Tongcheng Travel (00780) released its unaudited financial results for the first quarter of 2026 after the market closed on May 21.

The financial report shows the company achieved operating revenue of RMB 50.06 billion for the period, a year-on-year increase of 14.4%. Net profit attributable to the parent company was RMB 7.79 billion, up 16.5% year-on-year. Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) reached RMB 13.89 billion, representing a 19.8% increase from the same period last year.

Against the backdrop of normalized overall demand in the tourism industry, Tongcheng Travel maintained double-digit growth in its core performance metrics this quarter. An analysis of the data reveals key insights into the structural shifts within its core OTA business, the efficiency of user conversion in lower-tier markets, and the tangible application of AI technology across both the business-to-business (B2B) and business-to-consumer (B2C) segments of the industry chain.

Breaking down the total revenue of RMB 50.06 billion, revenue from the core online travel platform (OTA) amounted to RMB 44.5 billion, a growth of 17.34%. Within this core segment, various sub-businesses exhibited differentiated growth trajectories.

Transportation ticketing, the traditional traffic cornerstone for Tongcheng Travel, generated revenue of RMB 21.24 billion during the period, up 6.2% year-on-year. The stability of this business is primarily attributed to the continuous enrichment of value-added products and services, demonstrating strong resilience against economic cycles and remaining crucial for maintaining a large, active user base.

Accommodation booking revenue reached RMB 13.65 billion, a 14.7% increase. According to the financial report, the growth momentum in this segment mainly stemmed from rising demand for high-quality lodging, with the proportion of room nights from high-star hotels on the platform continuing to expand. This indicates that while deepening its presence in the mass market, Tongcheng Travel is gradually increasing the average revenue per user (ARPU) and profit margins.

Notably, "Other Revenue," which includes hotel management business, reached RMB 9.61 billion, surging 59.6% year-on-year. This exceptionally high growth is primarily attributed to the expansion of the hotel management business scale. It signals that Tongcheng Travel is moving beyond a pure intermediary role by extending upstream into the industry chain, building a more defensible matrix of physical assets and asset-light management operations.

However, performance was not uniformly strong. The financial report shows that vacation business revenue for the period was RMB 5.56 billion, a decline of 5% year-on-year. Management attributed this to pressure on demand for outbound group tours due to geopolitical risks. This structural decline objectively reflects the substantial impact of macro uncertainties on the cross-border tourism chain.

In an era of saturated internet traffic, Tongcheng Travel's user data offers another perspective. Over the 12 months ended March 31, 2026, the company's annual paying user base reached a record high of 254 million. The cumulative number of annual service users reached 2.047 billion, a 4.5% year-on-year increase. In the first quarter, Tongcheng Travel's average monthly paying users remained at 46.4 million.

The core support for this massive user base remains its extremely high penetration in lower-tier markets. By the end of the first quarter, over 87% of registered users on the Tongcheng Travel platform came from non-first-tier cities in China. Benefiting from its long-term integration with Tencent's WeChat ecosystem, Tongcheng Travel maintains a significant advantage in customer acquisition costs in these lower-tier cities. Concurrently, daily active users on its proprietary app also maintained strong growth this quarter. The company is attempting to convert low-frequency travel transactions into high-frequency member loyalty through initiatives like the launch of a dynamic Platinum membership system. This shift from traffic acquisition to refined operations of the existing user base is key to maintaining its profit margins in these markets.

Regarding technological iteration and business integration, the quarterly report reflects a clear trend of internet platforms evolving towards "industrial AI." On the consumer-facing (C-end) side, Tongcheng Travel's AI agent, DeepTrip, now supports 17 languages and has garnered nearly 10 million cumulative global users. Its core "Skills" are now available on major AI large model platforms. Alongside a 2.9-fold increase in consumer users on its international platform, HopeGoo, this multilingual, end-to-end AI-powered planning capability is transitioning from an early-stage novelty to essential infrastructure for overseas market expansion, tangibly reducing the service costs associated with cross-border customer acquisition.

In terms of empowering the B2B industry chain, the Yilong Hotel Technology platform, through AIoT solutions like "Zhiyi Smart Stay," has provided system support to over 100,000 accommodation businesses. In the previous business model, the traditional accommodation industry faced significant constraints from labor costs and digital gaps. By offering SaaS and AIoT solutions, Tongcheng Travel not only spreads out its own system R&D costs but also, by improving the operational efficiency of individual properties, achieves data collection and deep integration at the foundational level of the industry chain. This deep integration of AI into the physical industry aligns with the underlying logic of physical AI in manufacturing—using technology to reshape the cost structure of offline fulfillment processes.

In summary, Tongcheng Travel delivered a steady first-quarter 2026 performance in line with market expectations. With the two main pillars of transportation and accommodation operating soundly, the hotel management business demonstrated strong potential as a second growth curve. Meanwhile, the full-chain penetration of AI technology provides tools for long-term cost optimization.

However, disruptions to the outbound travel business from the macro geopolitical environment persist. Looking ahead, a core challenge for Tongcheng Travel will be balancing the consolidation of its foundational position in lower-tier markets via the WeChat ecosystem with the effective management of the capital and operational costs associated with its heavy upstream extensions, such as hotel management. This will be crucial in determining whether its profit model can continue its upward trajectory.