Yahoo Finance Ctrip.Com International Ltd (CTRP) Q2 2019 Earnings Call Transcript
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Ctrip.Com International Ltd (NASDAQ: CTRP)
Q2 2019 Earnings Call
Sep 10, 2019, 8:00 p.m. ET
Contents:
Prepared Remarks
Questions and Answers
Call Participants
Prepared Remarks:
Operator
Thank you for standing by, and welcome to the Second Quarter 2019 Ctrip.com International Limited Earnings Conference Call. All participants are in a listen-only mode. There will be a presentation, followed by a question-and-answer session. [Operator Instructions]
I would now like to hand the conference over to Michelle Qi, Senior IR Director. Please go ahead.
Michelle Qi -- Senior Investor Relations Director
Thank you, Jennifer. Thank you, everyone, for joining us call this morning. Good morning and welcome to Ctrip's 2019 Q2 earnings conference call. Joining me today on the call are Mr. James Liang, Executive Chairman of the Board; Ms. Jane Sun, Chief Executive Officer; and Ms. Cindy Wang, Chief Financial Officer.
During this call, we will discuss our future outlook and performance, which are forward-looking statements made under the safe harbor provision of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent 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 Ctrip's public filings with the Securities and Exchange Commission. Ctrip does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
James, Jane and Cindy will share our strategy and business updates, operating highlights and financial performance for the second quarter of 2019, as well as outlook for the third quarter of 2019. After the prepared remarks, we will have a Q&A session.
With that, I will turn the call over to James. James, please.
James Jianzhang Liang -- Executive Chairman
Thank you, Michelle. Thank you, everyone, for joining us on the call today. Now, let's begin with a quick update on our business growth and performance. We're pleased to report solid results for the second quarter of 2019. Net revenue grew 19% year-over-year, reaching RMB8.7 billion. We have increased our share in the domestic travel market with GMV growth rate for both domestic hotels and the air ticketing are accelerating, even against the backdrop of the softer market environment.
Our international businesses also seeing great performance, with a growth rate for international hotels and the air ticket more than doubling that of China outbound traffic growth in the same period. As we continue to evolve as an industry leader in China, we have great opportunities ahead to realize our global vision. Ctrip has develop key competencies to provide excellent services to travelers in China and around the world, including a one stop platform that covers more than 60 products globally. Such one stop product offerings empower our mobile platforms with our superior mobile app accounting, well, of over 80% of the future [Indecipherable]. Furthermore, we are continuously making investments in technology, including the open platform and ensure the competitiveness of each product and collaboration between power limes. Nowadays, open platform connects several hundred thousand direct and intermediates suppliers, ranging from individual professionals to worldwide travel leaders.
Today we also announced the proposal to change the company name to Trip.com Group Limited. The new name reflects the services and products we provide and it can be easily remembered by global users. Trip.com Group includes a range of brands including Ctrip, Qunar, Trip.com, Skyscanner and many more. In October, we will celebrate the 20th anniversary of the Company. In our first two decades, we have become the leader in China's travel industry. Over the next decade, we will strive to become one of the most innovative and respected companies in the global travel industry.
With that, I will turn the call to Jane for our operating highlights.
Jane Jie Sun -- Chief Executive Officer
Thanks, James. Today, I would like to start with why we are aiming at the international market. In the domestic market, we have already grown to become the undisputed leader across all travel segments from accommodation to transportation. We are confident in the continued sustainable growth and profitability of our business in China. At the same time, China has become the largest source market for international travel. Taking advantage of this, Ctrip has built a comprehensive and extensive product network and developed global service capabilities to serve among travelers. We will leverage our existing products, services and technologies to serve travelers outside of Mainland China, especially in the Asia Pacific regions.
In the long run, this will enhance our scalability, reduce seasonality and diversify our potential risks from geo uncertainties. Our efforts in global product expansion, service quality and brand development are setting the base to realize this long-term goal. I would like to share some of the recent highlights in this area. Firstly, our global product expansion. In the second quarter, our product coverage continued to expand in scope and the depths as we know from experience.
Transportation is typically the first step for our customers, when they book their trips. We therefore work hard to provide comprehensive, cost effective and convenient transportation solution and believe this will help our customers to boost customer acquisition efficiency and cross-sell to the other products. The company recently launched a strategic partnership with East Japan Railway Company. The partnership allows us to purchase Japan Rail tickets in addition to enjoy services such as airport ticket pickups and hotel deliveries. Today, our international train products cover train tickets, high speed rail and airport link services in more than 50 countries and regions across the world. Global users can access international train services through the Ctrip.com, Trip.com and simple [Phonetic] mobile platforms.
We have also launched an overseas Ridehailing service which integrated mainstream local Ridehailing services onto our own platforms. The service is currently available in over 785 cities across 47 countries in Southeast Asia, in the United States and in Europe. Ctrip users will also enjoy 24/7 customer services and translation services. Ctrip launched the Hotel More program in 2018, where hotels can sale long room offerings such as meals, spar sessions, pick up and drop off services, meeting room bookings and more. So far, a large majority of the high star hotels on Ctrip platform have opened up their relative Hotel More's and we have received encouraging feedback from our customers.
Secondly, we continue to focus on service quality. We see improving Net Promotion Scores across all of our product lines in the second quarter. This reflects our consistent effort in upgrading our services. One of the many initiatives we have rolling out recently is the tiered cancellation policy for hotel bookings. So far hundreds and thousand of the hotels have participated in our program and this program has benefited then 3 million Ctrip customers.
We are committed to upholding to our customer centric principles in every market we operate and to extend high quality customer services to the global travelers. Today, all of our overseas call centers are in operations. As we continue to scale our call center to serve growing needs of their respective markets, we expect operational efficiencies to improve in the coming years. Thirdly, looking at the growth of the main brands. Due to the strength of our products and services, we continue to gain market share across our key business areas and widen our gap with the other domestic competitors in China.
Domestic revenue maintain a solid growth rate that outpace the industry at a higher multiple. International revenue accounted for over 35% of the total revenues in the second quarter of 2019, with the rapid growth of outbound travel and our global brands. We expect this to become 40% to 50% in the next three to five -- four years. Our hotel and flight ticket sale for cross border travel activities maintained faster growth during the quarter, more than doubling the growth of China's outbound trips. Although the recent fluctuation in some destinations will impact Q3 outbound travel figures, historically, we have gained market share when faced the macro headwinds.
In the long run, we remain optimistic about China outbound tourism market. For Trip.com, air ticket volume delivered triple digits year-over-year growth for the 11th consecutive quarter and hotel growth is accelerating. We are extremely pleased to see direct users for Trip.com's first batch our focus to market, are increasing in numbers, confirming the efficiency of our local brand strategy.
In South Korea, Trip.com was named the Brand of the Year in the travel category by Korea Customer Council. Skyscanner continues healthy momentum with its direct-booking business, maintaining triple digits growth. It has generated great synergies in many markets with Trip.com, mainly through their direct booking initiative. We expect to replicate such success across more international markets going forward. Our other facilities, we completed our share transactions with Naspers Limited and become the largest shareholders of MakeMyTrip, a leading online travel company in India. We will give full support to make MakeMyTrip team and we are confident that MakeMyTrip will continue its success in the years to come.
To conclude, we are encouraged by our results across all the business lines in the market. Today we are confident and excited about the long-term future for the travel industry in China and in the world. We are focused on our mission to provide the best products and services for global travelers, while creating long-term value for business partners, employees and shareholders.
With that, I will now turn the call to Cindy.
Cindy Xiaofan Wang -- Chief Financial Officer
Thanks, Jane. Thanks, everyone. For the second quarter of 2019, Ctrip reported net revenue of RMB8.7 billion representing a 19% increase from the same period in 2018. Net revenue for the second quarter of 2019 increased by 6% from the previous quarter. Accommodation reservation revenue for the second quarter of 2019 was RMB3.4 billion, representing a 21% increase from the same period in 2018. This was primarily due to the strong execution in increasing accommodation choices and quality of services that we offer for our customers.
During the second quarter Ctrip branded low-star hotel room nights increased over 50% year-on-year. This directly reflects the effectiveness of our promotions in this segment. In addition, we observed a continued increase of the travel consumption from customers we acquired through this low -- comparatively lower end hotel segment. We will continue to extend our promotions in this segment as long as we see good return on investment. In the domestic mid to high-end hotel segment, our growth rate accelerated sequentially. Growth in our international hotel segment was more than twice as fast as the China outbound traffic growth rate. Transportation ticketing revenue for the second quarter of 2019 was RMB3.4 billion, representing a 13% increase from the same period in 2018. This was primarily driven by fast growth in international travel demand and an increase in ground transportation.
The international air ticket business maintained strong growth, specifically Trip.com's air ticketing volume recorded triple-digit growth for the 11th consecutive quarter. Ground transportation registered healthy volume growth this quarter. International train ticket volume grew more more than 7 times year-over-year. Packaged-tour revenue for the second quarter of 2019 was RMB1.1 billion, representing a 25% increase from the same period in 2018.
In the second quarter, GMV for our offline stores continued to see strong growth with daily transaction value peaking at RMB120 million. We are delighted that the large majority of our offline stores become profitable within 12 months. Customized tours and dynamic packages also delivered outstanding performance. Corporate travel revenue for the second quarter of 2019 was RMB309 million, representing a 21% increase from the same period in 2018. This was primarily driven by expansion in our corporate customer base, as well as the trend for more mixed products and packages.
Revenues from other business increased by 22% year-on-year in the second quarter of 2019, reaching RMB524 million. This was primarily driven by strong growth in our advertisement and Financial Services business. Gross margin was 79% for the second quarter of 2019, compared to 80% in the same period in 2018 and remained consistent with the -- with the previous quarter. Excluding share-based compensation charges, total non-GAAP operating expenses grew 11% year-on-year and 1% quarter-over-quarter in the second quarter of 2019.
Total headcount in IT, supplier management and administration was largely consistent with the previous quarter. Marketing efficiency continued to improve, this was due to our ROI driven marketing strategy and continued efforts in customer services, product cross selling and content building. Despite the sequential decrease of marketing investment, we were able to maintain stable growth in both MAU traffic and in the acquisition of new transacting customers. We also saw steady improvement in the cross-sell ratio between product lines.
Non-GAAP operating profit in the quarter was RMB1.7 billion, grew 43% year-on-year and 26% quarter-over-quarter. Non-GAAP operating margin for the second quarter was 20% increasing from 16% in the same period of 2018 and 17% in the previous quarter. This increase was mainly due to improvements in operational efficiency. Diluted loss per ADS was RMB0.73 or USD0.11 for the second quarter of 2019. The net loss was primarily due to the loss recorded for fair value changes of equity securities investment. Excluding share-based compensation charges and fair value change of equity security investment, non-GAAP diluted earnings per ADS were RMB2.25 or USD0.33 for the second quarter of 2019.
As of June 30, 2019, the balance of cash and cash equivalents, restricted cash and short-term investment held to maturity, deposit and financial product was RMB67.8 billion or USD9.9 billion. In July, the company announced a transferable term loan facility of up to USD2 billion equivalent with a greenshoe option of up to USD500 million. In August, the company repaid USD500 million of convertible notes of maturity, which reduced the potential dilution of approximately 1.5 million ordinary shares. We also announced a Put Right Notification for 1.25% convertible senior notes due 2022. If all our outstanding notes are surrendered for repurchase through the exercise of Put Right, the aggregate purchase price will be USD975 million, which will further reduce potential dilution of approximately 1.9 million ordinary shares. On August 30, the company completed a share exchange transaction with Naspers Limited. Following the transfer, Ctrip owned ordinary shares and Class B shares representing approximately 49% of MakeMyTrip's outstanding voting security. Ctrip will apply for the equity method of accounting to pick up the gain and loss of MakeMyTrip through from August 30 on a one quarter lag basis.
Now turning to the future outlook. For the third quarter of 2019, the company expects net revenue growth to continue at a year-over-year rate of approximately 10% to 15%. This forecast reflects potential impact of about about 400 to 500 basis points on the growth rate due to short-term macro and industry headwinds. Excluding share-based compensation, the company expects non-GAAP operating income will be in the range of RMB2.3 billion to RMB2.6 billion. For the rest of the year, the company expects to outperform the market, while delivering continuous operating leverage compared with the previous year. This forecast reflect Ctrip's current and preliminary view, which is subject to change.
With that, operator, please open the line for questions.
Questions and Answers:
Operator
Thank you. [Operator Instructions] Your first question comes from Thomas Chong from Jefferies. Please go ahead.
Thomas Chong -- Jefferies -- Analyst
Hi, good morning, James, Jane, Cindy and Michelle. Thanks for taking my question. Can you comment about the short-term as well as the long-term impacts of macro and industry headwinds. How would Ctrip mitigate such impact? Thanks.
Cindy Xiaofan Wang -- Chief Financial Officer
Thanks.
James Jianzhang Liang -- Executive Chairman
Yeah, thank you for the question. Yeah, we see bit of headwind in some of the Asian markets due to the difficult geopolitical situation. And I think these are the short-term impact as people will rearrange their plans to travel later this year and in future for their holidays. Overall, in the long run, I think particularly in Asia, we are still very positive, because China is still going to be the fastest growing -- one of the fastest growing large economies in the world and overall Asia is still going to be -- remain the fastest growing economically region in the world. And Ctrip with our strong presence in Asia, we are very well positioned to take advantage of that. So in the long run, we are still very positive about our growth prospect in China and internationally because Ctrip has a strong presence in the fastest growing Asian markets. Thank you.
Cindy Xiaofan Wang -- Chief Financial Officer
Yeah, Thomas. So, for the next quarter, our four [Phonetic] customers impact -- potential impact of about 400 to 500 basis points on the growth rate, mainly due to the short-term macro uncertainties and industry headwinds, which mainly come from recent slowdown of Hong Kong and Taiwan, together with a slight price decrease. So in the first half of this year, outbound travel to Hong Kong and Taiwan accounted for about one-third of total Chinese outbound travelers. Therefore, we included some negative impact from these two markets in our Q3 guidance.
And in addition, based on the TravelSky report, average price of outbound air ticket dropped about 400 -- 750 basis points year-over-year in July, as a result of softer demand and macro uncertainties. However, in the mid to long-term as James said, not only the most comprehensive, extensive destination offerings, but also our expansion into the other global markets will help us to reduce or even mitigate risks from certain geographic uncertainties.
Therefore, we are still very confident that as long as we continue to invest in our product and services, Ctrip will able to further strengthen our market leadership and market positions in the China, not only the China market, but also the global travel market especially during the macro slowdown as we always achieved in the past 20 years. Thank you.
Operator
Thank you. Your next question comes from Binnie Wong from HSBC. Please go ahead.
Binnie Wong -- HSBC -- Analyst
Hi, good morning management. Thank you for taking my question. My question is on outbound strategy. So is it become a more significant contribution to us, can you comment comment on, are we competing more on pricing, partnership with local partners or will be for more inorganic investments, just want to see how does it impact our margin trend. And also as it relate to your operating margin improvement, we also see solid improvement this quarter, both Y-on-Y and Q-on-Q basis and hitting 20% this quarter. So would that be mainly contributed by rising contribution from higher margin outbound and how should we expect this continuing? Thank you.
Jane Jie Sun -- Chief Executive Officer
Thanks, Binnie. For outbound business, yes, we are doubling the industry growth and has gained lots of market share. The high-end customers continuously to travel outbound. In Q3, there are certain regions displayed certain uncertainty. However, our product offerings with a comprehensive product to composition really attract our customers to use our brand and products and go all over the world. And for our international business outside of Asia, the Trip.com also is focusing on mainly the international air tickets, which has showed three digits growth for the past two years, more than past three years. So we are confident that outbound, as well as foreign to international tickets will be the future drive for our business.
And Cindy will comment on the margin.
Cindy Xiaofan Wang -- Chief Financial Officer
Yes. Our operating margin were continuously to improve through the operational efficiency gaining not only from the outbound business, of course outbound is more toward the mid to high-end of the market, because the average selling price is much higher compared with domestic products. But even our domestic product we see continuous operating efficiency gaining across all the business unit. Thank you.
Operator
Thank you. Your next question comes from Ronald Keung from Goldman Sachs. Please go ahead.
Ronald Keung -- Goldman Sachs -- Analyst
Thank you, James, Jane, Cindy and Michelle. So my question would be on margins as well, just seeing how your third quarter guidance seems to already be a suggesting 22% to 25%. Just want to hear any color that management could share on your cost control, mostly on the OpEx side given the slower revenue. Can you share some color how this will play out for the fourth quarter, given last year you invested heavily in the fourth quarter '18. And whether we are still sticking to the 20% 2020 EBIT margin target that now, that I think the first nine months you are -- even for 2019 you're hitting that quite already, so like to hear your sharing on that. Thank you.
Jane Jie Sun -- Chief Executive Officer
Thank you, Ronald. We will provide guidance for the fourth quarter in the next quarter, but overall speaking, we are -- although there is some macro slowdown, some of the macros which will impact our top line growth, but our target is to continuously outpace the industry growth. And at the same time as we already achieved, we achieved significant operational efficiencies across all expense line items. So we are still quite confident that we can achieve our 20 plus percent non-GAAP operating margin in the medium-term. Thank you.
Operator
Thank you. Your next question comes from James Lee from Mizuho Securities. Please go ahead.
James Lee -- Mizuho Securities -- Analyst
Thanks for taking my questions here. Cindy, first on, did you actually provide operating income guidance for 3Q '19, I'm not quite sure I heard that? And also can you provide segment guidance for your revenues? And also for Jane specifically, can you provide us update on competition with [Indecipherable] specifically, last quarter you sort of indicated things are stabilizing here, are you seeing any changes there? Thanks.
Cindy Xiaofan Wang -- Chief Financial Officer
Thank you. I'll provide revenue guidance for each business line item. So in the third quarter 2019, our accommodation revenue will grow at about 13% to 18% year-on-year. And the transportation revenue will grow about 3% to 8% year-over-year. And packaged tour revenue will continue to grow at a healthy rate of 15% to 20% year-on-year. Corporate travel will grow at about 20% to 25%. So here comes, the total revenue will grow about 10% to 15%.
Jane Jie Sun -- Chief Executive Officer
And regarding the competitive landscape, so our goal is for high-end or double the industry growth rate and continuously to serve the high-end customers very well with our high quality services, comprehensive products. And for lower tier cities, we will or Ctrip brand will deliver about 50% year-over-year growth. So the trajectory is very strong and we will keep up with our strong investment both online and offline to make sure we stay ahead of the game. Thank you.
Operator
Thank you. Your next question comes from Natalie Wu from CICC. Please go ahead.
Natalie Wu -- CICC -- Analyst
Hi, good morning. Thanks for taking my question. Just curious, did management see any impacts of train ticket take rate those take rate or GMV growth this year given the one, two, three, zero, six initiative? Thank you.
Cindy Xiaofan Wang -- Chief Financial Officer
Thank you, Natalia. So, Ctrip starting from one to two years ago, we started to diversify our revenue source including global train ticket product to not only just cover the Asia Pacific regions, but we also cover almost all the European countries. We also launched a train power which targeted to the European customers who can book their train ticket through the mobile app. And so we see very healthy growth and actually exponential growth opportunity in the global train ticket market. The international train grew about 7 times year-over-year.
And in addition, we also introduced a high speed train travel channel, which help us to book -- helping our customers to book train, high-speed rail, train travel, especially during the weekend. So by putting all these efforts, we will make sure that Ctrip will continue to provide the best user experience in this industry. And most importantly, we can cross-sell a variety of other products together with the huge traffic that are coming from the train business. Thank you.
Operator
Thank you. Your next question comes from Gregory Zhao from Barclays, please go ahead.
Gregory Zhao -- Barclays -- Analyst
Hi, management. Thanks for taking my question. The first one is a follow-up question on your margin guidance, so just want to understand were the operating income and operating margin would be for if not if no macro and Hong Kong headwind in Q3. And the second question, just want to clarify the 4% to 5% growth slow down in Q3, it's only due to the geopolitical issue or also certainly some other factors like the foreign currency and the macro slowdown or putting in another way, so what's Hong Kong and Taiwan contribution to our total revenues, so just want to make sure the 4% to 5% slow down assumptions if not I mean over conservative. Thank you.
Cindy Xiaofan Wang -- Chief Financial Officer
Thank you. So as we already achieved -- Ctrip -- our whole team were working very hard to increase our operational efficiency across all expense line items, across all business units, so to make sure that during the macro slowdown, our uncertainties we can still achieve very profitable and operation results. And regarding your questions on the Hong Kong and Taiwan. Hong Kong and Taiwan in the first half of this year, the outbound travel to these two destinations accounted for about one-third of the total Chinese outbound travelers. So it's a very significant portion of the total market, that's why you see these two markets, because of the uncertainties in this two market, Ctrip -- we baked in some conservative and negative impact.
But yes of course all the currencies order and macro uncertainty is like the trade war between US and China also put some pressures for us in the short-term. And in addition actually based on the TravelSky report, the average price of the outbound air ticket also dropped about 750 basis points year-over-year, which we believe also because of the short-term macro uncertainties. But as always, our management always strongly believe that during these slowdown period, it's always is the best opportunity as a market leader to continuously to gaining market share during this period. Thank you.
Jane Jie Sun -- Chief Executive Officer
Thanks.
Operator
Thank you. Your next question comes from Billy Leung from Haitong International. Please go ahead. Pardon me, we have just lost that questioner. We'll go to the next one. Your next questioner is Joyce Ju from Bank of America. Please go ahead.
Joyce Ju -- Bank of America -- Analyst
Good morning, James, Jane, Cindy and Michelle. Thanks for taking my question. My question is actually related to the -- it's also the outbound destiny -- travel destinations. Just trying to understand because James earlier mentioned that, do you expect like most of the Chinese leisure travelers what actually substitute those dangers or like destinations with problems, with other destinations, is it -- could you elaborate more to help us understand? Is it more likely to substitute them with like as outbound destinations or like we are actually replaced by some domestic destinations, which probably have lower ASP?
Cindy Xiaofan Wang -- Chief Financial Officer
Thanks for your question, different customers will react differently. In the history of our business, we noticed there are a couple of factors that's very important when our customers make their decision as to where they want to go. The first thing is the Visa, the easiness of the Visa application, whatever country give the most easiest way to apply for Visa, normally will attract lots of customers, particularly for these busy customers who have the last minute changes on their agenda.
The second thing is direct flight, whichever city offers direct flight, again will attract a lot of customers, because they save time going there. The third thing we feel is the friendliness of the destination. So historically countries such as Thailand always receive very good incoming customers because hospitality business in Thailand is very well developed. So factoring all these things, different customers will take different approaches. During the long vacation, customers tend to go to the long haul for example, Europe, Australia, New Zealand are quite attractive this year. And then some customers will change to -- convert their overseas plan on to a domestic plan, but because Ctrip's product covers both domestically in Asia, in the rest of the world and our product will be suitable for different customers depending on their preference. Thank you.
Operator
Thank you. Your next question comes from Alex Poon from Morgan Stanley. Please go ahead.
Alex Poon -- Morgan Stanley -- Analyst
Hi, James, Jane, Cindy and Michelle. Thanks for taking my question. I had a question regarding your margin, recall you have reiterated margin guidance, non-GAAP OPM of 20% in 2020, since your headcount is not growing, your revenue is still growing, what margin do you plan to achieve at a steady state before you start investing more, is next year margin still 20%? And for specifically for transport business, the guidance growth rate of 3% to 8% year-over-year, if I have to break it down into domestic and international business, the domestic business should be a little bit slower, in case that is in a negative growth territory, is there any negative operating leverage should we expect, at the same time your margin also expands. Thank you very much.
Jane Jie Sun -- Chief Executive Officer
Yeah, in some of the segment of the domestic market given our existing market share, we probably would not expect exponential growth opportunities in terms of market share, but we will still make sure that we will continuously making -- gaining more market share by offering the best user experience in the market. We actually created a lot of value not only in the transportation segment, not only the airport, air ticket, but also like train ticket, bus ticket et cetera. And in terms of the margin, yes, we will achieve operational efficiencies across all business unit not only the outbound travel related business, but also the domestic business as well. So yeah, we are quite confident that we can achieve 20 plus above non-GAAP operating margin in the next one to two years. Thank you.
Operator
Thank you. Your next question comes from Alicia from Citigroup. Please go ahead.
Alicia Yap -- Citigroup -- Analyst
Hi, good morning, James, Jane, Cindy and Michelle. Thanks for taking my questions. I have couple of follow-up questions regarding the guidance. Can you actually walk us through a little bit given I think the packaged tour guidance was actually holding up quite strong. And given the outbound travel that you mentioned one-third is actually coming from Hong Kong and Taiwan market versus I think your hotel and air ticketing revenue guidance is a bit soft. So can you quantify this 400 to 500 basis point impact from Hong Kong and Taiwan, is it mainly related to the hotel and air ticketing rather than the packaged tour. And then just a follow-up on Trip.com should not be accounted in the outbound, right? So just wondering how much Hong Kong and Taiwan revenue is coming from this Trip.com. Thank you.
Cindy Xiaofan Wang -- Chief Financial Officer
And so -- for the -- thank you, Alicia. For the packaged tour business because it's -- there are two parts, one is the group tour. And the second one is like the packaged dynamic package product to bundle hotel and air ticket together. So majority of the packaged tour business contributed from the group tour because Ctrip -- most of the Ctrip customer are toward the mid to high end. So when they choose the destination like Hong Kong and Taiwan, they tend to use -- they tend to travel independently rather than travel with group. This is one of the reason why you see a less impact after these two destinations from the packaged tour versus the other accommodation and transportation business.
For the Trip.com, yes, it's mainly customer mode -- almost most of the customers of Trip.com they are coming from the market other than domestic China market. And Hong Kong is one of the focused market for Trip.com, but the targeted customer of Trip.com mainly is the Hong Kongese who travel to China or to the world, which is less impacted by the recent event. Thank you, Alicia.
Alicia Yap -- Citigroup -- Analyst
Thanks.
Operator
Thank you. Your next question comes from Jerry Liu from UBS. Please go ahead.
Jerry Liu -- UBS -- Analyst
Hi, thank you. I have two questions. The first is, if we look long-term on the operating margin profile as Trip.com to capture the demand of those local travelers. What kind of impact do we see on margins? Is there an investment period? And secondarily, is that corporate travel, if we look at corporate travel revenues, it looks pretty healthy. So, can we just get some comments on the TPE filing -- for the TCE side, seems like there is less impact on geopolitics and these are the headwinds. Thank you.
Cindy Xiaofan Wang -- Chief Financial Officer
For the Trip.com business, we covered I believe more than 20 markets in the world, but mainly focused -- currently mainly focused in the Asia-Pacific region. So, we will still for each individual market we will look at the operating margin. And based on the development stage, we will look at -- we will set ROI threshold for each individual market. For the more matured market, for example, the Hong Kong market, we already achieved quite sustainable profitability in that market. And for the -- for example, the Korea and Japanese market, we are very close to the break even point already. But again for the Trip.com, we are still in the very early stage of expanding our market share outside the world. So we are still expecting some investment in the -- not only the marketing, but more importantly in the product development side to make sure that we have the best product to serve the local market.
In corporate travel, yes. I think within China, corporate travel for Ctrip is doing very well. Our business is leading the second player by a wide margin. In addition to that, globally, we will also try to extend our strength in corporate travel from the China market to Hong Kong, Taiwan and the rest of Asia and try to serve our customers not only within China, but along the way, when they -- wherever they travel, we'll be happy to offer our product and services to follow their footsteps. Thank you.
Operator
Thank you. Your next question comes from Tian Hou from T.H. Capital. Please go ahead.
Tian Hou -- T.H. Capital -- Analyst
Yeah. Good morning, management. My question is, we have already entered the last month of 3Q, so the guidance is 10 to 15 year-on-year. So if we look at the travelers, most of time they -- most of customer plan ahead. So, in your system when you give this guidance, the 5 percentage point gap, so under what kind of circumstances you guys see the lower end, under the -- what kind of circumstances of September you will accomplish the high end of the guidance, so what makes the key factor of the spin? Thank you.
Jane Jie Sun -- Chief Executive Officer
Of course, booking window, we -- in the last 20 years, Ctrip managed to build the most comprehensive product offerings and compared with very competitive pricing. And especially now over 80% of our bookings is coming from the mobile app. So the booking window really is very short or more than 70% of our customers book our product within five days. So it's really hard for us as we already explained to all the analysts that it's very difficult for us to provide a very precise guidance for the -- for example for the fourth quarter or even the whole year. Yeah, again, we will -- our all Ctrip team were working very hard to achieve as high growth rate as possible, but again we cannot promise which low-end or high end just because of the short booking windows. But we will work very hard to achieve the higher one. Thank you.
Operator
Thank you. Your next question comes from Jialong Shi from Nomura. Please go ahead.
Jialong Shi -- Nomura -- Analyst
Hi, good morning management. Thanks for taking my question. My question is about your international business. So I just wonder how much of your revenue is contributed by the international business? And if we further break down the international business, how much of the international revenue is coming from the Chinese outbound travel? And how much of that is contributed by pure overseas markets, i.e. serving long Chinese travelers? And if we comp out your international business, what was the growth rate in Q2 for your international revenue that includes Skyscanner, Trip.com and Chinese outbound travel. And what is the margin profile for this business? Thank you.
Jane Jie Sun -- Chief Executive Officer
In terms of the international contribution, for the hotel accommodation business, international revenue contribute about 20% to 25% of our total revenues and in that -- for the air -- for the air business international has already -- contribute about 40% to 45% of our total air ticket revenue. And the packaged tour mainly contributed from the outbound travel and -- and the international one -- the international revenue contribute about 40% to 50% of the total packaged tour revenue.
So regarding the question about the split of outbound versus the international, outbound contribute about 20 to 25 overall of our total revenue and the pure international including Skyscanner and the Trip.com contribute about low teen -- tend to low teen percentage of total revenue. And the margin profile as I said, outbound because of the average selling price is much higher than compared with the domestic one. So in terms of margin it contribute higher margin compared with our average margin level. And for the pure international business especially Trip.com, we are still in the stage of early investment, but again we will closely monitor the margin profile for each individual market based on their different growth stage. Thank you.
Jialong Shi -- Nomura -- Analyst
Thanks.
Operator
Thank you. Your next question comes from Billy Leung from Haitong International. Please go ahead.
Billy Leung -- Haitong International -- Analyst
Hi, thank you management for taking my question. Sorry, I got cut off earlier, just one -- just one question. I just wanted to ask management if they could share their thoughts on our international expansion. What kind of difficulties or hurdles have we faced when we go overseas, is that a pricing issue, is it dealing with local partners or integrating our international brands just to share your thoughts on difficulties or hurdles in international business. Thanks.
Cindy Xiaofan Wang -- Chief Financial Officer
International business represents great opportunities for us. However, in order to grow that business, we need to recruit talents at local level. So we are putting concerted efforts to identify and recruit and train our team in each market, so that we can build a strong team, understand our customers and build our product offerings that is suitable for the local customers and move methodically into each region. So, the business has great potential and we are moving as quickly as possible, mainly the people will make the business penetrate further into each region. Thank you.
Operator
Thank you. Your next question comes from Jamie Shen from BOCI. Please go ahead.
Jamie Shen -- BOCI -- Analyst
Hi. I just have a very quick follow-up on the third quarter margin because historically margin will trend up [Indecipherable] quarter-on-quarter during the peak season, but this year given the weaker than expected revenue trend, shall we still be expecting margin expansion quarter-on-quarter? Thank you.
Cindy Xiaofan Wang -- Chief Financial Officer
Thank you. We provide margin guidance of this third quarter excluding share-based compensation, we expect our non-GAAP operating income will be in the range of RMB2.3 billion to RMB2.6 billion. Thank you.
Operator
Thank you. There are no further questions at this time. I will now hand back to Michelle Qi for closing remarks.
Michelle Qi -- Senior Investor Relations Director
Thank you everyone for joining us today. You can find a transcript and webcast of today's call on ir.ctrip.com. We look forward to speaking with you on our third quarter 2019 earnings call. Thank you and have a good day.
Jane Jie Sun -- Chief Executive Officer
Thank you.
Cindy Xiaofan Wang -- Chief Financial Officer
Thank you very much.
Duration: 59 minutes
Call participants:
Michelle Qi -- Senior Investor Relations Director
James Jianzhang Liang -- Executive Chairman
Jane Jie Sun -- Chief Executive Officer
Cindy Xiaofan Wang -- Chief Financial Officer
Thomas Chong -- Jefferies -- Analyst
Binnie Wong -- HSBC -- Analyst
Ronald Keung -- Goldman Sachs -- Analyst
James Lee -- Mizuho Securities -- Analyst
Natalie Wu -- CICC -- Analyst
Gregory Zhao -- Barclays -- Analyst
Joyce Ju -- Bank of America -- Analyst
Alex Poon -- Morgan Stanley -- Analyst
Alicia Yap -- Citigroup -- Analyst
Jerry Liu -- UBS -- Analyst
Tian Hou -- T.H. Capital -- Analyst
Jialong Shi -- Nomura -- Analyst
Billy Leung -- Haitong International -- Analyst
Jamie Shen -- BOCI -- Analyst
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