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Ctrip.com International, Ltd. (NASDAQ:CTRP)
Q4 2017 Earnings Conference Call
March 14, 2018, 8:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, welcome to the Fourth Quarter 2017 Ctrip.com International Limited Earnings Conference Call.

My name is Serena, I will be your moderator for today. At this time, all participants are in 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 will now hand the call over to the Head of Corporate Affairs, Victor Tseng. Please begin.

Victor Tseng -- Head of Corporate Affairs

Thank you. Good morning, and welcome to Ctrip's Fourth Quarter 2017 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 risk and uncertainties. As such, our results may be materially different from the views expressed today. A number of potential risk 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 fourth quarter of 2017, as well as the outlook for the first quarter of 2018. After their prepared remarks, we will have a Q&A session.

With that, I will turn the call over to James for our business updates. James, please?

James Jianzhang Liang -- Executive Chairman of the Board

Thank you, Victor and thanks to everyone for joining us on the call today. 2017 was a strong year for Ctrip on many fronts. Our 300 million registered users traveled in 214 countries [inaudible] globally with the [inaudible] transactions totaling RMB550 billion [inaudible]. Our business continues impressive revenue growth for the year, up 39% year-on-year to RMB26.8 billion. I'm proud of the progress our team has made in many ways that we should be striving to make travel more convenient and more enjoyable. [Inaudible] travelers made about 130 million [inaudible] trips in 2017 [inaudible] trips [inaudible] forecasted to grow to over 200 million trips a year by 2020 according to a China national [inaudible]. Ctrip will continue to focus our efforts on capturing this trend.

On the international front, over the past year [inaudible] investments have begun [inaudible] synergies. Skyscanner is one of the most successful flight metasearch sites in the world, particularly in Europe, and they have accumulated nearly 70 million monthly active users. We helped Skyscanner develop a direct booking engine, which increased Ctrip's own conversions on Skyscanner by over 60%. In the most recent quarter, Ctrip launched trip.com, [inaudible] specific focus with international common platform. [Inaudible] targeted Asian markets. With the [inaudible] of Skyscanner and trip.com, Ctrip has established the strongest foundation to serve its non-Chinese customers around the world.

2017 was also a year of learning. We feel grateful for all the lessons we learned from the customers in the year. It reminded us that we're industry leaders, who bear more responsibility to continue improving. It has been and will continue to be challenging in a way as we will always endeavor to maximize Ctrip's social impact while increasing the company's commercial value. Guided by the fundamental principles of consistency, transparency, and equality, we will continuously improve our products and services as we strive toward our own ideal. From Day 1, Ctrip's value has been [inaudible] in our name: C for customer, T for teamwork, R for responsibility, I for integrity, and P for partners. These core values differentiate us from our peers and will continue to elevate Ctrip to the next level.

[Inaudible] we've become the largest online travel service provider in China, we're only at the beginning of that journey. The future opportunities for us are [inaudible] in China and globally will make significant investments in technology in order to bring our users the most advanced and [inaudible] seamless customer experience and we've learned that [inaudible] customers and providers, we can generate this exceptional financial return for our shareholders. According to the Report on World [inaudible] Economy Trends in 2018, [inaudible] federation. 2017 set a global [inaudible] revenue of RMB5.3 trillion, accounting for 6.7% of the total GDP. We [inaudible] 50% and will continue to grow larger and eventually become one of the largest customers to GDP growth globally. This was about 11.9 billion total global travel trips made in 2017 and [inaudible] less than 5% of them. [Inaudible] people [inaudible] growing as our world becomes more and more interconnected. Therefore, we see huge opportunities ahead.

Against this backdrop, Ctrip's international innovation is still in its early stage [inaudible] growth trajectory. In 2017, international [inaudible] travel and [inaudible] accounted for 20% of our total revenue, with [inaudible] environment, competitive products, unparalleled service capability, and [inaudible] strong market position, we [inaudible] international business with 40% to 50% of our total growth revenue in the next five years. We [inaudible] and have committed to the long-term success of Ctrip.

With that, I will turn the call over to Jane.

Jane Jie Sun -- Chief Executive Officer

Thanks, James. Hello, everyone. We had strong results in the fourth quarter, even as we positioned through short-term challenges in this business area. Net revenue increased at 26% year-over-year to RMB$6.6 billion end quarter. We ended the year with annual net revenue of RMB26.8 billion, up 39% year-over-year. We continue to execute on our strategy and are encouraged by our rapid growth, especially in international expansions and penetration of the lower-tier cities.

As user increasingly appreciates the convenience of Ctrip's unique one-stop travel platform, we're very excited about the opportunities ahead of us. Over the years, we have increased customer engagements by adding more travel-related products and increasing more user cases to interact with our travelers. As indicated in our cohort analysis, the first batch of users we acquired in 2012, on average, made about five orders per year. This same batch, in 2017, increased their orders to nearly 20 orders per year.

Moreover, we have seen strong cross-selling trends between product lines. For example, about 20% of newly acquired air ticketing customers make at least one purchase in hotel reservations for each of the following year. The corresponding cross-selling rate between air and train is even higher at about 30%. Our competitive products and service has strengthened our long-term retention rate at around 50% and the majority of our revenue comes from loyal customers. We continue to penetrate into international markets and lower-tier cities in China through our technology, services, products, and breadth.

International market is one of the most important focal points this year and will continue to be so for coming years. Our international expansion is premised on our strength in transportation products. We have built one of the most competitive flight booking engines globally and the results are clear. International flights have been gaining strong momentum. Now China-related flight ticket volume for the fourth quarter continue to grow rapidly, accounting for one-third of total international tickets already. The roll-out of direct booking and Skyscanner also made solid progress. Skyscanner's direct booking revenues of this quarter almost doubled compared to the same period a year ago. Particularly, trip.com benefited from Skyscanner's direct booking initiatives and achieved triple-digits growth in the air ticketing volume in the fifth consecutive quarter.

We also continued to push the one-stop shopping capabilities by adding many more new features and product lines created for international travelers. Key developments, including the launch of car rental services travel on trip.com, international customers are now able to book rental cars in more than 6,000 cities across the globe. We have access to more than 130,000 rental outlets and over 7 million car inventories.

We also brought railway services to our customers recently. Our customers can now access UKRail and KoreaRail, two of the longest railway service providers in their respective markets. In destination development, we announced a strategic partnership with OpenTable, a booking coding company, allowing Ctrip users to discover and book tens of thousands of restaurants across North America. Lastly, we continued to link up with more local attraction partners to provide great access for our customers to popular venues like the Australian Open for tennis and big bus tour for city tours.

I also would like to share an exciting new development. After months of hard work, we will be launching Hyatt Hotel flagship store on Ctrip's website and mobile applications. This is the very first online flagship store for both companies and we're very excited to work closely with Hyatt and other potential more global partners in the future. We continue to find innovative ways to better serve global hotel chains to capture the growing numbers of outbound Chinese customers.

Our growth strategy in the lower-tier cities is very systematic and disciplined. Historical data showed travel consumption is highly correlated with the income level, so we choose cities to penetrate based on the GDP per capita to ensure that the ROI is satisfactory. Since we started executing this strategy about a year ago, our penetration rate in our targeted cities has increased by over 50% on average.

As part of the lower-tier penetration strategy, we invested in Traveling Bestone to give us a new dimension offline to grow and serve our customer base. We opened over 1,000 Ctrip Bestone branded franchise stores in 2017 in order to reach the group of potential customers who are not yet comfortable with online transactions, especially with the large ticket sized transactions. Total GNV of these stores, including the 5,000 Traveling Bestone branded stores, grew over 30% in 2017. Additionally, these offline stores serve as marketing tools 20 times 7 in hundreds of the cities in China, becoming a strategic component of our travel ecosystem. This unique offline channel strategy for travel along with the strong alliance we've built over the years in travel supply chains in brand channels will strengthen our ecosystem and boost future growth.

Additionally, I would like to reemphasize the customer-centricity and what it means to us at Ctrip. As James said, we started Ctrip 18 years ago, with customer service coded in our genes. We are proud of our top-notch service quality in the industry and more than half of our employees work in the customer-facing position. During the past Chinese New Year, our service center employees worked diligently to make sure that our customers' inquiries are addressed in a timely manner 24 hours non-stop. The quality of our service center is leading the industry. Over 90% of our customer inquiries are answered within 20 seconds. This is why we're recognized in almost all prominent awards in this field, such as both Golden Headset, Golden Voice, China's Best Customer Service Center Award, etc.

In 2017, we also launched a global SOS service, which provides not only translations service, medical guidance, and the recovery of lost goods, but also timely supports e-emergencies such as natural disasters and terrorist attacks. Ctrip's effective response in Las Vegas shootings, Bali volcano eruption, and most recently Taiwan/Bali earthquakes demonstrated the efficiency and effectiveness of such service. Our local employees, 5,000 travel guides, thousands of supplies and hotel partners all worked together to secure safety of our customers.

More importantly, we continue to focus on listening to our customer's voice. We leveraged Ctrip's Senator Club, which consists of our most active customers to drive valuable customer suggestions into actions. The routine survey on the nets promoter's goal also provides us with important customer experience insights. There is also a Blue Cup employee inside Ctrip and we call them Blue User Guardians. They are working actively to be a voice for our customers.

To sum up, our dynamic service capability is one of Ctrip's important pillars and differentiators to attract and then retain customers. Because of the distinct nature of travel products which is time sensitive, interconnected, and usually irreplaceable, we will keep up to improve our product and service and make sure our customer can travel safely and have peace in mind during their trip. Lastly, as we transition through the short-term challenge in certain business area, we will continue to execute on our growth strategy, especially in the international extension and the penetration of low-tier cities. As we leverage Ctrip's unique one-stop travel platform and surveys capability, we are excited about the opportunities ahead of us.

With that, I will turn the call over to Cindy and she will walk through the details of financial results.

Cindy Xiaofan Wang -- Chief Financial Officer

Thanks, Jane. Thanks, everyone. 2017 was a strong year for Ctrip on many fronts. Our 300 million registered users traveled to 214 countries and regions globally and completed transactions totaling RMB$560 billion, excluding Skyscanner. Our business achieved impressive revenue growth to the year, up 39% year-on-year to RMB$26.8 billion.

On the international front, over the past year, our Skyscanner advancement has begun to generate solid synergy. Skyscanner is one of the most successful flights metasearch sites in the world, particularly in Europe, and it has accumulated nearly 70 million monthly active users. We helped Skyscanner develop a direct booking engine, which increased Ctrip's own conversion on Skyscanner over 50%. In the most recent quarter, we also launched trip.com, our APAC-focused one-stop international travel platform.

Although it is still on a small scale, trip.com is growing rapidly in our targeted Asian markets. With the aid of Skyscanner and trip.com, Ctrip has established a solid foundation to serve non-Chinese customers around the world.

Ctrip's internationalization is still in its early stage, but on a far-growth trajectory. In 2017, international revenue, include China outbound travel as well as Skyscanner, accounted for over 20% of our total revenue. With a promising industry environment, competitive products, unparalleled service capabilities and Skyscanner's strong market position, we aim to grow Ctrip's international business to 40% to 50% of our total growth revenue in the next five years. With regard to the actual financial results, for the fourth quarter of 2017, Ctrip reported net revenue of RMB$6.4 billion, representing a 26% increase from the same period in 2016. For the full year ending December 31st, 2017, net revenue was RMB$26.8 billion or 39% increase from 2016.

Accommodation reservation revenue for the fourth quarter of 2017 was RMB$2.3 billion, up 25% year-on-year, primarily driven by an increase in accommodation reservation volume. For the full-year of 2017, accommodation reservation revenue with RMB$9.5 billion or 30% increase year-on-year. The accommodation reservation revenue accounted for 35% of the total revenue in 2017. The team demonstrated strong results in driving growth in both lower-tier cities and international markets.

Transportation ticketing revenue for the fourth quarter of 2017 with RMB$2.9 billion, representing a 20% increase from the same period in 2016, primarily driven by an increase in ticketing volumes and a consolidation of Skyscanner's financial results since the end of last year. For the full-year of 2017, transportation ticketing revenue with RMB$12.2 billion or 38% increase year-on-year. The transportation ticketing revenue accounted for 45% of the total revenue in 2017. Transportation business groups leveraging existing ticketing engines further strengthened the capability of integrating air, train, bus, and car rentals, providing comprehensive transportation solutions to customers.

Packaged tour revenue for the fourth quarter of 2017 with RMB$623 million, representing a 34% increase year-on-year. The growth was mainly driven by volume, growth of upline the guided tours. Packaged tour revenue for the full-year 2017 with RMB$3 billion or 29% increase from 2016. The package-to-tour revenue accounted for 11% of the total revenue in 2017.

To catch up the trend of middle class in China upgrading their lifestyles, package-to-tour business groups launched customized tour products in early 2016. In less than two years, customized tour business increased its conversion by more than 3X and revenue more than doubled by setting up detailed service standards and effectively managing quality of service.

Concrete travel revenue for the fourth quarter of 2017 with RMB$207 million, 15% increase from the same period in 2016, primarily driven by expansion in travel products coverage. For the full-year of 2017, concrete travel revenue with RMB$753 million, up 24% year-on-year. The corporate travel revenue accounted for 3% of the total revenue in 2017. Corporate travel business further increased its market share by 21% in 2017, solidifying its leadership position in China. More itineraries management as much with minor functions were added to the platform, allowing corporate clients to travel with ease of mind across various types of travel products.

Gross margin was 83% for the fourth quarter of 2017, compared to 78% in the same period in 2016. For the full year of 2017, gross margin was 83%, compared to 75% in 2016. The improvement of gross margin was mainly driven by increasing automation in service center through adoption of AI technology and consolidation of Skyscanner.

Excluding share-based compensation charges, total non-GAAP operating expenses grew in line with revenue growth for the year despite accelerating sales and marketing spending in strategic markets. Total non-GAAP operating expenses as a percentage of net revenue in 2017 remained stable with 2016, primarily due to efficiency improvement in product development, offset by more sales and marketing spending.

Non-GAAP income for operations was RMB$908 million for the fourth quarter, compared to RMB$797 million in the same period in 2016. Non-GAAP income from operations was RMB4.8 billion for the full-year, compared to RMB2 billion in 2016. Non-GAAP operating margins for fourth quarter was 14%, compared to 16% in the same period in 2016. Non-GAAP operating margins of full-year 2017 was 18%, compared to 10% in 2016.

Diluted earnings per ADS were RMB0.88 or U.S. dollar $0.14 for the fourth quarter of 2017. Non-GAAP earnings per ADS were RMB1.56 or U.S. dollar $0.24 for the fourth quarter of 2017. For the full-year ended December 31st 2017, diluted earnings per ADS were RMB3.82 or U.S. dollar $0.59. non-GAAP diluted earning per ADS were RMB6.9 or U.S. dollar $1.06. As of December 31, 2017, the balance of cash and cash equivalents, restricted cash, and shortened investments were RMB48.1 billion or U.S. dollar $7 billion.

Effective January 1, 2018, the company adopted a new revenue recognition standard, Accounting Standards Update. The company currently estimates that the impact of this new standard on its revenue reported in comparative periods of 2018 is not material if the new standard is adopted retrospectively.

Now turn to outlook. On the first quarter of 2018, as Jane mentioned, we are still transitioning through short-term challenges, including the impact from the unfortunate PR incident in late last year. For the first quarter of 2018, we expect the net revenue growth to continue at a year-on-year rate of approximately 9% to 11%, which is estimated based on Ctrip's new revenue recognition standard while taking into account the revenue reported for the same period in 2017. 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.

Questions and Answers:

Operator

Thank you. 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 restrictions and each analyst is only allowed to ask one question each time. If you have additional questions, please join back to the queue. For questions, please press 01 on your telephone keypad now.

Our first question, we have Xiao Ming from UBS. Please go ahead.

Xiao Ming -- UBS -- Analyst

Morning, management. Thank you for taking my question. So, my first question is regarding the international travel business. Jane, you mentioned a lot of the detailed measures in the past quarter and recently about the international business. So, I'm wondering, if we look at long-term growth potential, so what are the growth drivers for international business? And, also, how should we think about the competition, particularly with booking growth? And, secondly, some questions, recently, there are some social media discussion or outcry about the hour-differentiated pricing strategy between new customers and old customer so do we expect any reconciliatory risk in this regard? Thank you.

James Jianzhang Liang -- Executive Chairman of the Board

Okay. Well, let me take the first question, Jane, for comment and second and third part. We planted the seeds of international business a couple years ago and are starting to see the benefits there. In a very exciting business [inaudible] for us is foremost driven by continued Chinese outbound [inaudible]. With growing affluence in the higher [inaudible] in China and the world, I now personally feel that China's outbound opportunity will only get bigger and Ctrip will continue to capture [inaudible] part of the opportunity given our strength in international flights capability increasing one-stop shop capability and best-in-class service.

[Inaudible] has also [inaudible]. [Inaudible] has established itself global brand for flights globally. The team [inaudible] has the same vision as Ctrip and will continue to drive growth organically in realizing synergies with Ctrip with the right [inaudible] and increasing one-stop shop capabilities like [inaudible] that was recently launched.

On trip.com, [inaudible] focus on one-stop [inaudible] platform is getting off to an excellent start with [inaudible] growing in triple-digits so I'm optimistic about international business and future contributions [inaudible] planting these seeds so we have multiple growth drivers going forward.

Jane Jie Sun -- Chief Executive Officer

Regarding your question on the pricing, our principle is to make sure the price is transparent and equal and with no discrimination. So, I believe our CEO from the help centers has already talked with the media to emphasize the importance for our transparency on the pricing.

Xiao Ming -- UBS -- Analyst

Thank you.

Operator

Our next question, we have Alicia from Citigroup. Please go ahead.

Alicia Yap -- Citigroup Global Markets Asia -- Financial Services

Hi. Good morning, James, Jane, and Cindy. Thanks for taking my questions. Two quick ones. No. 1 is there have been some ongoing concerns from investor regarding the competitive landscape in China, especially with [inaudible] and Fliggy so could you give us some update on how you see the competitive landscape in both China as far as the overseas markets? No. 2, regarding your guidance with accounting change, is that suggesting more impact in the first half comparison while you may actually enjoy some tailwind benefit in comparison in the second half this year? So, any color on what would be the like-for-like basis on the 1Q guidance would be great. Thank you.

James Jianzhang Liang -- Executive Chairman of the Board

Well, the [inaudible] travel market's huge, so there's lots of internal spending in China is about RMB5.4 trillion and Ctrip shares only 10% so, with all the competition, there's a lot of room for players to grow. And there's always [inaudible] investing in markets [inaudible] products so Ctrip's always been known for our one-stop shop and 24/7 capabilities and extra service in the brands and will continue to differentiate between us and our competitors. Also, we now have 6,500 travel stores -- physical travel stores -- in place to drive omni-channels strategy to gain more and more shares in our target cities that's also a key differentiator.

As Jane said earlier, we are proud of our progress last year. Our penetration rate in our targeted cities in China includes over 60% on average. And now the outbound [inaudible] even larger growth potential going ahead. So even with all the competition, I think Ctrip is going to capitalize on the Ctrip [inaudible] both domestically and internationally.

Jane Jie Sun -- Chief Executive Officer

Yeah, regarding the new revenue recognition, effective from this year, Ctrip adopted a new revenue recognition feature and there's a new revenue recognition standard, Ctrip will recognize our... for example, the hotel, accommodation reservation revenue on the date ineligible for cancellation rather than checkout. And, for example, our packaged tour revenue will be recognized on the first day of the tour rather than the last day of the tour.

Overall, we estimate the net impact of the change in accounting standards for the full-year will be immaterial, while the impact on our quarterly revenue may be more significant in some of the business line items. But, based on the comparison of the revenue, in 2017, under the new standards, we estimate that overall impact on the Q1 revenue will be immaterial.

Operator

Any further questions, Alicia?

Alicia Yap -- Citigroup Global Markets Asia -- Financial Services

Yeah. I thought my line got dropped. So, actually, can I just follow up, but in terms of the guidance on that, because most of the Chinese traveler actually book quite late into the quarter before the trip, so should we expecting or thinking about Ctrip impacts is quite small in terms of the foreseen recognition on the first day of the booking? Because, obviously, we have the upcoming summer holidays coming in, right, and also some of the short holidays -- like May 1st and all that -- so how should we think of all those changes impacting us in the first and second quarter compared to, let's say, last year?

Cindy Xiaofan Wang -- Chief Financial Officer

Yes, there might be some more significant impact toward the later part of this year, but overall speaking, on a full-year basis, we believe the net impact of the change in the accounting standards will be immaterial for us.

Alicia Yap -- Citigroup Global Markets Asia -- Financial Services

I see. Alright. I'll get back to the queue. Thank you.

Operator

Next in queue, we have Binnie from Bank of America. Please go ahead.

Binnie Wong -- Bank of America Merrill Lynch -- Research Analyst

Good morning, James, Jane, and Cindy and thank you for taking my question. In terms of the international strategy -- I think James gave more color earlier -- do you think we're relatively focused more on competing on pricing product differentiation or what are the key aspect Ctrip will do in competition with the global players? And, also, we looked at the accommodation revenue has decelerated to 25% this year versus around 30% in the first nine months in the year so what are the reasons and what should we expect in 2018? And then, lastly, is just, in view of the changes that we have been doing on cross-selling on air ticket sales, right, so we understand company are also launching super VIP program, and also the Gold Travelers, and also the air ticket and hotel combo, can you just comment on the run rate as this is another way we have been cross-selling our different products on our platform and how we receive that in terms of 2018 under the trend potentially? Thank you.

Jane Jie Sun -- Chief Executive Officer

Sure. I will take the first one on international business. For Ctrip for the international business, first of all, it's anchored outbound business. We have seen strong trajectory for Chinese customers who have increased their GDP per capita and their personal income. Secondly, the visa restriction for Chinese customers also are being lifted for many countries so that provides us with a solid foundation to get more inventories from the airlines, rental cars, attractions ticket providers to give our customer more comprehensive product.

Secondly, it's driven by our technology and air ticketing is the leading product, which will take our customer from one place to another. So, if we look at the trajectory on the international air tickets, Ctrip is growing very fast to reach every popular travel destination between China to the rest of the world and, if the customer have multi destinations, our team also are able to connect them from one country to another.

Thirdly, because of the strong technology platform, even for the customers who try to fly from one country to another, even if they are not Chinese travelers, they are able to use our technology in a product outside of China so, as I indicated in the opening remarks, that number has already accounted for one-third of the overall international travel volume for air ticketing business so that is very strong because we only started this business two years ago so the trajectory will become confident going forward. And, based on our analysis in the COHO analysis, normally for international travelers, they start to book their travel package with the air ticketing products so we are excited about this product.

Thirdly, I think the Skyscanner also is a very strong air product. They offer more than 30 leverages, penetrating into the most popular destinations around the world. And before Ctrip and Skyscanner teamed up, they used to have redirect model, which would take the bookers to another site but now, because of their active booking service capability, Ctrip is enabled Skyscanner customers to book directly on their website, which enhanced the users' experience and satisfaction and conversion rate very strongly.

So, these strong initiatives enable us to reach out to the customers from China to the rest of the world even for the customers in great China area, in Asia area. So, using that technology and platform, we're excited that we're able to offer the international tickets as the starting point and, also, these customers normally will need the rental cars and attraction tickets accordingly. So, we're excited to utilize our technology and service to serve the customers who have this need.

Cindy Xiaofan Wang -- Chief Financial Officer

Yeah, regarding your second and third question, I think you're asking about reasons for the softness [inaudible] as well as the guidance for the first quarter. I think that, most importantly, as James and Jane mentioned earlier, customer-centricity is in the gene of Ctrip and we will continue to focus on improving our user experience, guided by the fundamental principles of consistency, transparency, and equality. So, all the value-added service products we are offering, it has a fundamental value to our users. However, after listening to our customers, we have greatly optimized our air ticketing booking process since late October, which in the short-term has brought us some headwind for the air ticketing revenue growth and the impact has already show in our Q4 results as well as the Q1 guidance.

And, secondly, we had an unfortunate PR crisis coincident with the change of VAS, value-added services, process after our Q3 earnings release which, in the beginning of November, we saw some negative impact on Ctrip brand and traffic in the short-run starting from later part of last quarter last year and the first quarter of 2018. But, thanks to our team's hard work and government support, negative impact has started to fade away and we already saw some recovery recently.

Binnie Wong -- Bank of America Merrill Lynch -- Analyst

Thank you.

Operator

Just gentle reminder, please restrict yourself to only one question at each time. Next in queue, we have Gregory from Barclays. Please go ahead, sir.

Gregory Zhao -- Barclays Capital -- Vice President

Hi, management. Thanks for taking my questions. I have several questions. The first one is, as your revenue formula of your blended [inaudible] generally, so now we know the takeaway impact that you share with us in air ticketing and hotel room booking generally or the booking order trending in Q4 and 1Q '18? The second question about the margins. So, your 4Q non-GAAP operating margin is actually very strong so can you help us understand the margin impact from the adjustment of your cross-selling products offering and of that function and, specifically, in Q1 full-year '18's margin outlook? Also, I want to check with you about your midterm's margin guidance at the 20% to 30% so just do you stick to the guidance in 2019? Thanks very much.

Cindy Xiaofan Wang -- Chief Financial Officer

Thank you, Gregory. Jane's already shared the total GMV in 2017 which achieved RMB560 billion in the GMV, which showed a very healthy GMV growth of around 30%. Back in 2015/16, we shared with our investors mid-term GMV of, by the year 2020, we can achieve a very healthy organic GMV growth figure at around 30%. We believe, although there is some short-end help with that, we think we are still on the right track to achieve that GMV target. And, also, regarding the mid-term opportunity margin guidance, we still strongly believe that Ctrip, our non-GAAP operating margin can get back to the over 20% -- 20% to 30% range -- in the next one or two years.

Gregory Zhao -- Barclays Capital -- Vice President

Thank you very much.

Operator

Next in queue, JinLiang from Deutsche Bank.

JinLiang Hen -- 86 Research -- Analyst

Hi, good morning. Actually, this is JinLiang from 86 Research, not Deutsche Bank. Good morning, James, Jane, and Cindy. Thanks for taking my questions. My question is also on GMV. I'm wondering, out of the RMB560 billion GMV in 2017, how much of it is generated by our cohort users? Also, wondering what is the trend of retention and repurchasing rate of newly acquired users? Also, if you can provide some early on booking demands also for the second quarter, that would be helpful. Thank you.

Cindy Xiaofan Wang -- Chief Financial Officer

Ctrip, because of the reputation of the fastest service, so still most of our GMV was generated or contributed by the assisting user and we did a lot of cohort analysis. For example, for a typical customer that we acquired back three or four years ago, the average transactions they make on Ctrip's platform back to 2014/2015 is only about 5 transactions per year. But, same cohort, the total transactions in one year they made on Ctrip platform increased to over 20 times a year. That's actually the most important part of our revenue growth. And also, on top of that, we very aggressively gaining more market share, both within the lower-tier cities in China as well as in the international market.

JinLiang Hen -- 86 Research -- Analyst

Thank you, Cindy. And any early outlook in bookings for, especially, the second quarter would be helpful.

Cindy Xiaofan Wang -- Chief Financial Officer

Oh, yes. As I said, there was some unfortunate PR incident which impacted our traffic and the revenue in the fourth quarter and first quarter, but we already saw some recoveries on our traffic very recently.

Operator

Thank you. Next, we have Wendy from Macquarie. Please go ahead.

Wendy Huang -- Macquarie Capital -- Managing Director

Thank you. Thanks for the management clarification on your international business and sharing but I still want to get some more color on your Q1 guidance. Can you confirm whether this 9% to 11% is pure organic growth based on apple-to-apple comparison? So, what actually has changed in past two months to make you lower your previous guidance from the previous guidance of 15% to 20% to current 9% to 11%? If this 9% to 11% is a reflection of the organic growth, can you maybe give us some breakdown as to the air ticketing revenue growth implied in this guidance and also how much is due to the regulations on the bundle sales.

And, also, based on my calculation, if this is the organic growth, then should we assume that bundle sale strategy will be fully, actually, cleaned up in the first quarter already, especially when we compare this number to the 40% to 45% organic growth you achieved in first half last year or this 30% organic growth you achieved excluding the Skyscanner? And, also, you mentioned that you are transitioning through these short-term challenges. Given the headwinds on the revenue side, should we expect the company to become more cost-difficulty and to take the shareholders' interests into consideration in this kind of situation? And, if that's the case, how should we expect the margin for first half and rest of the year? Thank you.

Cindy Xiaofan Wang -- Chief Financial Officer

Thank you, Wendy. As I explained, the most important reason for the softness in Q1 forecast is because of the change in the VAS booking process. We improved air ticketing booking process and, if you'll try now, and it's very transparent and straightforward for simply to opt-in or uncheck any VAS product that you choose during the whole booking process. But, again, all these products are valuable for our customers and their current model still uses we're offering some products that they think are useful and our team, going forward, will continue to improve the product offerings so that our customer will be more easily to find things that fit to their demand.

Yeah, but, on the other hand, actually, the blended uptake rate, we now have, at least for the domestic air tickets, it's almost to the lowest level compared to the rest of the world. However, the service and the value that we provide is the best in the world. Therefore, we still strongly believe that Ctrip created a lot of value to our end users, our suppliers as well as the whole industry value chain.

But, at the same time, we were very proactively communicating with all the related government agencies to see how to recognize the value of very efficient agents like Ctrip and how Ctrip can help to further improve the long-term sustainable growth of the whole domestic air ticket industry. But, in the mid-to-long run, as we promised, international air tickets have already become the key driving force for our air ticket revenue growth so, therefore, we strongly believe that the pain process that we are now going through will be in the short-term.

Yes, we hear you on the difficulty on the cost side so, although we had some headwind on the supply, but we still think we can cut all the unnecessary costs for each business line item. But, at the same time, given that we are still in the early stage of, for example, especially into the international market as well as the huge growth potentials in the domestic air tickets, so we are still aggressively gaining more market share. I see Ctrip, although there is some shorter headwinds, but we still see huge potential both globally as well as domestically so we will, as always, have a very disciplined but aggressive by extending our market share but, as always, we will carefully monitor all the return on investment of our market share extending. But, for all the unnecessary costs -- for example, in the last couple years, we significantly improved the cost efficiencies by introducing AI technologies and automation ratio now in the service centers -- profit's the highest in the industry -- but, at the same time, we keep also the highest service standards in the industry.

Wendy Huang -- Macquarie Capital -- Managing Director

Thank you.

Operator

Thank you. Our next question is Jed from Oppenheimer. Please go ahead.

Jed Kelly -- Oppenheimer & Co. -- Executive Director, Equity Research

Great. Thanks for taking my question. Could you give us a little detail on what you're expecting for the individual revenue's segments' growth rate in 1Q, and then how what your guidance is around non-operating margins for 1Q? And then just on your sales and marketing investment, how should we be thinking about it going forward in 2018 and how should we be thinking about it in terms of growing in the lower-tier cities and growing toward your international travel? Thank you.

Jane Jie Sun -- Chief Executive Officer

Thank you, Jed. For each business line item, for the accommodation reservation, we can grow at about 18% to 20% in the first quarter and, because of the negative impact around change of the air ticketing booking process, we forecasted nearly a flattish on the transportation category, and for the packaged tour business, we forecast a 10% to 15% year-over-year growth, and for the [inaudible] travel business, we will have a 20% to 25% year-over-year growth so that comes to total revenue to 9% to 11% year-over-year. In the first quarter, we expected non-GAAP operating profit to be in the range of RMB800 million to 900 million, implying a non-GAAP operating margin of about 12% to 13%.

Operator

Next in line, Eileen from Deutsche Bank. Please go ahead.

Eilieen Deng -- Deutsche Bank AG (Hong Kong) -- Equity Research

Thank you, management, for taking my question. Want to clarify we see the fourth quarter growth margin still maintain almost flat sequentially despite the high margins value-added services has improved. So, can management help us understand how do you achieve that? And, management, you just mentioned the first quarter guidance on the margins -- how should we think about 2018 full-year operating margin level? And could management also comment on any additional impact from other [inaudible] other than flats? Thank you.

Cindy Xiaofan Wang -- Chief Financial Officer

Yeah, thank you. Regarding the forecast for the rest of the year, I think it's still too early to have a full picture of the year. However, because of the unfortunate coincidence happened in Q4 last year, we believe Q1 will have the biggest impact in terms of the year-over-year revenue growth rate. And, also thanks to the comparatively lower comp of the second half of 2017, we will see our growth recovery toward the later part of this year.

And the gross margins, as I said, Ctrip, in the last couple years, by introducing a lot of AI technologies, we significantly improved the operational efficiency in the service center while maintain or even improved service standards in the call center. Therefore, although there's some shots of headwind on the top side, still we can maintain a very healthy and profitable growth margin. And, also, the acquisition of Skyscanner, because they have the metasearch model, which is different from OTA model, has then also helped on the gross margins.

Jane Jie Sun-Chief Executive Officer

I think, to add to Cindy's comments, although the dollar amount for this year is reflected in the guidance, however, we believe that this is an industry phenomenon and Ctrip has the largest skill which enables us to expand our market share and serve more customers. So, we have seen very strong trajectory on volume pickup, both domestically as well as internationally, so this year will be an excellent year for us to extend our presence, both into the lower-tier cities as well as internationally through our strong competitiveness in the products and the service and extend our market share.

Operator

Thank you. I will now hand the session back to Victor for closing remarks. Please go ahead, Victor.

Victor Tseng -- Head of Corporate Affairs

Thank you, everybody, for today's call and you can find the transcript and webcast of today's call on ir.ctrip.com. We look forward to speaking with you on our First Quarter 2018 Earnings Call. Thank you, have a good day.

Jane Jie Sun-Chief Executive Officer

Thank you very much.

Cindy Xiaofan Wang -- Chief Financial Officer

Thank you.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Duration: 65 minutes

Call participants:

Victor Tseng -- Head of Corporate Affairs

James Jianzhang Liang -- Executive Chairman of the Board

Jane Jie Sun -- Chief Executive Officer

Cindy Xiaofan Wang -- Chief Financial Officer

Xiao Ming -- UBS -- Analyst

Alicia Yap -- Citigroup Global Markets Asia -- Financial Services

Binnie Wong -- Bank of America Merrill Lynch -- Research Analyst

Gregory Zhao -- Barclays Capital -- Vice President

JinLiang Hen -- 86 Research -- Analyst

Wendy Huang -- Macquarie Capital -- Managing Director

Jed Kelly -- Oppenheimer & Co. -- Executive Director, Equity Research

Eilieen Deng -- Deutsche Bank AG (Hong Kong) -- Equity Research

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