Business, Internet

Tough Quarter For Online Travel In China At eLong.com

With a drop in hotel commissions, Chinese Internet travel company eLong Inc. managed to massage a minuscule profit as the company reported unaudited financial results for the first quarter ended March 31, 2009.

The company's net income for the first quarter 2009 was CNY2.0 million, which compared to net loss of CNY32.6 million over the prior year quarter. The profit was driven primarily by a CNY38.2 million decrease in foreign currency exchange losses, partially offset by a decrease of CNY4.3 million in interest income.

"Q1 was a tough quarter, but see early indications that our focus on expanding our presence online, driving product innovation and improving supply will yield results," stated Guangfu Cui, CEO of eLong.

Total gross revenues for eLong.com increased 1% year-on-year to CNY82.5 million and net revenues increased 1% year-on-year to CNY77.8 million. Operating loss in the first quarter was CNY3.4 million compared to CNY3.6 million in the prior year period, driven primarily by a decrease in general and administrative expenses, partially offset by greater sales and marketing expenses.

Hotel commissions decreased 2% for the first quarter of 2009 compared to the prior year quarter, primarily due to lower commission per room night, which was partially offset by higher volume. Commission per room night decreased to CNY62 from CNY65 in the prior year quarter primarily due to lower average selling prices and mix shift to lower margin budget hotels. Room nights booked through eLong increased 4% year-on-year to 912,000. However, air ticketing commissions increased 8% for the first quarter of 2009 compared to the prior year quarter, driven by an 18% year-on-year increase in air segments to 506,000, partially offset by a decrease of 8% in the average ticket price to CNY758 compared to the prior year quarter.

Gross margin in the first quarter of 2009 was 69% which was the same as in the first quarter of 2008. Total operating expenses increased 1% for the first quarter of 2009 compared to the first quarter of 2008. Operating expenses were 74% of net revenue, a decrease of 26 basis points compared to the prior year quarter. Cash, cash equivalents and short term investments as of March 31, 2009 were CNY964.9 million.

eLong.com expects net revenues, for the second quarter of 2009 to be within the range of CNY77 million to CNY85 million, equal to a decline of 5% to an increase of 5% compared to the second quarter of 2008.

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