Ladies and gentlemen, welcome to the first quarter 2018 Ctrip.com International, Ltd. earnings conference call. My name is Aaron. I will be the moderator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session. As a reminder, this conference is being recorded for replay purpose. Now, I will hand the call to Chief Communications Officer, Victor Tseng. Please begin.
Thank you. Good morning, and welcome to Ctrip's first 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, 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 first quarter of 2018, as well as the outlook for the second quarter of 2018. After the prepared remarks, we will have a Q&A session. With that, I will turn the call over to James. James, please.
Thank you, Victor, and thanks to everyone for joining us on the call today. I'm happy to report that Ctrip delivered a solid start this year as we continue to push customer-centric as a core priority in order to strengthen our foundation as China's leading online travel company. Today, I would like to share our customer-centric principles and how this is integrated into every one of our employees' day-to-day work. What does customer-centric mean to Ctrip? It's about creating value for our customers in every segment of our operations, from product design to service fulfillment. Some people might ask whether being customer-centric will hurt our earnings. Yes, it may require us to sacrifice short-term earnings. However, from a long-term perspective, a company that creates the maximum value for customers is the right foundation to grow market leadership and long-term shareholder value.
As a result, we should not sacrifice customer value for short-term financial interests. Of course, the devil is in the details, and in the past year, we've made some inefficiencies in some areas. We are taking steps to reinforce and refine our customer-centric focus with the following principles. First, transparency. Ctrip provides transparent disclosure of information such as price, service scope, change or cancellation policies, so that we can minimize customer misinterpretations. Second, optionality. Ctrip provides an obvious and convenient method to cancel and opt out of value-added products. Third, consistency. Ctrip provides consistent prices and service policies for the same product across different web pages, and we work to minimize price fluctuations through technology improvements and process optimization. Fourth, impartiality. Ctrip provides objective and impartial product ratings, such as Hotel Diamond Rating based on algorithms and programs designed from the perspective of the customers.
In the long run, we strive to achieve the following goals as we move towards our long-term aspiration of providing the best travel service in the world. First, be reliable. We'll work hard to provide the most reliable services and minimize the possibility of any problems or service disruptions. Second, be proactive. We'll work hard to be the most proactive service provider when it comes to helping customers resolve problems and mitigate losses. Even if it is not contractually Ctrip's responsibility. For example, such as in a scenario when a hotel overbooks their room inventory. Third, provide strong customer assurance. We will work hard to provide the highest level of customer protection in the industry and offer the highest compensation among our peers if we fail to deliver. Fourth, reduce customer mistakes. Through intelligent product design, we'll work hard to minimize the chance of customer making a mistake.
Fifth, be responsive. We'll work hard to deliver the fastest customer response and the resolution rate through phone, instant message, and all other channels. Sixth, be convenient and user-friendly. We'll reduce the level of effort needed to use our product to the lowest possible level and to ensure a greater customer experience. Seventh, be comprehensive. We'll work hard to provide the most comprehensive post-transaction services. This may include helping our customer obtain better deals, sometimes even in situations over and beyond our contract to show obligation. In terms of how we will fundamentally incorporate customer-centric philosophy in our organization, we'll do the following. First, we'll increase the weighting of our customer satisfaction in our evaluation system and incorporate service quality as a key measurement metric in performance evaluation. Second, we'll continue to invest heavily in service technology.
Third, we'll set up an independent product rating committee to ensure that product ratings are objective. The committee will fully leverage big data, manual review, and appeal processes to optimize our rating for products such as Hotel Diamond Rating and Ctrip Gourmet List Restaurant Ratings. Fourth, we'll set up a customer protection committee that reports directly to the executive-level management to enforce and monitor the implementation of these policies and targets. In the past 19 years, since the launch of Ctrip, we have claimed many firsts in the travel and service area, such as the first large-scale call center, the first to introduce service process indicators, and utilize Six Sigma programs to improve our systems and processes. We must be mindful that Ctrip's success to date is derived from the value we created for our customers, and this will not change in the future.
Our vision is not only to be the best travel service provider in China, but the best in the world. This is a great and aspirational goal, and a goal that's worth total dedication. Despite the challenges and setbacks along the way, we believe as long as we stick to our customer-centric principles and continually make investments and innovations, we will achieve our goal and become the pride of the travel industry. With that, I will turn the call over to Jane.
Thanks, James, and hello, everyone, on the call today. Ctrip reported solid results in the first quarter of 2018. In particular, our accommodation revenue grew a healthy 23% year-over-year despite our large base. Ctrip reported solid results in the first quarter of 2018. In particular, accommodation revenue grew a healthy 23% year-over-year despite our large base, as our hotel business maintained balanced growth between revenue and volume. We further enhanced our leadership in mid-to-high-star hotels, with the growth rate continuing to outpace the industry average. We also strengthened our presence in low-tier cities and budget travel markets. In the Ctrip brand, the low-star hotel segment saw strong room night growth of 40%-50% year-over-year in the second half of the quarter. Our transportation business also maintained strong volume growth across different transportation product categories.
We are extending our footprint in air ticketing business while we are transitioning through tough comp due to operating adjustments on value-added services. Excluding Skyscanner, international air tickets account for 40% of the group air ticketing volume, up from 35% a quarter ago, as we continue to ride the wave of Chinese outbound customers. Over 30% of our international air tickets are non-China-related routes. In addition, Skyscanner's ticketing maintained over 30% year-over-year growth in the first quarter. As industry leaders, we are taking more responsibility to help the travel industry evolve. We are striving to build a healthy travel ecosystem that brings value for all stakeholders along the value chain, including customers, suppliers, and other business partners.
Today, I would like to share some of the work we have done to improve customer service quality and to improve our suppliers and highlight some of our technology to support the ecosystem. First, regarding the customer-centric principles. For Ctrip, customers' needs always come first. We listened to the voices of our customers and challenged ourselves to upgrade our related travel products and services based on the fundamental principles of transparency, optionality, consistency, and impartiality. In the first quarter, over 150 of such improvements, upgrades, and enhancements based on the customer feedback have gone live, such as correcting bugs in the systems, improving service efficiency, and improving the booking experience by our customers. On the instant message or IM platform embedded in our mobile app, the first contact to resolution rate is over 90%, and the overall customer satisfaction rate increased to 95% by the end of the quarter.
We also upgraded our service commitment across product lines, including air ticketing, hotels, package tour, car services, local activities, and train ticket service. Reassuring that we hold the highest standard of service quality in travel industry. Our Net Promoter Score, NPS, improved by more than 15% over a quarter ago on average across hotel and air ticketing products. We're encouraged that customers are recognizing our efforts, as demonstrated by continued increase in traffic growth across Ctrip group brands over the quarter. Going forward, Ctrip will always strive to offer the best customer experience in the industry, no matter what challenges we encounter along the way. We will continue to prioritize the customer-centric principles in our operations. We'll continue to make significant investment in our products and technology, such as our ABC initiatives in artificial intelligence, big data, cloud computing, to cope with travelers' evolving demands.
To ensure strong execution of our customer-centric principle, our customer service KPI now weighs heavily in overall evaluation in each business unit. For a long-term perspective, we are confident that we have right vision, strategy and principle in place to create better value for customers, shareholders and society. Second, to empower our partners. The strong bond between Ctrip and our suppliers is also our core competence. Throughout the years, we have made investments to better integrate with global travel supply chain to promote broader choices, better services, and unique experiences. We bring many customers to our suppliers, particularly mid to high-end customers that are naturally drawn to Ctrip service capabilities. We also engage fully in shaping the future of China tourism market through continuous cooperation with all travel partners and by sharing Chinese travel market trends for the coming years. Last month, we launched the Ctrip Hotel University.
This initiative provides training courses designed to help hotel managers and operators utilize various tools on Ctrip platform to engage with customers and to improve operating and market efficiency. The Hotel University also provides high big data insights on trends around the industry development and customer behaviors. We aim to help hotel owners to build a high-quality talent pool to promote the development of the hotel industry in China. In many segments, we're aligning suppliers and customers to raise standard for reliable products and services. We are now seeing solid results. As a direct example, the customer's tour package products deliver triple-digit growth in its third year and has become a meaningful part of our package tour business. Many of these suppliers have been beneficial for this growth. Third, for technology.
At Ctrip, technology has always been our competitive advantage, and it continues to be a critical area to focus and invest. Today, our open platform technology allows many players in the industry to connect efficiently with Ctrip. In our air ticketing business, our AI technology helps airlines to better forecast flight demands based on our users' behavior. We also developed a credit rating system based on the user's booking history on the platform. Our strong credit rating user can enjoy different levels of convenience in their booking experience. The system also allows product providers to get a better sense of what kind of customers they're serving. Over 5 million customers enjoy the easy booking process through the credit guarantee and deferred payment. Fourth, for international business. Skyscanner now has a footprint covering over 200 markets. In the first quarter, Skyscanner's MAU increased by around 30% year-over-year, reaching 18 million.
Its direct booking program continues to gain momentum, delivering revenue growth over 600% year-over-year in the first quarter. We're still just touching a very small portion of what direct booking can contribute in the long run. Trip.com is gradually gaining the customer's recognition, particularly in the air ticketing business. With the international air ticketing showing the triple digits growth in its first quarter, Trip.com is gaining its momentum. A few days ago, Trip.com officially launched Japan site and announced the issuance of Trip.com Global Travel Credit Card, which is the first joint credit card with Sumitomo Mitsui Card Company and UnionPay International. We work hard to improve users' experience and one-stop-shop capabilities of Trip.com.
Recently, Trip.com's mobile web was featured in Google I/O 2018 conference in a showcase of Accelerated Mobile Page, AMP, which is a recognition by Google that Trip.com's users have a faster mobile booking experience compared to its peers. There is a lot of work ahead of Trip.com as we strive to replicate our core competencies in service and one-stop-shopping platform to serve non-Chinese markets, which includes rolling out our local services capability and more travel products in transportation in different languages. As always, we'll take a methodic and substantive approach to expand our service scope and depth. We are hugely grateful for the trust of our customers. Together with our partners and our employees, we strive to make their travel easier and more enjoyable. There are still many improvements for us to make, and also many areas we can further unleash our potential.
We're in the good position to capture the growth in travel industry, both domestically and globally. We're very excited about the bright future ahead of us. With that, I will turn the call over to Cindy, she will walk you through the details of our financial results. Thank you.
Thanks, Jane. Thanks, everyone. Effective January 1st, 2018, the company adopted a new revenue recognition standard. Results for reporting periods beginning after January 1st of 2018 are presented under the new revenue guidance. We adopted the full retrospective transition approach and retrospectively adjusted the financial statements for the year 2016 and 2017. For the first quarter of 2018, Ctrip reported net revenue of RMB 6.7 billion, representing an 11% increase from the same period in 2017. Accommodation reservation revenue for the first quarter of 2018 was RMB 2.5 billion, up 23% year-on-year, primarily driven by increase in accommodation reservation volume. As Jane mentioned earlier, we continue to gain market share in the mid- to high-star hotel segment, while we significantly increased our presence in lower-star hotel segments. In the first quarter, international hotel room nights grew about triple the industry growth.
Transportation ticketing revenue for the first quarter of 2018 was RMB 2.9 billion, which remained consistent with the same period of 2017. Ground transportation, including train ticketing, bus ticketing, and car services, led the growth of this reporting line. To further strengthen our service quality in this area, we obtained a license for car hailing business. Our own car hailing operation was focused on travel-related business, especially transportation to and from airports and train stations. Air ticketing segments delivered strong volume growth across Ctrip, Qunar, Skyscanner, and Trip.com brands. 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.
Packaged tour revenue for the first quarter of 2018 was RMB 834 million, up 18% year-on-year, primarily driven by increase in volume growth of organized tours and self-guided tours. By the end of first quarter, the number of business partners on our platform increased by 71% year-on-year as we completed the merge of our inventory pool with Traveling Bestone , significantly enriching our product offerings. The growth of our offline stores continue to gain momentum, and they now form a strategic component of our ecosystem. Total GMV of these stores grew around 50% year-on-year in the first quarter of 2018. Last month, we signed the 1,000th Ctrip store. Together with Qunar, a Traveling Bestone brand, we expect to have 8,000 stores across China by the end of this year.
Corporate travel revenue for the first quarter of 2018 was RMB 180 million, up 25% year-on-year. The growth in corporate travel business was primarily driven by expansion of travel product coverage. As we are working with multiple partners to be an integral part of budget and cost control for our corporate clients, more and more clients choose to book hotels and other travel products through the corporate travel platform. Gross margin was 82% for the first quarter of 2018, compared to 80% in the same period in 2017. The improvement of gross margin was mainly driven by increasing automation in our service center through the adoption of AI technology. Excluding share-based compensation charges, total non-GAAP operating expenses grew 14% year-on-year, and 3% quarter-over-quarter in the first quarter of 2018.
Non-GAAP operating profit in the quarter was RMB 966 million, up 8% year-on-year and 38% quarter-over-quarter. Non-GAAP operating margin of the first quarter was 14%, slightly decreased from 15% in the same period of last year, mainly related to revenue headwinds in the air ticketing business. Diluted earnings per ADS were RMB 1.81, or US$0.29. For the first quarter of 2018, excluding share-based compensation charges and fair value changes of equity securities investment, non-GAAP diluted earnings per ADS were RMB 3.48, or US$0.55 for the first quarter of 2018. As of March 31st, 2018, the balance of cash and cash equivalents, restricted cash and short-term investments was RMB 52.5 billion, or US$8.4 billion. Now I turn to the outlook.
For the second quarter of 2018, the company expects the net revenue growth to continue at a year-on-year rate of approximately 12%-17%, which is calculated on the estimated net revenue of the second quarter of 2018 under the new revenue recognition standard and the net revenue of the second 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 will 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 the queue. Once again, participants with question to pose, please press 0 followed by 1 on the telephone keypad, and you'll be placed in the queue. To cancel the queue, please press 0 2. Our first question, Gregg Zhao from Barclays. Please go ahead.
Thank you for taking my question, and congrats on the solid quarter. My first question is, during the opening statement, James just shared his understanding of the customer-centric and what it mean to Ctrip. Would you please also talk about what that means in terms of the CapEx and any potential financial impacts it may cause in details? In Q1, we saw both user traffic and revenue recovery from the trough from November 2017. Now it's about the end of May, can you share with us the user traffic and booking trend in the first two months of 2Q? By the way, is there any way to quantify the correlation between the Ctrip and Qunar user traffic and your revenue growth? Thank you.
Thank you, Gregg. Our traffic has been back to a normalized level recently, and we are continuously gaining market share across all business lines. As company now is focused more on the customer-centric, Ctrip has taken the leadership to set the highest product and service standard in the travel industry which in the long run will benefit the whole travel industry as well as Ctrip. Therefore, we decided to sacrifice certain short-term financial benefits to ensure that the customer now is having the best booking experience and the highest service standard on Ctrip platform. As long as we are continuously to further solidify our leadership and gaining market share, we are still very confident that in each upcoming quarter, our growth should improve step by step through tough comps into the fourth quarter, which we will have a comparatively lower comp of last year. Thank you.
Thank you.
Thank you very much.
Thank you. Our next question, Eileen Deng from Deutsche Bank, please go ahead.
Thank you, management, for taking my question. Congratulations on the strong results. I have a question for James. The international business in this quarter continued to deliver us robust growth, especially for Skyscanner and Trip.com. Could you share more insights on the underlying driver of such accelerated growth? What is our strategy for this international business going forward? Thank you.
Thanks. First of all, Ctrip's outbound business maintained strong growth in the first quarter of 2018. Driven by strong outbound demand, international air ticketing volume grew rapidly with two to three times the market growth rate. Our growth of overseas hotels also tripled industry growth rate in Q1. Secondly, Skyscanner delivered strong results in the past quarter. Ctrip and the Skyscanner technology worked closely together to push direct booking initiative, we are glad to see eight more direct booking partners were added in the first quarter. Moreover, Skyscanner remains an independent platform with great attention to customer experience. That's why our traffic growth has been strong. Lastly, Trip.com continued to deliver triple-digit growth in air ticketing in Q1, we are also step by step adding more products to Trip.com and increase our service capability.
We're very optimistic and confident about our international business going forward. Thank you.
Thank you.
Thank you. Our next question, Ronald Keung from Goldman Sachs, please go ahead.
Hi. Thank you, James, Jane, Cindy, and Victor. My question is on accommodation side. Could you just share with us the latest views on competitive landscape, both on the low end, which we know has been competitive and any sort of indications on the high end on the competitive landscape, and therefore filtering to any commission rates or coupon rate trends that you could share? Lastly, your expectations for revenue growth in the second quarter, hopefully by segments that you could share with us. Thank you.
Thanks. Accommodation reservation market in China is huge and now still very fragmented, with online penetration rate at only about 20%-25%. There always have room for a few players in the market. However, Ctrip proved to be the leader ever since we established. Most importantly, Ctrip is the only company who have sustainable profit in this industry. In terms of the strategy in different segments of the accommodation reservation market, for the mid-to-high-end hotels, we will continuously to make investment in building the most comprehensive product offerings with very competitive pricing for both domestic and international hotels. We will further solidifying our leadership in the mid-to-high-end hotel market. For example, for the outbound international hotel business segment, Ctrip continues to triple the industry growth in the first quarter.
For the lower end of the hotel market, given it's still very fragmented and offline-driven, Ctrip will be very decisively focused on volume growth and market share gaining. Thank you.
Thanks.
Thank you. Our next question, Alicia Yap from Citigroup. Please go ahead.
Hi. Good morning, James, Jane, Cindy, and Victor. Thanks for taking my questions.
Thank you.
Could management provide some of the latest progress and update? If we just look at the domestic air revenue, what was the growth rate on the year-over-year basis? If you could share with us, based on your second quarter guidance, what is the implied growth rate for the domestic air for the second quarter, and how should we think about the overall second half growth rate outlook? If Cindy can also give us colors on the second quarter operating margins outlook. Thank you.
Sure. Yeah. Let me provide the second quarter revenue guidance for each business line items first so that you can have a better overview. In each of the business line items, accommodation reservation revenue will grow about 20%-25% year-on-year in the second quarter, transportation ticketing will grow about 0%-5%. Package tour revenue will grow about 25%-30%. Corporate travel business will continue to have a very steady, healthy growth at about 20%-25%. Please also be noted that all the 2018 financial results adopt the new revenue recognition standards. The 2017 comps are also reflected the base period, which are restated under the new revenue guidance. For the 2017 quarterly numbers, please refer to the press release, which we provided the 2017 quarterly financial restatement details for your reference.
In terms of the margin guidance, in the second quarter, we expect our non-GAAP operating profit will be in the range of RMB 1.1 billion-1.2 billion, implying a non-GAAP operating margin at about 15%-16%. This relatively steady non-GAAP operating margin was mainly due to more aggressive sales marketing spending before summer, and partially offset it by operational efficiency improvement. In terms of the air ticketing revenues, yes, our domestic air ticket business still have a very healthy volume growth and gaining market share. However, the revenue per ticket was significantly impacted by the change of the value-added service practice. As James and Jane explained, we were going forward very focused on the customer-centric. In return, we think it will bring us a very healthy long-term growth and market share gaining in the long run. Thank you.
Thanks.
Thanks.
Thank you. Our next question, Natalie Wu from CICC, please go ahead.
Hi. Good morning, Management. Thanks for taking my question. I have a question regarding the accommodation business. Just wondering, how do you see the growth rate for your accommodation business going forward? How much is driven by volume and how much is driven by take rate? Also, what's the current contribution from mid to high-end hotels versus lower-end hotels, both GMV-wise and revenue-wise? How should we think about the margin profile of your mid to high-end hotels versus lower-end hotel business? Thank you.
Sure. We look at a couple of baseline. The first one is our GDP growth rate is about 6.5%. The second baseline is the industry growth line, which can normally double the GDP growth rate at about 10%. In Ctrip, based on our scalability, our service, and efficiency, we can outpace the market by doubling the market. As Cindy says, our growth forecast is somewhere around 20%-25%. In terms of the segments, for lower end, our strategy is to aggressively gain market share. We do not plan to make any money in the lower-end market. The growth rate has demonstrated by our strong growth in that segment at about 40%-50% year-over-year growth in terms of volume. The majority of the revenue contribution comes from the mid to high end.
We will provide the excellent services to our mid to high-end users and make sure our service level stands out as the best in the market. That's how we can move in both markets.
Thank you.
Thank you. Our next question, Jed Kelly from Oppenheimer, please go ahead.
Morning, management. Thanks for taking my question. Sales and marketing grew slightly faster than revenue this quarter. How should we think about the pace of sales and marketing growing versus revenue as we move throughout the year? Do you think you can potentially reach your outer year margin goal of 20%-30% by 2019 after you transition through some of these cross-selling headwinds?
Yes. For the sales marketing expenses, actually, if you compare with sales marketing expenses as compared with the net revenue, we are actually at the lowest level compared with the international peers. Thanks to the over now close to 80% of our traffic contributing from our own mobile app, which is a purely organic traffic.
However, given there's huge potential opportunities both domestically and internationally, we have the top priority to further expand our market share both domestically and internationally. We never set any budget limit on the sales marketing spendings. However, we will carefully monitor the return on investment for each of the sales marketing channels. Once the marketing channel can bring us positive ROI, we will continuously to make investments. In terms of the margin guidance in the midterm margin guidance. Despite we will continuously make investment in the service and marketing as well as the product and the service. We still are committed to the 20%-30% non-GAAP operating margin in the next one to two years. Thanks.
Thank you. Our next question, John Choi from Daiwa.
Good morning. Good evening. Thanks for taking my question. I have a question on Skyscanner. I think you guys mentioned the user growth was up by 30%, but revenue was up by 600%. Also, I heard that you guys have eight more direct booking partners. Just going forward, in terms of monetization of Skyscanner, how much more upside potential do we see, and how should we think about the growth going forward? Thank you.
Yes. Skyscanner, the MAU increased about 30% year-over-year. In a very saturated market in a global places to have 30% growth in MAU is a demonstration of how strong the team is. The 600% year-over-year growth, that's referred to the direct booking. Before Ctrip make the investment, the majority of the booking is redirecting the traffic to the airlines or the other players listed in the market. After Ctrip make the investment, we inserted our direct booking services into Skyscanner. When a customer make a click onto Ctrip, they do not need to be redirected to other sites. Instead, Ctrip's service capability will empower the customer to make the reservation within Skyscanner's sites. That is going to enhance the user's experience and increase the satisfaction rate by the user and also increase the earnings ability by Skyscanner.
We only account for a small portion of the overall Skyscanner's traffic. Going forward, to an extent that Skyscanner has a great presence in certain regions, we will increase these direct booking facilities to make sure the user's experience is enhanced, and therefore, their earnings abilities and satisfaction rate will enhance as well. I hope that helps. Thanks.
Thank you. Our next question, Juan Lin from 86Research.
Hi, good morning, James, Jane, Cindy, and Victor. Thank you for taking my questions. My first question is on the international business. I wonder if you could provide some color on the revenue contribution of overseas business for accommodation and also the contribution of overseas business for total revenue. Also, I wonder, when I look at the gross margin, it looks like gross margin declined for the first time since a while ago. I'm wondering what are the reasons behind the gross margin decline, and whether there's still room for gross margin improvement going forward. Thank you.
The international business, international hotel now accounts for about 25%-30% of the total accommodation. Sorry, 20%-25% of the total accommodation revenue. International air tickets contribute about 40% of our total air ticketing revenues. Our revenue mix is now moving more towards the international business as we expected. In terms of the gross margin for this quarter, the main reason for the decrease is because of the decrease of the per-ticket revenue on the air ticketing business. However, our service center team were continuously working very hard to provide the best in-class services, and at the same time maintain a very reasonable cost per booking. Our cost per booking, actually, in the last three years, consistently decreased.
We will continue to make investment in the technologies in the service industry, for example, to introduce the AI-assisted chatbot to increase the intelligence of the AI assistant chatbot. To help us improve the user satisfaction rate and at the same time to control the cost. Thank you.
Thank you, Cindy.
Thank you. My apologies. Our next question, Jin Yoon from Mizuho. Please go ahead.
Hi. Good morning, guys. Any chance you could provide a soft guidance outlook for 3Q revenues? In the quarter, there were concerns about cancellation and return flights, charges related to cancellations and returns on flights. Has that had any material impact to revenues or guidance in the near term? Thanks.
Cindy will provide you with any number-related question, Regarding the policy on cancellation, return, or delay of the flights, Ctrip was the first company come out by telling our consumer that our policy is we charge zero fee for processing the cancellation, delay, or change of the tickets. I think the priority for Ctrip is to make sure our customers are well taken care of during their trip. Our policy for these cancellation and change of the tickets is zero service fee. Whatever our airlines and service provider charges, we will just present to the customers without adding any additional cost from Ctrip's part. That has been the positive response by our customers.
Yeah. As well as we continuously to further solidifying our leadership position and gaining market share, we are still very confident that for each upcoming quarter, our growth should improve step by step through the tough comps until the fourth quarter, which we will have a comparatively lower comp of last year. Thanks.
Thank you. Our next question, Ming Xu from UBS, please go ahead.
Morning, management. Thank you for taking my question. First is a follow-up question on the competition in low-end hotel booking market. Could you maybe share with us some color on the coupon level? Secondly, I noticed you recently issued the ABS for your travel finance business. How should we think about this finance business going forward? Thank you.
Yeah. Ctrip starts with high and the mid end, and we're very dominant in that market. As we move further, we're very aggressive in penetrating into the lower-tier cities. There are a couple of things we have done. First of all, we have increased the coverage for the hotels that is penetrating into the low-end market. Secondly, our sales and marketing is enhanced to also let our brand penetrate into this market. Thirdly, we also have thousands of offline shops that covers the low-end cities. So far, the concerted efforts from the product offering plus service plus the sales and marketing and our offline strategy has worked very well, which is demonstrated as our numbers have shown for the low end of the accommodation to increase its growth to 40% and 50% growth year-over-year.
For that market, because Ctrip is a newcomer into the market, our goal is market share gain. We're not intending to make money for this low-end market. In terms of the ABS, yes, our finance team is very new, yet they work very hard and very creative. Their product is the number 1 that's listed on the Shenzhen market. Because Ctrip customers are quite high end, this product provides a high-quality customer pool for further financial products to be listed on Shenzhen Exchange. Going forward, I think we will be also working very hard with the banks, with the financial institutes to provide different alternatives for financial products, and also maintain a very prudent spirit to make sure all the product has a high quality to support the credit rating. Thank you.
Thank you.
Thank you. Due to time restrictions, our last question. Wendy Huang from Macquarie, please go ahead.
Thank you. First I want to clarify about the 40% international air ticketing contribution that Cindy just mentioned. Is this excluding the Skyscanner? If that's the case, if we include Skyscanner, what should be the international contribution to the air ticketing segment? Can I also double-check if Skyscanner's revenue mostly included in the transportation segment as well? For the package tour, is there an international revenue contribution figure that you can share with us as well? On the international front, given that in the domestic market, actually, Ctrip probably does not have a meaningful competitor out there. However, when you enter into the international market, Priceline is a very strong player in that landscape. What's your strategy to compete against your shareholder, Priceline, on a global stage?
Finally, I have a housekeeping question on the financials about the CNY 688 million fair value loss that you booked this quarter. Where is it booked? Is it in the other income or equity income? Which investment is it related to? Thank you.
Thank you, Wendy. Our 40% contribution from the international air tickets didn't include Skyscanner's contribution. Skyscanner in the last quarter contributed about 10% of the group's total revenue. Yes, a vast majority of the revenue of Skyscanner comes from the air ticket business. In terms of the international contribution for the package tour business, 50%-60% of the revenue of package tour business comes from the outbound travel business. In terms of the fair value loss, which actually, it reflected the change of the U.S. GAAP. Before, all the investment in the available-for-sale investment all classified in other comprehensive income, which is balance sheet items. From January 1st of this year, we have to book the fair value change of these investments in the P&L, which is below the operating line items. Those investment included our minority investment in public companies.
Regarding Booking.com, historically, we always have very good partnership with Booking.com. Booking.com has developed a tremendous footprint in the global places, and we have the highest respect for them. For Ctrip, our strength is the coverage associated with our China customers. In China, we open our inventory to our partner. In the global places, Booking.com open their inventory to us. So far, I think it work out very well. There is lots of things we can explore together. Thank you.
Thank you. Now we have come to the end of the Q&A session. I will now hand the session over to Victor Tseng for closing comments. Please go ahead, 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 second quarter 2018 earnings call. Thank you and have a good day.
Thank you very much.
Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.