Chinese Internet travel service provider's (LONG) unaudited financial results for the first quarter ended March 31, 2007 show revenue increased 22% to CNY63.0 million compared with the prior year period.

The company, which competes at a distant second to Chinese online travel rival, says revenue from hotel commissions increased 16% primarily due to higher room volume, as well as a modest increase in commission per room night. Room nights booked through eLong increased 14% to 756,000, while commission per room night increased 3% to CNY65. Commission per room night increased due to our hitting higher room volume thresholds.

"eLong increased air ticketing commissions to nearly 20% of our travel revenue during the first quarter," said Henrik Kjellberg, chairman and interim CEO of "We are pleased with our progress in diversifying the Company's revenues, as well as continued efficiency gains across our operating expense base, and remain confident in the long-term opportunity of China's online travel market."

eLong has grown its hotel offering over 22% since first quarter 2006, and now features discounted rates at nearly 4,000 hotels in over 300 cities across China.

Gross margin in the first quarter was 72.9%, a decrease of 247 basis points compared with 75.4% in the prior year period. Gross margin decreased due to the increased mix of lower gross margin air revenue, as well as increased compensation expense as eLong invests in improvements to its call center.

Sales and marketing, general and administrative expense and service development expenses decreased 7% during the first quarter, while total operating expenses decreased 5%. Sales and marketing expense increased 24%, and increased 52 basis points as a percentage of revenue to 41.4%. The increased expense was due to increases in business volume and higher marketing spending. General and administrative expense decreased 45% due to lower professional fees during the quarter. General and administrative expenses as a percentage of revenue were 17.1% in the first quarter.

Operating loss was CNY5.2 million as compared to an operating loss of CNY15.5 million in the first quarter of 2006, an improvement of CNY10.3 million due to higher revenue and lower general and administrative expense, partially offset by the increase in sales and marketing expenses and cost of services.

The company recorded a net loss of CNY0.8 million for the first quarter compared to a net loss of CNY12.2 million in the prior year period, an improvement of CNY11.4 million primarily due to CNY10.3 million of lower operating loss.

eLong expects total revenues for the second quarter of 2007 within the range of CNY73.0 million to CNY81.0 million, an increase of 9% to 21% from the second quarter of 2006.


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