Trip.com Group Limited (TCOM) delivered a "phenomenal" Q3 2025 earnings report, with revenue reaching RMB 18.3 billion (up 16% YoY) and net profit attributable to shareholders surging 194.01% YoY to RMB 19.9 billion - surpassing even Kweichow Moutai's (600519) profitability. The company's daily profit averaged RMB 216 million, redefining market expectations for online travel platform earnings. This exceptional performance was driven partly by short-term gains from asset disposals, but more fundamentally by Trip.com's entrenched dominance in the OTA sector, though it also highlights growing tensions between platforms and merchants.
Unlike Kweichow Moutai's premium pricing model based on scarcity, Trip.com's profit surge stemmed primarily from strategic asset sales. The company recorded RMB 17.032 billion in "other income" from partial divestment of its stake in Indian OTA MakeMyTrip - an investment originally made in 2016 for $180 million as part of global expansion. By end-2024, Trip.com held 49% voting rights (book value: RMB 7.1 billion) before reducing its stake to 16.9% in July 2025, realizing substantial capital gains that accounted for most of its quarterly profit.
Even excluding one-time gains, Trip.com's operational profitability leads the internet sector. As a capital-light travel platform, it maintains stable 80%+ gross margins (81.55% in Q3), significantly outperforming Tencent (56.41%) and NetEase (64.10%). Notably, this resilience persists despite intensified competition, as major internet firms have failed to dent Trip.com's market position despite heavy investments in travel services. Analysts note that temporary commission reductions for overseas expansion actually mask even greater profit potential.
Within China's tourism sector, Trip.com's profit advantage appears staggering. While 49 listed travel companies collectively generated 30× Trip.com's revenue (RMB 542.8 billion), their combined net profit (RMB 22 billion) barely exceeded Trip.com's standalone figure. This disparity reflects Trip.com's platform advantage - avoiding heavy assets like aircraft leases while profiting from information intermediation. With RMB 107.7 billion in cash reserves by September 2025, the company enjoys reinforced competitive moat for domestic and international growth.
Accommodation bookings remain Trip.com's profit anchor (43.72% of Q3 revenue at RMB 8 billion, up 18% YoY), reflecting hotels' deepening dependence on the platform. Its tiered partnership system (12-15% base commissions plus 5-30% optional promotion fees) means many hotels surrender 20% of room revenue to Trip.com. This reliance stems from China's low hotel chain rate (40.09%) and post-pandemic oversupply, forcing independent properties to accept steep platform fees despite shrinking margins.
Transport ticketing, while contributing 34.43% of revenue (RMB 6.3 billion), offers limited profitability due to supplier concentration and transparent pricing. Airlines' direct sales strategies and railway monopolies constrain OTA margins, making this segment primarily a user acquisition channel for higher-margin businesses. Emerging segments like package tours (RMB 1.6 billion) and corporate travel (RMB 756 million) show promise but remain below 10% revenue share.
Trip.com's unassailable position stems from strategic consolidation (acquiring stakes in Qunar, Tongcheng Travel, and eLong during 2010-2015 price wars) and operational excellence. Its 24/7 multilingual customer service and reliability create exceptional user stickiness in an industry where trust is paramount. Analysts note its self-reinforcing network effects - more merchants attract more users, which in turn draws more merchants.
While replicating its China success globally through acquisitions and localized services, Trip.com faces emerging challenges from AI disruption and changing consumer demographics. The company has begun investing heavily in AI to maintain its edge. However, its overwhelming market power (56% GMV share vs. 15% for Tongcheng and 13% for Meituan) raises concerns about ecosystem imbalance, as merchants increasingly struggle with platform dependency amid thinning profits. Whether this profit dominance can sustain through industry evolution remains to be seen.
Comments