Ladies and gentlemen, welcome to the second quarter 2018 Ctrip.com International, Ltd. earnings conference call. My name is Serena. I will be the moderator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. As a gentle reminder, this conference is being recorded for replay purposes. Now I'll hand the call to Chief Communications Officer, Victor Tseng, to begin. Victor, over to you.
Thank you. Good morning, and welcome to Ctrip's second quarter 2018 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 provisions of the U.S. 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 2018, as well as the outlook for the third quarter of 2018. After the prepared remarks, we will have a Q&A session. With that, I will turn the call to James. James, please.
Thank you, Victor, thanks to everyone for joining us on the call today. I'm pleased to announce that Ctrip delivered solid results in the second quarter of 2018. In line with the principles I discussed in the last earnings call, our teams continue to put the customer at the center of everything we do. Ctrip is synonymous with the highest quality travel experience. We will continue to make investment in improving customer satisfaction as we believe this strategy will create more customer lifetime value over the long run. Today, I will explain our strategy of driving both higher customer acquisition and customer retention rates. First, we'll aggressively drive new customer acquisition. Our focus is twofold. First, continue to innovate in product services to fulfill ever-changing demands of travelers. For instance, our data tells us that customers like to travel with families.
As a result, we've introduced travel products that's suitable for children and elderly with family-friendly booking options. Second, fully leverage our omni-channel travel strategy of more than 7,000 franchised offline stores across 200 cities to create unique points of contact to engage and better convert potential travel customers that are harder to reach through online channels. Second, we'll boost user engagement and cross-selling opportunities. Today, Ctrip offers over 60 tailor-made products and services that not only over-cover the basic hotel and the transportation booking but also fully address travelers' in-destination needs, including dining, shopping, and local activities, both in China and abroad. As a result, over 40% of today's traffic converts to in-destination demands during peak times, and in-destination traffic is growing over 50% year-over-year in the second quarter. We're seeing more engagements throughout the travel funnel and are already benefiting from those cross-selling opportunities.
For example, the air train cross-selling ratio increased significantly from a single digit to over 20% in the past couple of years. With AI and a smarter product innovation, there was still much room to improve our capability to service our customer throughout their whole travel itinerary. Third, we will enhance customer loyalty. We further upgraded our service system in the past few months by improving customer guarantees and the facilitation capability. These efforts have netted about 20% improvement in our NPS results from April to July this year. We recently introduced Hotel Rewards Club, or 悠享汇 in Chinese, program to reward our loyal members with hotel booking discounts and extra benefits. The program already covers tens of thousands of domestic hotels, and to date, we've helped save our customers an average over RMB 2 million on daily basis.
In summary, we worked hard to amass a large and loyal travel user base and cultivate a strong travel brand recognition. These efforts are unparalleled in the travel industry, and our work is far from done. With a vast pool of potential new customers in front of us and a large existing base of loyal customers for us to serve even better, we have a clear vision to further extend our leadership in travel and to the best, not only in China but in the world. With that, I will turn the call over to Jane.
Thanks, James. Ctrip reported solid results in the second quarter of 2018. In particular, accommodation revenue grew healthily at 21% year-over-year, despite our large base. This was driven by consistent growth in volume and steady take rates. We have continued to reinforce our leadership position in the mid to high-end star hotel market. In the meanwhile, we are aggressively gaining market share in the low-star hotel market.
We are also helping hotel operators boost sales with our intelligent hotel booking system while further strengthening our price competitiveness in the low-star hotel category. These efforts helped drive accelerated year-over-year volume growth of around 40% in the low-end hotel market. Transportation revenue grew 1% year-over-year. Strong volume growth across multi-modal transportation product categories was offset by the air ticketing booking process adjustment, as we discussed in the previous quarter. Excluding Skyscanner, international air tickets achieved approximately 40% year-over-year volume growth due to the robust growth in the second quarter for both outbound travel and Trip.com. We are growing around two times faster than the overall Chinese outbound growth rate. Skyscanner's total revenue maintained at a healthy pace of year-over-year growth of approximately 30% in the second quarter, driven largely by robust traffic growth.
Non-GAAP operating profit of RMB 1.2 billion came at the high end of our second quarter guidance. This is a testament to our scalability, which was offset by domestic ticketing process adjustments and our strong investment in customer-centric efforts. Today, I would like to share some of the progress we have made during the past quarter regarding the customer service improvements, supply empowerment, and international expansion. First, on service improvements. Unrivaled service quality is the key differentiator between Ctrip and other players. As James said earlier, Ctrip teams have made great strides in identifying travelers' pain points and developed higher service standards, which consistently exceeded our customers' expectations. We have upgraded our service guarantee across a number of products. We now promise full refunds for visa and related air ticket fees in case a customer's visa application is denied.
In addition, our air and hotel protection program promises free cancellation of hotel bookings due to flight delays and cancellations if customers book both hotel and flight tickets from Ctrip on our platform. We have promised to be proactive in tackling customers' problems, even if it is not contractually Ctrip's responsibility. Recently, we announced that when a customer's booking cancellation policy states it is a non-cancellable hotel room on our platform, we will provide refund assistance, which Ctrip will negotiate with the hotel to reduce the loss on behalf of our customers. Second, on the supply empowerment. By leveraging the 50 trillion bytes of data Ctrip generates every day, we advance our technology capability based on our AI research. We are able to help the suppliers to identify growth opportunities and improve their efficiency and enhance the product's competitiveness.
Since the establishment of Ctrip Hotel University in May, it has received an overwhelming amount of interest and participation. Within the organization, we have established a hotel training center, big data research center, and a user research center, as well as a designed range of courses which help hotels to cultivate talents. By the end of August, we have opened over 70 online and offline courses, which attract nearly 380,000 participants, with majority of whom are the hotel decision-makers. On average, hotels are able to increase their GMV by 20% after they take the training classes according to the feedback we received. Child-friendly rooms are a new niche area that we identify through big data. Ctrip's system indicated that 30% of our customers travel with children, and later we have observed a growth demand for child-friendly rooms to serve these travelers.
Hotels can now choose to promote child-friendly rooms as a unique selling point on our platform. As of today, we have helped co-develop child-friendly rooms in 23 cities in China. On average, the occupancy rate of these rooms is higher than normal hotel rooms and are associated with increased customer satisfaction rates. The Ctrip Institute of Customized Travel Business is another good example of our ability to foster the development of the industry throughout the value chain. In response to the major bottleneck faced by our customized tour supplies in lack of qualified trip planner, we planned these pioneering training programs in May this year, to systematically cultivate the talents in this area with plans to recruit and train 3,000-plus customized trip planner a year. Third, our international business. Trip.com and Skyscanner have both continued to make remarkable progresses in their respective targeted market.
Trip.com continued to perform exceptionally well in the second quarter, and has now achieved a triple-digit growth in air tickets volume for the seventh consecutive quarter. We have recently launched both local activity and airport transfer services in the selected market. We target to expand these product lines in the other market in the following months. This takes Trip.com another step closer to realizing one-stop trip shop capability and offering its customers a seamless end-to-end travel experience. Skyscanner is already one of the largest travel platform in the world. Despite its large base, it saw nearly 25% global MAU year-over-year growth in the quarter. Growth in direct booking on Skyscanner continued with 600% year-over-year growth as more partners migrated to the platform. While Trip.com has become the largest direct booking partner, it still only contributes low single-digit percentage on Skyscanner's total worldwide booking.
We are confident that we can raise this number to around 20%-30% in the long run by further improving Trip.com's competitiveness, pricing, and a strong service capability. Looking ahead, we are excited to achieve our long-term ambitions. Our persistence in delivering customer centricity, deep involvement in the industry value chain, and solid execution in our international business will create enormous growth potential in the years to come. As always, I would like to take this opportunity to thank our customers, our employees, our partners, and our investors for their continuous trust and support. With that, I will turn the call over to Cindy. She will walk you through the details of our financials. Thank you.
Thanks, Jane. Thanks, everyone. For the second quarter of 2018, Ctrip reported net revenue of CNY 7.3 billion, representing a 13% increase from the same period in 2017. Accommodation reservation revenue for the second quarter of 2018 was CNY 2.8 billion, up 21% year-on-year, primarily driven by an increase in accommodation reservation volume. We further expanded our total global hotel coverage to close to 1.4 million properties, an increase of 26% compared with the same period last year. In the second quarter, international hotels sustained a 40% room night year-over-year growth rate, more than doubling the outbound industry growth pace. Transportation ticketing revenue for the second quarter of 2018 was CNY 3 billion, representing a 1% increase from the same period last year. Ground transportation, including train ticketing, bus ticketing, and car services continue to grow rapidly. Air ticketing segment also maintained very strong volume growth momentum across all platforms.
Similar to the first quarter, revenue growth was offset by the decrease of per air ticket segment revenue, which is related to the operating adjustment we've discussed in previous quarters. We expect the situation will gradually improve in the second half of this year with comparatively easier comps. We have continued to expand our multi-model transportation offerings, such as free airport shuttle buses and airport parking vouchers. Today, our full selection of air plus train, air plus bus, train plus bus, and other car services can truly create a seamless door-to-door travel solution for customers across China. Package tour revenue for the second quarter of 2018 was CNY 839 million, up 31% year-on-year, primarily driven by increase in volume growth of both organized tour and self-guided tours. We continue to see the booming development of offline stores.
In mid-August, we announced the achievement of a new industry record of CNY 70 million in GMV in a single day. What thrills us more is that 80% of the offline store customers have never booked a Ctrip package tour product before, making the stores an excellent gateway for acquiring new customers. In-destination activities have become a more crucial part in the total travel market. We recently developed a global things to do platform covering over 100,000 things to do products in over 1,500 destinations all over the world, making it one of the largest platform of its kind. We also established an innovative product called Dolphin Pass, developed by Ctrip to cover the most popular things to do in certain destinations at a package rate. The new product can save our customer not only cost, but also time when planning a trip.
Corporate travel revenue for the second quarter of 2018 was CNY 255 million, up 28% year-on-year. The growth in corporate travel business was primarily driven by the expansion of our travel product coverage. We continue to see steady growth in corporate clients in this quarter, with accumulated accounts reaching over 170,000. We also generate revenue from other business, including our financial business. The revenue contribution from financial products and services is still very small, but growing rapidly. We mainly provide consumers with financial products as part of our one-stop travel shopping experience, and the purpose is to enhance the conversion rate. Given travel's unique attributes and our very strong risk control management, this business has enjoyed very healthy profitability. Gross margin was 80% for the second quarter of 2018, compared to 83% in the same period last year.
The decrease in gross margin was mainly due to the upgrade of service standards in every front of our business in order to be fully in compliance with the customer-centric principles that James emphasized in the first quarter earnings call. Excluding share-based compensation charges, total Non-GAAP operating expenses grew 30.9% year-on-year and 6.1% quarter-over-quarter in the second quarter of 2018. Non-GAAP operating profit in the quarter was CNY 1.2 billion, compared to CNY 1.2 billion in the same period last year, and CNY 966 million in the previous quarter. Non-GAAP operating margin for the second quarter was 16%, increased from 14% in the previous quarter, mainly related to operating efficiency improvement. Diluted earning per ADS were CNY 3.89 or $0.59 for the second quarter of 2018.
Excluding share-based compensation charges and fair value changes of equity security investments, non-GAAP diluted earning per ADS were RMB 1.9 or $0.29 for the second quarter of 2018. As of June 30th, 2018, the balance of cash and cash equivalents, restricted cash and short-term investments was RMB 57.7 billion or $8.7 billion. Now turning to the outlook. For the third quarter of 2018, the company expects the net revenue growth to continue at a year-over-year rate of approximately 13%-18%, which is calculated on the estimated net revenue of third quarter of 2018 under the new revenue recognition standards and the net revenue of the third quarter of 2017, retrospectively adjusted. This forecast reflects Ctrip's current and preliminary view, which is subject to change. This concludes our prepared remarks. Operator, now please open the line for questions.
Thank you. We'll now begin the question and answer session. Please note this session is only open to sell-side analysts due to time restriction, and each analyst is only allowed to ask one question each time. If you have additional questions, please join back to the queue. Participants with question to pose, please press 01 on your telephone keypad and you'll be placed in the queue. To cancel your queue, please press 02. Our first question, we have Alicia Yap from Citigroup. Please go ahead.
Hi. Thank you. Good morning, James, Jane, and Cindy. Thanks for taking my question. My question is related to the overall macro environment in China. Many investors, I think especially the foreign investors, are worrying whether China is slowing down. If this is true, how will Ctrip being impacted? Have you seen any of your business line being affected by any softer consumer consumption pattern over the past few months? In the event, if China economy gets worse next year, which business segment of Ctrip business will get the biggest hit? If any slowdown on the economic environment, how will that affect the pace of the margin recovery or margin improvement trend next year? Thank you.
Okay. Yeah. There's recently a lot of pessimistic rhetoric about the Chinese economy, but I think we should really put this into long-term perspective. In the long run, I'm still very optimistic about Chinese economy because if you look at the per capita income, China is still only a fraction of a developed country. In terms of the per capita capability, such as innovation and industrialization, China is lower than the developed countries, China is well ahead of other developing countries with a similar level of income. For example, Thailand and Brazil. China will have a much better prospect of growth than these countries. If you believe the per capita level innovation and the industrialization is the key for future growth, China will do well.
Of course, recently, there's some setback for example, in export sector, and because the consumption patterns are shifting to service, and you will see some slowdown in the manufacturing sector. The overall wage growth and the overall consumption should be pretty healthy, especially as we see in the travel sector. As being one of the high-end service sector, travel will do much better than other sectors. So far, the pattern is the overall travel consumption has not slowed down significantly. With a bit of slowdown in the outbound travel because of currency issue, but we see very healthy growth in the domestic travel business. China will likely to continue to invest very heavily in infrastructure like airports and high-speed railway, and that's very good for our business.
In the coming future, we will heavily invest into developing these products, especially related to high-end domestic travel, related to high-speed railway and short weekend travel. I think we will see huge potential in these areas, too. We're still very optimistic of the overall travel consumption, and that will definitely grow faster than the overall economic growth, which I believe is still going to be healthy, too. Thank you.
Next question, operator.
Our next question with [Dean Fong from HSBC. Please go ahead.
Hi, good morning, management. Thank you for taking my question. My question is on the hotel business. On the international hotels, can you comment about how you see the progress so far in terms of the growth and also how it impacts the margin? The reason I'm asking is that if we look at international hotel, it should have a bigger ticket size. Because we are tapping into the market, that will be associated with higher OPEX. Net, how should we see the margins profile of international business, and how does it impact us as it grows bigger? How does it impact our overall hotel margin? Domestically, lower-end hotel, because I think management also gave us some remarks in terms of how the growth in the low end.
We call low end actually has a lower margin, right, in terms of the margin profile if we compare to our core mid to high-end hotel segment. How should we think about that? Thank you, management.
Thank you. The accommodation market in China overall is huge and still very fragmented, with online penetration rate only about 20%-25%. Ctrip proved to be the leader ever since we be in this market, and most importantly, we are the only company who have a sustainable profit in this segment. In terms of our overall strategy in the accommodation market for the mid to high-end hotels, we will continuously making investment in building the most comprehensive product offerings with competitive pricing for both domestic and international hotels. We will further solidify our leadership in the mid to high-end hotel market.
For example, for the outbound markets that you asked, Ctrip continued to more than double the industry growth rate in the outbound hotel market segments. In the second quarter, we achieved over 40% of year-over-year growth. Although we are already a clear leader in this segment. For the lower end of the hotel market, given it's still very fragmented and offline driven, Ctrip will decisively focus on volume growth and market share gaining. Ctrip's lower staff hotel segment continuously saw very strong volume growth at around 40% year-over-year as well. Of course, in terms of profitability, the lower end has comparatively lower profitability, but the high-end market, especially the outbound, the most profitable outbound hotel market, we also have a very strong growth momentum, which to some extent offset with each other. In result, we can achieve a very healthy profitability in the accommodation market overall.
Thank you.
Okay. After 18. Our next question, we have John from Daiwa. Please go ahead.
Good morning, guys. Thanks for taking my question. I have a question on your lower tier city penetration strategy, because if you look at your major competitor has a pretty big user base, and I know that we have been penetrating through mostly offline. How does the management think about the long term, how to convert these lower tier city users to our online platform and hence drive the profitability in the long term? Second, on Skyscanner, if you could give a bit more detail about your direct booking revenue contribution, that'd be great. Thank you.
Sure. For Ctrip, both domestic market as well as the international market represent great opportunities for us. First of all, on the domestic market, as James said, the GDP per capita for China is rising, and Ctrip is very well-positioned in the 1st tier cities and state capitals and coastal cities. However, as the GDP per capita grows, we will further penetrate into the area which has strong growth in capital growth. Our strategy is a couple of folds. First of all, in the cities with strong economic growth, we have selectively opened about 7,000 offline stores. These stores are very well located in the city center, which have a couple of functions. One is the branding. We want to make sure these stores bring a very good brand awareness to the local people.
Secondly, these stores also will offer a comprehensive product. Ctrip is the only company which can launch and promote 60 products simultaneously. For example, not only the customers will be able to book air tickets in a nearby airport, they can also make reservations after the air ticket is booked, or when the storm is coming, we'll automatically promote the high-speed railway products to them. For the next 10 miles, we also have bus product to offer to our customers if they choose to use flights or high-speed railway to go their hometown. All that represents a very competitive product offerings to our customers. That's our strategy penetrating into the lower tier cities. Secondly, on the international cities, as we discussed before, Skyscanner is very well known for price comparison capability.
For Ctrip, we are able to instill our direct booking services onto their platform. So far, based on our observation, the customer satisfaction rate has increased significantly. Therefore, we have methodically increasing the percentage of the direct bookings on Skyscanner. Going forward, in the long run, we'll be able to take about 20%-30% to make sure the customers who are using Skyscanner will be able to book it on their platform seamlessly. That will increase further on their customers retention on the returning customers rate, as well as the earnings ability. I think our comprehensive product offering, as well as the strong service capability, will empower Skyscanner in the future. Thank you.
Our next question, we have Eileen from Deutsche Bank. Please go ahead.
Thank you, management, for taking my question. I have a follow-up question on the international business. Can management elaborate more on the future strategies, especially on the changes that to cope with the domestic consumer spend being affected by the currency and to the outbound? How about the strategies for the Trip.com and Skyscanner to offset the risk? If possible, can management give us a revenue contribution for the international business? Thank you.
Yes. For international business, people who are making very good money will be able to afford to going abroad. Ctrip targets at mid-to-high-end customer pool. That portion of the customer, in relative terms, are more resilient to the currency fluctuation. We will further extend our leadership in this field from a couple of front. First of all, the first booking normally is international air tickets. We have very strong hold in the international tickets because our platform connects global airlines and GDSs. That enable us to provide the best engine to calculate the fares, switching time as well as the pricing for our customers. That is why we grow very strongly in the international front, and has become number one in terms of total tickets booked compared to all the other players in the global places.
Secondly, also with the investment in Skyscanner, they also have a very strong presence in Europe and the rest of the world, which enable us to also have access to the customers around the world. The engine we built not only serve the Chinese customers very well, but also can serve the global customers for international air tickets. Secondly, the unique product offering for Ctrip is a comprehensive product offering. As we discussed before, not only we can book air tickets, hotel, we also offer customers whatever they need during the trip. For example, we have local attraction tickets. We have chauffeur cars, rental cars to receive customers and bring them to the destinations. For the customers who book the product, the whole trip on Ctrip, we also have one-stop shopping services.
In case the flight is delayed, we will automatically inform their drivers, also the service providers along the way. When customers is traveling with Ctrip, we want to make sure they have peace of mind. Recently, there are lots of unexpected incidents globally. For example, there is earthquake somewhere. Our team will be able to reach our customer and take them back home if the customer choose to, with our SOS program which Ctrip stands out for its excellent services during these critical time. All that offers our customer a very comprehensive service and products that is outstanding for the customer. For the international revenue, when we start our business, it was zero. Now it becomes 25% to one-third of our total number.
Yes. For example, the accommodation, international hotel accounts for about 20%-25% of the total accommodation revenue. International air ticket now contribute over 40%, or actually close to 50% of the total air ticket revenue. For the package tour business, majority of our revenue coming from the international tour. I think we have a very consistent growth strategy, which is continuously to outpace the industry growth, especially in the less competitive outbound travel market. We achieved double or triple the industry growth in the past few years, and we will continue this growth trend. Especially if there's any adjustment or slowdown in the industry, it will be the best opportunity for a leader to be more aggressively gaining market share. Thank you.
Thank you.
Our next question, we have Wendy from Macquarie. Over to you.
Thank you. First, the gross margin further declined to 80% this quarter. Is this the bottom of the gross margin, and how should we think about it in the longer term, given the revenue mix change and also some of the initiatives that you're doing? You are doing lots of new programs to improve the customer experience. I'm just wondering whether this is our competition pressure or is it more our longer term impact after the air ticket bundled sales regulation? Why are you doing so many customer experience programs in this junction? Whether we should take this as a structural change which actually may pressure your margin in the longer term. Lastly, if you can give some breakdown on the Q3 revenue guidance, that will be helpful. Thank you.
Thank you. There's a couple of reasons why you maybe observed a slight decrease of the gross margin. The first reason is the deleverage due to the air ticket revenue adjustment, which does have some impact on the margin. The second reason is we opened a couple overseas service centers to provide better local services to Skyscanner direct booking customers, as well as more incoming international customers to Trip.com platform. Because of our customer-centric philosophies that James emphasized during last earnings call. Our team has been executing diligently to further enhance it in every front of our business. For example, now if a customer visa gets rejected, we will provide full refund of related air tickets and free cancellation of the first night hotel booking, in case of any flight delay or cancellation.
There's no service charge as a distributor in relation to any change or cancellation air tickets. Actually our service team and the tech team behind the scenes do put continuous effort to make sure all customers have the best service experience when booked through Ctrip. These are just some initiatives which can sometimes even beyond our own contractual responsibilities, and do have some short-term impact on the margin, especially gross margin. However, we strongly believe that from a long-term perspective, a company that creates the maximum value for customers is the right foundation to continue growing market share leadership. In last couple years, we also made heavy investment in service-related technology. For example, now our AI-assisted chatbot help us to solve more than 75% of our after-sale service.
Now we have a clear vision and confidence to become the best service provider in the travel industry in the world, also in the most cost-efficient way. Though there is some short-term pressures on the gross margin, in the next couple quarters, we think our gross margin will be stabilized at around 80%. As always, we will continuously to improve our operational efficiency across all business line items and continuously improve operating margin as we promised. Thank you. Oh, sorry. For the Q3 guidance, our Q3 net revenue is back to growth at 13%-18% year-on-year, showing continuous improvement from the second quarter. Although we are still going through the tough comp base, because last Q3 was especially high base. The negative impact will gradually decrease toward the fourth quarter of this year.
In terms of the each business line items, accommodation reservation will grow about 20%-25% year-on-year. The transportation revenue will grow about 5%-10% year-over-year. Package tour business will continuously to have a very steady growth rate of about 20%-25%. Corporate travel will grow at about 25%-30%, the total revenue will grow 13%-18%. I think it's probably still too early to give full year guidance, because of the comparatively lower comp base in the fourth quarter of last year, we think our growth momentum will pick up a little bit in the fourth quarter. Thank you.
Thank you. Our next question with [Amos] from 86Research. Please go ahead.
Hi, good morning. This is Juan Lin from 86Research. Thanks for taking my questions. I have one question regarding transportation ticketing. Just to clarify, you mentioned that international air contributes close to 50% of air ticketing business. Does that include Skyscanner and whether this is market share for revenue or volume contribution? Also, looks like domestic air ticketing revenue declined faster than the first quarter on a year-over-year basis and also declined sequentially. Just wondering how should we expect domestic air ticketing business to trend in terms of volume and revenue growth for the quarters to come? How much of the growth for outbound air was contributed by Trip.com? Thank you.
In terms of the growth trajectory for the domestic air ticket, we are still gaining market share and has a very healthy growth in terms of the volume. Of course, the per-ticket revenue was negatively impacted due to the adjustment. I think the per-ticket revenue has been stabilized, and our take rate on the domestic air ticket is roughly about one to close to 2%, which we think will be stabilized. The close to 50% contribution from the international air ticket is from the revenue contribution. The per-ticket revenue is higher than the
a domestic one. The volume contribution is still comparatively low, but our Trip.com, as well as the outbound international air ticket, continues to see very strong growth momentum and taking a lot of market share in the market.
Thank you, Cindy.
Thank you.
Does the 50% include Skyscanner?
Oh, this does not include. It's a Ctrip number.
Thank you very much.
Thank you.
Our next question, we have Natalie from CICC. Please go ahead.
Hi, good morning, management. Thanks for taking our question. This is Hu Jong on behalf of Natalie. We have a quick question on the competition hotel segment. Your major competitor has been trying to upsell its hotel segment moving from lower end to the mid and high-end hotel. I wonder how should we think about this, and what is our strategy to defend our leadership? Thank you.
For Ctrip, our strength is in the mid to high-end hotels. Our volume in these hotels, we bring lots of volume to these hotels, and we have seen very healthy growth, particularly when the economy has some slowdown, as we discussed, and also when the currency shows some weakness. We have seen strength in our team to gain market share in this segment. Secondly, in the lower tier cities, our goal is market share gain. We are very willing to lower the price and to gain market share and expose our brand in the cities which normally Ctrip has not touched. We will be very aggressive in penetrating in the lower tier market by aggressively gain market share in the lower tier.
So far, in both end, we have seen strong growth in volume as well as the revenue growth, and we'll keep up this momentum in both segments.
Thank you.
Thank you.
Our next question, we have Gregory from Barclays. Please go ahead.
Hi, morning, management. Thanks for taking my question. My question about the currency, some headwinds. As you mentioned in the opening remark, your outbound business is seeing very solid growth. Just want to understand if RMB depreciation generates any headwinds to your outbound travel demand. Very quick follow-up, would you please give us a more quantitative update of your mid and long-term revenue growth and margin expansion outlook? Thank you.
Yeah. Outbound business represents the mid to high-end consumers, and Ctrip always is very strong in this segment. When a market shows a little bit turbulence, that's the best time for us to gain even more market share, because our customers, in relative terms, are more resilient. Secondly, our service is being enhanced every year, we are able to stand out during the time that the market shows some weakness to gain market share. Thank you.
Also, mid to long-term.
Oh, yeah. In terms of the mid to long-term, we are consistent with the previous long-term guidance. By the year 2020 our total GMV will achieve at around RMB 1.2 trillion. With the continuous improvement in the operational efficiency, we believe our non-GAAP operating margin will go back to the 20%-30% level. Thank you.
Thank you.
Our next question, we have Jed from Oppenheimer. Please go ahead.
Great. Thank you, management, for taking my question. Appreciate the color on the international volumes in the press release. Can you give us a sense of what your domestic transportations volumes were this quarter versus the industry growth rate? Can you give us some guidance around your non-GAAP operating margin for third quarter?
Sure. Given the still very, very early stage of our development stage. At this current stage, we will be still very focused on the market share gaining. Not only the transportation category, but across all the business line items, our growth rate will achieve at least double the industry growth. In terms of the margin guidance for the third quarter, we expect our non-GAAP operating profit will be in the range of CNY 1.8 billion-CNY 1.9 billion, implying a non-GAAP operating margin at around 20%. Thank you.
Our next question, we have Jerry from UBS. Please go ahead.
Hey, thank you. Yeah, my question is still on the operating margin. In the second quarter, actually non-GAAP operating profit's a little bit better than we thought and consensus thought. It looks like sales and marketing was a little bit lower. Could you touch on if there were any drivers there for the better efficiency? And then as we look into the rest of the year and the next year or two, as we get the operating margin higher, what are some of the key drivers to get us there? I would assume maybe product mix is a big driver, but any comments again on the operating expense efficiency? Thanks.
Yeah. In terms of our investment in acquiring new customer, we have a very consistent strategy. We will look at the return on investment in each of the sales marketing channels. Once the channel can generate positive ROI for us, we will continuously to make investment in that channel. In terms of the leverage of the operating margin in the long run, I think each of the expense line item will have room for the operational efficiency and scalability improvement. Again, as I said, we are very confident that our non-GAAP operating margin will go back to over 20% level in the next one to two years. Thank you.
Our next question, we have Peter from Wells Fargo. Please go ahead.
Good morning. Thanks for taking the question. You've spoken a bit about the competition in the lower priced hotels. Wondering if you could talk about the competitive landscape in the tier 1 and 2 cities, in particular with alternative accommodations and Airbnb. Secondly, following up on a number of questions on the currency headwind, just to be clear, thus far, you have not seen any sort of deceleration in bookings or air travel growth outbound as a consequence of the currency changes. Thank you very much.
Sure. For the tier 1, tier 2 cities, we are always very strong in these cities because our business starts from here. Secondly, regarding the alternative accommodation, Ctrip founded the largest alternative accommodation company in China, which is Tujia, and they are growing more than triple digits consecutively. Very healthy growth. I think we are also gaining lots of market share in the alternative accommodations as well. Thirdly, regarding the currency, we are very prudently monitoring the overall global market. However, in the relative terms, as we discussed, because of our customers are relatively high income compared to the other segment, our customers are relatively resilient during the time of turbulence.
We cannot say in absolute CNY amount what the market is going to be, but in the historical trend, when the market shows some weakness, Ctrip's growth rate compared to the market growth rate will extend, and therefore, in these times, we will be able to gain market share in relative terms. I hope that helps.
Yeah. The recent data that we have observed has already been included in our Q3 guidance. Thank you.
Thank you.
Our next question, we have Kevin from Cowen. Please go ahead.
Hi. Thank you very much. I had a question on Trip.com. Can you give more color on the traction Trip.com is experiencing across the different geographies? Where are you seeing the biggest strengths, and to what extent has the new brand rolled out in Western Europe, the U.S., and Latin America? Thanks.
Yeah. Trip.com is growing very well. Although it is very small, our product offering mainly is seeing a couple of things. First of all, the air ticketing is very strong for us. As we discussed, the infrastructure we developed in the international air tickets serve the Chinese customers very well, and also it can serve the global customers very well. Trip.com take the strength of our international air tickets and is replicating in different areas and has gained lots of traction in the targeted market. Secondly, we also instilled our direct booking facilities on Skyscanner. Wherever Skyscanner has a strong presence, Trip.com also have gained lots of market share in terms of the direct booking facilities. Thirdly, Trip.com not only has one product for air ticket, it also offers a lot of other product such as transportation, cars, attractions, information, et cetera.
We are hoping Trip.com will become offers a comprehensive product which can lead by the international air tickets, but also make it very convenient for the customers who are using the product on Trip.com. Thank you.
Thank you. That's all the time we have for questions, so I will now hand the session back to Victor for our closing remarks. Please go ahead, Mr. Victor.
Thanks to 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 2018 earnings call. Thank you and have a good day.
Thank you