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eLong, Inc. (



Q4 2011 Earnings Call

February 23, 2012 7:00 PM ET


Michael Doyle – CFO

Guangfu Cui – CEO


James Lee – CLSA

Fawne Jiang – Brean Murray

Catherine Leung – Goldman Sachs

Alicia Yap – Barclays Capital

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Eddie Leung – Merrill Lynch

Lawrence Auriana – Kaufmann Fund

Question-and-Answer Session


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Thank you. We will now begin the question-and-answer session. (Operator Instructions) Our first question comes from James Lee of CLSA. Sir, you may begin.

James Lee – CLSA

Thanks for taking my question. Mike, can you maybe help us understand the framework of your coupon program? Is it a pretty much nationwide program or is it more or less by region? And how do you determine kind of where to offer your program? And is it determined where you see most competition or is it by maybe new targets or new markets you want to go after? Thanks.

Michael Doyle

Sure. So our coupon program has been pretty consistent now for the last six quarters or so in its size and scope. We have coupons at a little more than half of our hotels. The competition of the program is distributed across all provinces and cities in the country, all-star categories and in all key districts within those cities. We’ve done that very deliberately to make sure that we have a coupon product that’s appealing to all customers.

James Lee – CLSA

And maybe as a follow up Mike, maybe can you talk about the program success in terms of conversion rate? How much qualify versus how much people actually use? And maybe you can help us understand where on a regional basis where you are seeing the most conversion. Is it mostly Tier 1 markets or is it mostly Tier 2? Thanks.

Michael Doyle

Thanks James. We haven’t shared that level of detail about the coupon program. We’ve just shared that it’s been a successful program for us and one that we have continued to invest behind.

James Lee – CLSA

Okay. And last question here, I’m so sorry taking so long. Can you give us a sense how long do you intend to continue to support this program? Obviously, it’s been very successful and you deliver a very good top line growth, and also in terms of hotel booking, but looking at your margin, it is lower than your peers and domestically/internationally. I was wondering how comfortable you are running at the current operating margin?

Michael Doyle

Yeah, so the motivation behind our coupon program is to provide customers value by saving the money and introducing them to our market leading hotel networks and our improved hotel website. So we feel like we’re still meeting those objectives.

We’re still acquiring new customers. And the program still makes financial sense for us. We view the coupon program like we do any other marketing channel. And we are measuring the efficiency of those channels. We constantly reallocate marketing resources to their best and highest use. And the coupon program is no difference. So we will continue to invest there until we feel differently about the opportunity.

James Lee – CLSA

Great. Thanks so much.


Thank you. Our next question comes from Fawne Jiang of Brean Murray. Ma’am, you may begin.

Fawne Jiang – Brean Murray

Good morning, Guangfu and Mike. Thank you for taking my questions. First question is actually regarding your fourth quarter hotel commission per room night. It seems like on both year-over-year or quarter-over-quarter you did have some improvement there, although it’s still – I think year-on-year minus 7%. I also noticed that in terms of ADR actually it was minus 8%. So your commission revenue per room night I think was better than the average ADR for the first time in the past eight quarters. Just wondering what’s the driver for that?

Also, I think Mike also mentioned that you still see shifting towards lower ADR hotels and you also have coupon program plus your increasing growth on the Group Buy. Just wondering whether you could prioritize the negative impact of those factors on your ADR?

Michael Doyle

Sure. First on the revenue per room night. You’re correct. The revenue per room night did decline 7% year-on-year in the fourth quarter. As the hotel revenue was impacted by the accounting change to the coupon program. So was revenue per room night. So without that change in the quarter, the revenue per room night was actually down a bit further than the decline in ADR.

So no real difference in trends to speak to this quarter on that metric. As far as the impact on the reduction in revenue per room night from coupon, from mix shift to budgeting Group Buy and to the ADR declined from Expo or otherwise. The biggest driver is mix shift to budget and Group Buy.

Fawne Jiang – Brean Murray

Okay, got you. I also have a quick question on your commission revenue per air segment. It seems like we also have a minus 4% year-over-year decline even though the average ticket pricing should increase year-over-year. Just wonder what’s the driver behind that and do you see commission rate cut here or...

Michael Doyle

So the trend this quarter I think is a bit unique and not necessarily useful to draw a trend from. We recognize our incentive payments from the airlines on a cash basis when received. And we received lower incentive bonuses in the fourth quarter. So we don’t expect that that’s a trend, but it does impact the current quarter. So Q4.

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