Good day, and thank you for standing by. Welcome to the Tongcheng Travel 2022 first quarter results call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your first speaker today, Kylie Yeung. Please go ahead.
Thank you. Good morning and good evening, everyone. Welcome to Tongcheng Travel's 2022 first quarter conference call. I'm Kylie Yeung, Investor Relations Director of the company. Joining us today on the conference call are our Executive Director and CEO, Mr. Heping Ma, our CFO, Mr. Julian Fan, and our VP and Head of Capital Markets, Ms. Joyce Li. For today's call, our management team will provide a review of the company's performance in the first quarter. Heping will walk us through the company's business performance for the past quarter. Joyce will discuss our operational highlights, and then Julian will address the details of financial performance accordingly. We will take your questions during the Q&A section that follows. As always, our presentation contains forward-looking statements.
Such statements are based on management's current expectations and current market operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, which may cause the company's actual results, performance or achievements to differ from those in the forward-looking statements. This presentation also contains some unaudited non-IFRS financial measures. They should be considered in addition to, but not as a substitute for, measures of the company's financial performance prepared in accordance with IFRS. For a detailed discussion of non-IFRS measures, please refer to our disclosure documents in the IR section of our website. Now, let me introduce our CEO, Heping Ma. Heping Ma, please go ahead.
Oh, thank you, Kylie. Good evening, everyone. Welcome to our earnings call for the first quarter of 2022. Entering 2022, COVID resurgence has been stubbornly disrupting the travel industry. The past quarter remained quite fluctuated as the first half was relatively encouraging, whereas the second half was fairly distressing. In the first two months of the quarter, we saw strong bounce, with demands for hometown visits and back to work being greatly released during and after Chinese New Year. However, the recovery trend took a drastic turn in March as Omicron raged through the country, leading to harsh travel restrictions nationwide and again dragged the travel industry to a new trough.
Be that as it may, we managed to deliver solid results for the first quarter, thanks to our resilient business model, strategy advantages in lower- tier cities and flexible operating strategies. More prominently, our user base continued to grow amid dramatic fluctuations with 12- months paying users climbing to a new high of 206 million by the end of March. Our accommodation business, which serves as the growth driver for the company, demonstrated its resilience amid uncertainties caused by widespread outbreak of Omicron in March, with room nights sold in lower- tier cities continuously surpassing pre-COVID level and suggesting more than 10% year-over-year growth for the quarter. Over the past quarter, we stayed focused on lower- tier cities and further established our presence in this blue ocean market.
By leveraging our in-depth consumer insights, we further dived into users' underlying needs and acted quickly to seize these demands at various scenarios. Cross-sale continued to play a key role in driving the growth of the segment as more precise efforts were made to market our hotel products and services to users from train and air ticketing businesses. For our offline user acquisition initiative, we have adjusted our operational strategy since the fourth quarter of 2021 and placed greater importance on efficiency and user value. Besides, efforts have been stepped up to develop value-added products and services to better serve users' needs during their stay at hotels, as well as more marketing tools to help small and medium hotels with more effective access to users on our platform.
Our transportation business, though materially impacted by the nationwide resurgence of virus in March, maintained reliable recovery in the first quarter, supported by impressive growth in January and February. As for our air ticketing business, we continued to enhance our market presence across the country. While strengthening our market position in strategically advantageous regions, we also tapped into target regions in lower- tier cities and established footholds in these markets. On the other hand, consistent efforts were made to diversify our user base through in-depth study of population demographics. With respect to our train ticketing business, we remained focused on enriching value-added products and services to provide users with easy access to travel and with convenience along their journey.
Our Huixing system, which lies at the center of our intelligent transportation architecture, continued to play a vital role in satisfying users' travel demands, especially when there is no available tickets or routes. In the following quarter, more efforts will be made to integrate air ticketing service into the intelligent system to better serve users' needs while enhancing traffic efficiency. Moreover, with our organizational change, through which all transportation ticketing services was consolidated into one business group, we made a continuous effort to enhance our operational efficiency. The consolidation has further facilitated the cross-selling from train tickets to other product lines, such as air tickets and car sharing. That's better utilizing the tremendous traffic volume generated by the train ticketing business.
Our bus ticketing business, an effective instrument for the company to grow user base, maintained its prominent growth during the last quarter, even under the shadow of widespread resurgence of COVID. Throughout the quarter, we further enhanced our geographic coverage across the country through the rollout of smart ticketing equipment and strategic cooperation with urban and rural bus operator. As of the end of March, we have around 14,000 smart ticketing equipment installed in almost all cities in mainland China. Meanwhile, we continue to penetrate counties and towns by extending cooperation with urban and rural bus operators, which contribute meaningfully to the growth of the business. As such, the business volume witnessed more than 170% growth in the first quarter when compared with the same period in 2021.
Efforts were initiated to study users' consumption behaviors and preferences since in the past quarter, and more efforts will be made in the following to dig deeper into users' underlying needs, thus gradually enhancing user value. Entering the second quarter of the year, China is experiencing the worst ever COVID resurgence since the first quarter of 2020, bringing the travel activities to a sudden stop with ever stricter restrictions imposed. Although our business remains resilient amid uncertainties, we are still inevitably impacted to a great extent, given that our whole industry is fundamentally hurt. While digging for external opportunities amid short-term adversity, we have also placed more importance on our daily operations and corporate organization. Aiming for more optimized organizational structure and a higher efficiency.
On the other side, we have implemented stringent cost control in internet and proactively adjusted our marketing strategy based on external changes to better control our expenses. We will continue to build up our core strengths with regard to organizational capability, product capability, and brand influence to get better prepared for the market recovery. In the short run, the uncertainties will continue and the road to recovery remains bumpy and uneven. However, for the long run, as I have reiterated many times, we stand firm on the upward trend of China's travel industry. With that, I have handed over the call to Joyce. She will walk you through our operational highlights for the first quarter. Joyce, please.
Thank you, Heping. The widespread surge of Omicron in early March did put a break on the recovery in the first two months of the past quarter and again, weighed heavily on the domestic travel industry. As a veteran in the industry, we acted swiftly and adjust our operational strategy to address external challenges. As always, we managed to deliver solid results for the quarter. Over the last quarter, we continued to seek deeper cooperation with Tencent on multiple fronts. We were entitled to a popular IP right by Tencent, and launched a esports event for the second year, aiming to establish effective interaction with the younger users. During the quarter, we also increased our advertising placement within Tencent ecosystem to further reach out to the extensive user in the ecosystem and build up our brand influence there.
We joined hands with Tencent Video to have our brand highly exposed in a series of TV programs, including a big- budget travel documentary. Besides, we continued to push ahead with our cooperation with QQ Music, QQ Browser, Weixin searching portal and Weixin video accounts. On the other side, we made a continuous effort to diversify our traffic sources. Apart from Tencent, we also worked with China's major handset vendors and short video platforms to have higher branding exposure to targeted users. We had in-depth sharing of membership benefits with several handset vendors. We also launched tailor-made products on our short video platform to better cater to their preference and their needs. Besides, more efforts were invested in our Tongcheng app to optimize user experience and enhance user interaction by enriching content on the platform.
Moreover, offline user acquisition initiatives continued to play a crucial role in acquiring new users for the company, as well as facilitating our penetration to lower-tier cities. During the first quarter, we continuously load our smart bus ticketing equipment across the country, while bringing more urban and rural bus operators on board to help us further penetrate counties and the towns with scanning codes on buses. In the last quarter, we also steadily pushed forward with our branding strategy, aiming to build us a unique travel platform that understands younger users. We appointed Generation Z actress as our new brand ambassador to build up our brand recognition and influence. At the same time, we use a Generation Z languages and styles in our advertisements to build closer bonds with the younger users and occupy a distinct place in their minds.
Besides, to echo our lower- tier city strategy, we rolled out massive ad placement on buses in tier three and below cities to build a stronger presence there. Moreover, our paid membership program continued to grow rapidly with accumulated amount of Black Whale members approaching 13 million as of the end of March. Over the quarter, we further enriched membership privileges and brought more partners on board to better fulfill users' needs, as well as enhancing users' engagement. Last year, we successfully tapped into the potential student market with our customized campus card, which offers students with extensive travel benefits. To further cultivate the market, we joined hands with an e-commerce platform recently and shared comprehensive membership benefits tailor-made for students.
With aforementioned efforts, our average MAUs continued to grow in spite of the huge fluctuation caused by the rampant surge of Omicron, reaching 244.8 million for the first quarter with a year-over-year growth of 4.5%. Our MPUs for the quarter maintained a robust growth and achieved a year-over-year growth of 16.1% at 71.7 million, thanks to our stable traffic on Weixin channels, customer-oriented product services, as well as our effective offline user acquisition initiatives. Our paying ratio also increased to 13% for the first quarter of 2022, and exceed the ratio of 11.6% in the same period in 2019.
More meaningfully, our 12-month paying users continued to expand and set a new record of almost 206 million as of the end of March, representing a robust growth of 22% when compared with same period in 2021. As an innovation-driven leader in the industry, we're committed to transforming from an OTA to an ITA. We consistently invest in technology and proactively adopt technological innovation to enhance not only our internal efficiency, but also to build a more efficient travel ecosystem. Our intelligent Huixing system, which offers travel combos based on users' preference and needs, continues to play a key role in satisfying users' travel demands, especially when there is supply shortage. With advanced algorithms and complex suppliers, it could also help the national transport network run more efficiently.
Moreover, we have adapted more smart technologies in our customer service to aim high efficiency while enhancing customer satisfaction. On the other hand, we are devoted to empowering our partners' business by our technology and internet expertise. In the past quarter, we have established a strategic partnership with Hunan Airport Management Group to facilitate its digitalization. Which will not only help the group build its information platform, but it will also help attract passengers for its Changsha Airport through our product and market innovation. In addition, our hotel-style solutions continue to help individual small and medium chain hotels run more efficiently in their daily operations. We have also continued to the digitalization of the traditional bus industry through nationwide rollout of ticketing system and smart ticketing equipment with our efficient operation.
As pro-social enterprise, we deeply understand the importance of the social responsibility for the sustainable development of a company, and proactively take part in social charity activities. We're established to make use of our industry expertise and internet technology to contribute to areas such as rural revitalization, poverty alleviation, and industry recovery. Lately, we launched a series of free online professional courses concerning industry knowledge, hotel operation, and marketing methodologies to help individual and small chain hotels better cope with the difficulties posed by the COVID, which have received a widespread recognition from hotel professionals. In the following quarters, we'll continue to help industry partners sail through the difficulties. Meanwhile, we join hands with Tencent to encourage people to participate and donate in a charity activity that was set to help rebuild a flood-hit village in Hunan Province.
On the other side, we volunteered to help disseminate COVID, the prevention policy in Suzhou for our AI-powered automated calling system, which greatly enhanced the efficiency of information diffusion. We spare no efforts to contribute to a better society. With this, I'll turn over the call to our CFO, Julian, who will walk you through our detailed financial results in the first quarter of the year. Julian, please go ahead.
Thank you, Joyce. Good evening, everyone. For the first quarter of 2022, we reported a net revenue of RMB 1.7 billion, representing a 6.5% year-over-year increase from the same period of 2021, or a 3.7% year-over-year decrease from the same period of 2019. We had a very good start in the beginning of the year, as Heping and Joyce mentioned. However, since the early March, the Omicron variant rampaged through the country and again shook the travel industry, which caused a negative impact on our business as well.
Benefiting from the improvement of operational efficiency and the prompt scale back of sales marketing investment in March, we achieved a RMB 245 million adjusted net profit with a 14.3% net margin compared with 13.6% in quarter four, 2021 and 18.5% in quarter one, 2021. We booked the RMB 32.4 billion GMV in the first quarter of 2022, with a 3% year-over-year decrease compared with the same quarter of 2021, or a 10% decrease compared with 2019. Mainly because the ADR and ATV were dragged down by the COVID headwind in this quarter, while partially being offset by the significant demand released from hometown visits and back to work during and after the Chinese New Year.
Accommodation reservation revenue achieved RMB 543 million for the first quarter of 2022, representing an 18% increase compared with 2021, or an 11% increase compared with the same quarter of 2019. The growth was mainly driven by the solid room nights growth, especially in lower- tier cities, while partially eroded by ADR decrease as a result of the temporary headwinds faced by the hotel industry, as well as the increased room nights contribution from lower- tier cities. If we compare with, let's say, quarter of 2021, domestic room nights growth in the whole quarter still booked a 5% growth supported by the short-haul traveling and local consumption during Chinese New Year. In particular, the room nights grew over 10% in lower- tier cities for the whole quarter.
The take rate continuously increased compared with that of 2021 and 2019 as a result of cutdown in couponing level in March and the increase of VAS contribution in accommodation segment. Transportation TCT revenue for the first quarter of 2022 was RMB 1,017 million, representing a 1% decrease compared with 2021 or a 19% decrease compared with the same period in 2019. The pent-up demand for traveling released significantly during and right after Chinese New Year, while suddenly plunged after restrictions imposed in Shenzhen and Shanghai in early March, which caused a year-over-year shrink in air and train ticket volumes for the whole quarter. Ticket volumes still booked over 170% growth compared with the same quarter of 2021 and contributed more revenue to transportation segment.
Blended take rate for transportation business in the past quarter further improved year-over-year, mainly because travelers were more willing to purchase insurance and other VAS driven by user safety concern and supply shortage. Other business revenue was RMB 158 million in this quarter, representing a 20% increase from the same period of 2021 or a 347% increase versus 2019, mainly driven by the big success in our Black Whale membership program expansion, PMS business, and advertisement business development. We're looking forward to further monetization and contribution from new products and services in the following quarters. Gross margin was 72.5% for the first quarter of 2022, decreased from 74.7% for the same period in 2021 and 74.6% for the previous quarter.
The temporary drop for the gross margin in quarter one was mainly due to call center burdens arising from the huge amount of consolidation and reschedule inquiries since the beginning of March. In the first quarter of 2022, our adjusted EBITDA achieved RMB 438.4 million, with margin increased to 25.5% from 22.8% quarter-over-quarter, and decreased from 26.0% year-over-year. Adjusted net profit achieved RMB 245 million with margin increased to 14.3% from 13.6% quarter-over-quarter and decreased from 18.5% year-over-year. Service development and administrative expenses in the first quarter of 2022 increased by 30% from the same period of last year, mainly due to an increase in FTC spending.
Excluding share-based compensation charges, selling, general and administrative expenses in total accounted for 26.8% of revenue in the first quarter of 2022, compared with 22.7% of revenue in the same period of 2021 and 25.7% in previous quarter. The temporary increase year-over-year, excluding share-based compensation, was mainly because we hired more employees in product and R&D for new product and service development since the third quarter of last year to further optimize staff composition. Selling and marketing expenses in the first quarter of 2022 was nearly flat compared with the same period of 2021. During this quarter, we strategically increased investments in marketing campaigns to seize the recovery opportunities during and after Chinese New Year.
Meanwhile, we closely monitor the market and COVID situation to make the marketing investment more effective, aiming for better ROI. In early March, we promptly turned to cost-saving mode and reduced most of our marketing investment to cope with the drastic headwind and challenges facing the industry. Excluding share-based compensation charges, selling and marketing expenses accounted for 36.5% of revenue in the first quarter of 2022, compared with 37.9% of revenue in the same period of 2021 and 39.4% of revenue in previous quarter. As of March 31st, 2022, the balance of cash equivalents, restricted cash and short-term investment was RMB 6.6 billion. Lastly, let's turn to our expectation for the second quarter of 2022.
The macro condition and the whole travel industry as well have been deteriorating since April, and the situation has been even worse than two years ago. First-tier cities were severely impacted by the lockdown policy, and stricter restrictions were imposed and widespread, which fundamentally hampered nationwide mobility. Based on what we observed, we are now expecting our revenue in the second quarter to decrease by 40%-45% compared with the same quarter of 2021. Our adjusted net profit is expected to be in a range of RMB 50 million-RMB 100 million. This forecast reflects our current and preliminary review, which is subject to changes. As we emphasized before, after two years of cultivation and preparation, the company is now in the best position to capture the post-COVID recovery opportunities and will continue to outperform the market no matter what challenge we will encounter.
Though facing challenges for the short run, we believe demand for travel remains resilient and unreduced, which has been demonstrated in the past quarter, and will rebound strongly as soon as restrictions are relaxed. We are optimistic that recovery will be on track soon. Operator, we are ready to take questions now. Thank you.
Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound or hash key. Please be reminded that we can only accommodate two questions at a time. Kindly stand by while we compile the Q&A roster. The first question comes from Alex Poon from Morgan Stanley. Please ask your question.
Hi. Thank you, management, for taking my question. My first question is, can management share our strategies to maintain market share or even grow market share during this difficult time and also the post-COVID recovery? This is the first question. The second question is, because the tier- one cities are in very tough situations right now, how's our performance in lower- tier cities in second quarter so far? Thank you very much.
Okay. I think we can answer two questions like this. First, Joyce will give you some color on the latest performance in the markets and especially in the low- tier city markets. Then I will try to answer the first question about the strategy to maintain the market share during the tough condition. Joyce, please.
Thank you, Alex. Thank you for the question. I think everyone might not be concerned about the latest market situation and performance recently as there this round of COVID resurgence which have appeared one after another in areas such as Shenzhen, now Shanghai and Beijing. We can see that many regions are still experiencing the resurgence of COVID cases right now. In general, we can see that government's strictest measures and travel restrictions are still in place. That's why we say the travel industry is severely impacted. We can tell from the travel demand in terms of air and railway passenger number in the recent May Labor Day holiday have been down by nearly 17%-18% when compared to the same period of 2019 or even compared with 2021.
Although it has been slightly better than the numbers in Spring Festival, I think the market in the first half of the second quarter was even worse than the situation in the same period of 2020. However, as you also mentioned, in terms of impact to the company in April and May, we observed that the business in the low-tier cities, local tourism and short-haul consumption are less impacted compared with the business in high-tier cities, where there were still tight lockdowns, as well as the long-haul travel and business travel, were severely impacted. As a result, our accommodation, room nights, bus leasing and car hailing business are still more tenacious than air and train business. One thing that we would like to mention is that some regions are less impacted by the pandemic, and our business in these areas have been relatively stable.
For example, the Southwestern region and the Sichuan-Chongqing areas, where we have a strong market position. Since early May, other than Shanghai and Beijing, COVID-19 was relatively well controlled in other cities. We observed a step-by-step recovery in Guangzhou, Shenzhen and Southwest regions for the transportation business and the central and coastal regions for accommodation business. We expect a better June performance than April and May. While some areas have ended or loosened the mobility restrictions, these measures and the uncertainties of reopening continue to present meaningful headwinds in the short run. However, we think the demand suppression will be short and temporary, and we're confident that the rebound will continue as what we observed during this Chinese New Year once the restrictions was relaxed.
In terms of the near- term strategy that the company to deal with the tough market condition, the most important thing is to protect our margin in this quarter and next quarter. We immediately implemented the cost measures to respond to the difficult market situation, as we did each time in the past two years. We have proactively adjusted our marketing strategy based on the external changes to better control our expenses. We carried out internal cost control measures to reduce our variable cost as well. At this moment, we place more emphasis on our daily operations and the corporate organization so as to achieve more optimized organizational structure and higher internal efficiency.
Of course, at the same time, we also closely monitor the market situation and try to actively seek more business opportunities amid short-term adversity. For example, we noticed that some of our targeted and advantageous markets, just like Joyce mentioned, such as the Southwest regions are less impacted by the pandemic. We continue to explore business potentials and strive to expand our market share in those markets. We are aware that some business segments, such as the 2B business, like advertising business and hotel SaaS solution, the PMS, as well as SaaS, are quite stable during this period. We have made increased efforts to expand our business in those segments. We understand that and believe in the economic vitality of the lower-tier cities market.
We continue to study the market and conduct in-depth research on lower-tier cities on a large scale, so as to grasp more business opportunities and get better prepared for the market's recovery. Actually, I think in May, in recent two weeks, our business team and product research team visited 30-40 lower-tier cities to conduct a first-hand market research and dig out more business opportunities. This research allowed us to clearly see the immense potentials and better understand the lower-tier cities market, which will benefit the company to further develop suitable products and services for our user in the future.
Yeah, just like we mentioned, while the uncertainties will continue in the short run, but we still stand firm on the upward trend of China's travel industry in the long run and continue to fortify our core competencies, regarding our organizational capacity, product capability and brand influence, for our long-term sustainable growth.
Thank you.
Your next question comes from Brian Gong from Citigroup. Please ask your question.
Thanks management, for taking my question. I have two questions. The first one is, you know, with worsening macro, you know, given the spread of Omicron and those strict measures by governments, and how does management see recovery pace after, you know, latest resurgence under control? Do you see, you know, worsening macro could impact people's traveling spending? My second question is, how does management see the recovery pace in the second half? I know the visibility is quite low right now, so can management talk about, you know, in the full case, what could the revenue and the profit be, and in the worst case, just like this quarter, revenue and the profit could be? Yes. Thank you.
Thank you, Brian. I will give you some color on the recovery pace after the latest resurgence under control. Actually, we can see that the market is still very fluctuating and the user booking window became extremely short after COVID. With the uncertainties brought by the resurgence of the COVID cases, actually it is extremely difficult for us to give a full year guidance or full year outlook at this moment. Anyway, from our results in the past two years, it is very clear that we are able to recover faster than the industry and outperform other players as well. We actually feel confident in the recovery of the travel market and our performance in the second half of 2022.
Although we cannot give you an exact guidance on the second half, we are still very confident on the recovery, as the travel demand rebounded quickly every time once the COVID situation was under control in the past two years. For example, we experienced an extreme rebound for the pent-up demand release during the national holiday in 2020, the second quarter of 2021 and the Chinese New Year of 2022. For each time, we set another historical record on our MAU, MPU and also APUs. To be more specific, I would like to give you some color for each of our product lines, how we catch the recovery trends in the second half of this year.
For example, for air and train business, we have superior product offering and technological advantage. For example, our Huixing system, which can smartly offer the best available and suitable travel solution to our customers. What is more, the benefits of transportation were far more welcome than pre-COVID period, such as cancellation insurance. The insurance of safety, the VIP lounge and membership card, et cetera. For our accommodation business, we have various channels to connect with our users. Some channel sources are mature and some channel sources are new and additional to our platform. For example, we have Weixin as our main battlefield, which is very stable with rapid growth. We upgraded Tongcheng and eLong apps recently as well to better serve different user group. Our cross-selling initiative from transportation to accommodation still we have a lot of room to improve.
Offline user acquisition in the hotel and accommodation scenario, especially in lower- tier cities, helps accelerate the online penetration and target user penetration. Additionally, we are also developing new distribution channels to attract users in different scenarios such as Gaode and Baidu Map, et cetera. More importantly, we have already emphasized a lot of times we will persist in our one-stop-shop strategy to offer more VAS in the whole process of accommodation business, which continue to show a strong growth potential in the past quarter. The VAS contributed more than 12% of accommodation revenue right now. For those business that help the company largely acquiring new users, such as bus ticketing, carpooling and the tourist attraction ticketing business, there are still plenty of space for us to further cultivate.
We will still keep investing marketing dollars and target a higher growth in the second half of the year. Meanwhile, we will tightly monitor the monetization and ROI for a UE improvement. Leveraging the huge traffic sources, the superior technology and industry knowledge, we will also explore more opportunities to better serve our supply and strive for more revenue contributions on those areas. These businesses include advertisements, PMS and hotel management as we mentioned. Also smart SaaS system for industry digitalization. Meanwhile, we will continue to expand our Black Whale membership coverage to drive user loyalty and purchase frequency. We are still very optimistic on the top line growth when the situation will be better because our business foundation and potential are so strong.
In terms of the people traveling spending, actually, we do think people will spend less. For example, in the past, Chinese New Year, you know, we are very encouraged on the pent-up demand release and the total market recovery. For example, in January and February, the growth and the recovery of the company for each product line is so strong. We achieved more than 20% growth for accommodation room nights, and also 15% growth for air tickets, and more than 200% growth for bus tickets compared with 2021 in January and February.
We think once the restriction is relaxed, we think people will come back to the travel industry, will start to travel, to do their business traveling and leisure traveling, as well. In terms of your second question, could you please restate it? I cannot remember your second question.
Yeah, actually you can answer the second question. My second question was, you know, the outlook for the second half, what could the revenue and the profit be under, you know, the bull case or the worst case respectively? In a worst case, probably like this quarter.
Yeah, actually, we think the April and May already hit the bottom. We don't think the second half will be even worse than the situation in the second quarter. We're still very optimistic on the recovery on the second half. In terms of the profitability, you know, nowadays we have a very lean operation structure, operation cost structure. For example, in the first half, in the first quarter of this year, we have already realized a RMB 1.7 billion revenue scale. When we reach this kind of a revenue scale, we can reach a 14%-15% of the margin.
When the revenue scale improve or increase, we are very confident that the margin, the net margin will be improved as well because some of the costs are fixed and/or relatively fixed, and it will be scaled by the revenue increase. Thank you.
Thank you.
We'll take the final question from the line of Thomas Chong from Jefferies. Please ask your question.
Thanks management, for taking my questions. I have two questions. First, could you please share some color on the take rate trend for accommodation in top and lower- tier cities? My second question is how should we think about the trend in operating expenses going forward? Thank you.
Okay. Thank you. For the first question in terms of the take rate, actually the trends for top and lower- tier cities, the take rate trend is relatively the same. For accommodation, actually our revenue take rate in previous quarters improved step by step. Also in the past quarter, slight increase as well when compared with the quarter one last year or the previous quarter. Because we reduced the subsidies to users in March and also the contribution of revenue from non-room products and services increased. Thanks to the effective implementation of our accommodation one-stop-shop strategy. Going forward, actually, we are very confident that our revenue take rate for accommodation, both in low-tier city and high-tier city will still have some room to improve.
That is mainly because our VAS revenue contribution is still ramped up in the past quarters, in the past several quarters. I think in quarter one, it still take very little portion. It take like 12%. We are very confident that will contribute more in the future. For example, the advertisement in the hotel segment, and also the other VAS or the shopping inside the hotel, et cetera. In terms of the operating expense trends, actually, there's two major part. One is the sales marketing dollars. Actually, the sales marketing dollar is relatively variable. It takes like 35%-40% of our total revenue for each quarter.
Based on our flexible management, we can very promptly adjust these parts, so it's more related to the revenue. For the fixed spending, for example, the staff cost and some advertisement, the fixed amount is relatively stable quarter-to-quarter because we don't have a plan to increase our headcount in the future. That is why, as I mentioned, it will be scaled down in the future, and the expense rate as a revenue will step by step improve as the revenue scale to normal. Thank you.
Thank you.
At this time, I would now like to hand the call back to Kylie for any closing remarks.
Thank you. We're closing the call now. If you wish to check out our presentation and other financial information, please visit the IR section of the company website. Thank you, and see you next quarter.
Thank you. This concludes today's conference call. Thank you for participating. You may now all disconnect.