40 cities, 40 airports in China, so that covers all of the cities. And we have been doing that for a few years and in the future we’ll do more of a branding effort in some of the cities, in some of the major 2nd tier cities, so including advertising PR, some joint marketing effort with the leading airlines and telecom companies. These efforts will be only targeted to the top tier, maybe top 10 2nd tier cities.

Andy Coulier

Can you describe the impact on your sales and marketing cost in 2006 from the campaign?

James Liang

You will remain to be six selling a similar level in terms of percentage for the revenue overall. So we are allocating some money to 2nd tier cities.

Operator

Your next question comes from the line of William Bean, Deutsche Bank

William Bean

I just have a couple of other follow-up questions if nobody else has anything. In terms of the room rates, they have been going up a lot especially in the top tier cities, do you see occupancy rates going up as well and as those occupancy rates go up, do you see the leverage over the hotels decreasing?

Min Fan

The occupancy actually in the 5-star hotel has been always pretty high and the last years probably even higher than this year, so we are not seeing an increase but overall it’s pretty high and particularly in Shanghai. We are not seeing any that kind of a pressure that hotel had more pressure for us to get rooms.

William Bean

What do you think the overall occupancy rate is in the 3-5-star in the top tier cities and then overall?

James Liang

In 3rd tier cities I think that 5-star hotels would be still very hot and in fact for those 3-4-star hotels, the occupancy rate do not increase a lot, round year, even if we talk about last years figure, so you can see we maintain a very good population with our membership hotels.

Operator

Next question is a follow-up with Lu Sun, Lehman Brothers

Lu Sun

Thank you, actually I have a question on the competitive landscape, I understand that for hotel booking and also air ticketing booking it seems like you have very high amount this year against the consolidator, can you comment where you see the competitive landscape going to and especially when more you know electronic tickets are introduced by the airline? And also I think on the other hand I am seeing a lot of traditional travel agencies offering leisure packages to the consumers, do you see more competition from those guys in this category?

James Liang

Well you know we have a strong competitor in the hotel sector. You know we have a much weaker competitor in the air ticketing the traditional air ticketing companies, traditional air ticketing agencies. The coming of eTickets will certainly benefit us competing with these traditional air ticket agencies. The rise you can see, it’s because of the rise of eTicketing doing a lot because it’s not picking up significantly. Over the long-term, eTicket will enable some of the airlines to be our competitors, but independent eTicketing agencies eTicketing will certainly propel us to be an even more dominant position in the independent air ticket agencies. For the packages, we are we don’t have any really competitors right now. The traditional travel agencies they do offer some sort of packages along with their group products, but in terms of branding, in terms of sales marketing, delivery quality they are far behind us and they are very fragmented as well as the lack of nation wide player, so actually even though package counted as pretty small in our overall revenue mix, but I think that we have probably highest level of dominance in the space even higher than their ticket.

Lu Sun

Where do you think that the man will come from for package tour, do you think that people will be more prone to travel to outside of China, or their just using your service to travel to some of hot destinations inside of China?

James Liang

Both, probably 30% of revenue is outbound mostly to Southeast Asia. I think in the future we’ll see a growth from all of these destinations.

Min Fan

Especially, as we can see for the traditional travel agencies a lot of let’s say white collar people if they got broader, they will visit Chinese famous destination. First time they will join the core group, buy a traditional , so if they want to go a second time or third time, somebody will tend to seat you which we can provide a better options and better hotel and airlines and other options, so I think it’s a kind of a new model and so we can try more later travel.

Operator

Ladies and gentlemen we have no further questions in the queue and I’ll turn the call back over to Yin Yin for any closing remarks.

Yin Yin

Thank you, Sam. Thank you for participating in our Earnings Conference Call this morning or rather this evening for some of you. This concludes our session today. You are welcome to contact us for any further follow-ups. Thank you.