Good day, ladies and gentlemen and welcome to the first quarter 2007 Ctrip.com International Limited Earnings conference call. My name is Alexis and I will be your coordinator for today. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today’s call, Ms. Tracy Cui. Please proceed.

Thank you for attending Ctrip's first quarter 2007 earnings call. Joining me on the call today we have Mr. James Liang, Chairman of the Board; Mr. Min Fan, Chief Executive Officer; and Ms. Jane Sun, Chief Financial Officer. We may during this call 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. Min, James and Jane will provide business updates, industry outlook, financial highlights for the first quarter of 2007, and outlook for the second quarter. We will also have a Q&A session towards the end of this call. With that, I will turn to Min for a business update. China Direct (ticker: CHND.OB) is a diversified management and consulting company. Our mission is to create a platform to empower medium sized Chinese entities to effectively compete in the global economy. As your direct link to China, our organization serves as a vehicle to allow investors to participate directly in the rapid growth of the Chinese economy. :

Thanks, Tracy. Hello, everyone and thanks for joining us today. I am very pleased to report a strong performance by our team in the first quarter of 2007. We continue to remain a dominant market leader and demonstrate strong execution capabilities across the business. Our dedicated efforts to continuously improve the service quality yield significant results and enabled us to expand market share at a rapid pace. Our hotel supply network continued to expand with approximately 4,900 hotels by the first quarter of 2007, compared to approximately 3,500 by the same period last year. The number of hotels with guaranteed allotment rooms further increased to account for more than 50% of the total supply. Besides network expansion, we continued to attract new customers at a rapid pace and maintain a loyal customer base. A number of active cumulative customers reached to 2.9 million by the first quarter of 2007. Our strong brand name and high quality customers have enabled us to partner with major brands in China. On May 15th, we announced the launch of a dual currency travel credit card with the Bank of China. The card is primarily targeted for the high-end business travelers. The holders of the card can enjoy multiple benefits, including Ctrip's VIP membership, free travel insurance, travel mortgage and access to discounts at over 10,000 merchants covered by Ctrip, Bank of China and MasterCard. As e-ticketing becomes more and more popular in China, we start to benefit from this trend by leveraging our brand, platform and service. While the industry suggested that the air ticketing market grew about 12% year over year in the first quarter, we were able to achieve 73% year-over-year growth in ticketing volume. We expect to continue to work closely with airlines and offer more flexibility and convenience to our customers. In the first quarter, we continued to introduce new products and services. To name a few, we officially launched limousine service to provide the transportation tools to business and the high-end leisure travelers. Through the launch of this service, we were able to offer more comprehensive and customized solutions to our customers. Also, we introduced a new hotel search function to allow customers finding resort hotels more easily. In an effort to offer convenience to our leisure travelers, we set up this function to provide better visibility for the resort hotels and enable more cross-selling of our products. Finally, in order to provide more value-added service to our corporate clients, we started to roll out an upgraded version of Ctrip Travel Management system, a more sophisticated online travel management solution for corporate customers in China. By using this system, our clients can plan and book their trips more efficiently and cost-effectively. Overall, we remain optimistic with the industry growth and our capabilities to take advantage of this opportunity. We are dedicated to first grow our market share and provide optimal financial return to our shareholders. Now, I will turn to James for an industry outlook.

I have previously conveyed on many occasions about our confidence in the overall industry outlook. I would like to reiterate our belief in the overall market development. The growth in domestic consumption is becoming a more important driver for China’s economy to further fuel growth in travel demand. As one of the largest travel service companies in the country, we are very optimistic about our future. Quarterly results clearly concentrated on Ctrip's leadership in the industry. Developing infrastructure in the travel industry presents us unique competitive advantages. We will continue to build partnerships with our suppliers to provide value-added service to our customers. As the industry is elevating to a higher level, we anticipate to grow together with our partners. Now let me turn to Jane for the update on our financial performance.

Thanks, James. I am very glad to report the strong results for the first quarter of 2007. Despite the fact that the first quarter is normally the slowest quarter of the year for business travelers, our net revenues reached another record of RMB232 million, or $30 million, in the first quarter of 2007, representing a growth of 49% year over year and 3% quarter over quarter. Revenues from hotel reservations were RMB133 million, or $17 million, in the first quarter of 2007, up 40% year over year due to increased volume per room night, and down 3% quarter over quarter due to a seasonally weaker first quarter as a result of the Chinese New Year Holiday. The total number of hotel room nights booked was approximately 1.92 million in the first quarter of 2007, compared to approximately 1.38 million in the same period last year and 1.94 million in the previous quarter. Revenues from air ticketing remained strong at RMB95 million, or $12 million, in the first quarter of 2007, up 64% year over year and 9% quarter over quarter. The total number of air tickets sold in the first quarter of 2007 was approximately 2.22 million, compared to approximately 1.28 million during the same period last year and 1.90 million in the previous quarter. Revenues from packaged tours were RMB16 million, or $2 million, in the first quarter of 2007, up 73% from the same period last year and 46% from the previous quarter due to the increased leisure travel demand in the first quarter of 2007. The gross margin was 79% in the first quarter of 2007 compared to 82% for the same period in 2006 and 80% in the previous quarter. The decrease in gross margin was largely due to the higher cost of services as a…

(Operator Instructions) Your first question comes from the line of Jason Brueschke with Citigroup. Please proceed.

Thank you. Good morning, everyone and I guess congratulations on another great quarter. Let me have two questions and then I’ll get back in the queue. The first one really relates to the growth in the first quarter. Truly an impressive quarter, given the fact that this is a weak quarter seasonally due to Chinese New Year. We understand that air tickets probably show less of an effective Chinese New Year, but historically we have seen I think a much greater impact on the hotel business and yet the hotel business really seems to be doing well, growing at 40% year over year. Could you maybe give us a little color on what is going on in the hotel business? Is it the fact that you are taking share maybe from eLong or other people in the market, such as the travel agencies? Or is it really simply a matter of the robustness of the market and maybe some way you guys are executing or marketing differently than you’ve done in the past? Thanks.

Thanks, Jason, for the question. First of all, on the business environment, I think there are internal factors as well as external factors that impacted our business. Internally, for the hotel business, we have increased the hotel suppliers from prior years, 3,500 hotels to 4,900 hotels. That helps with our business. Secondly, our strategy to expand in the second-tier cities really is generating great results. Externally, I think the big economic environment was very strong in the first quarter and also the good weather during the Chinese New Year also helped us to grow our revenue by 40%. But overall, I think the execution by our team really helped our business. On the air ticketing side, when we researched customer loading data for the three major airlines, they showed about 12% year over year growth. We were able to outpace the market growth at 73% year over year. Again, I think our investment in developing the e-ticket platform to help our customers to handle the e-ticket very well and also our branding efforts as well as the marketing efforts is very effective. With more customers using credit card, Ctrip has its own credit card and just yesterday on the 15th, we launched the second credit card with Bank of China. I think all of these things combined together, along with our internal efforts to make sure our business processes and customer service level is increasing on a daily basis, all these efforts have yielded greater results on the air ticketing side. So that’s the reason I think our first quarter results were stronger than our guidance.

Great. My second question relates to the corporate travel initiative. It’s been now probably a little over a year since you formally launched this. While as expected, it is probably going very well in general terms, I was wondering if after a year you can now give us some more specifics, maybe how many clients, how fast the business is growing, do you ever intend to break this out as a separate revenue line, maybe an update on how the competitive landscape around the corporate travel business is going, et cetera, that would be very helpful. Thanks.

For the corporate travel business, I think right now it is still relatively small compared to other business lines, but we have done a lot of things to grow this part of the business, and especially in terms of service. We just talked about -- we had another update to the online booking platform launched this quarter and we do think this kind of service will definitely help this part of the business to grow more rapidly. I think the growing space is just what we expect right now, but I think it is right now still quite small, so right now we do not divide it into special profit line right now, but if you are talking about the competition landscape, I think in the market right now, American Express still is number one in this field. But I think we are catching very fast.

Thank you, and again, congratulations to everyone on the quarter.

Our next question comes from the line of Richard Ji with Morgan Stanley. Please proceed.

Good quarter. I have a couple of questions, starting with air ticketing. Obviously we see a very robust growth in air ticketing sales for the quarter. I’m just wondering how much of that is due to expanded e-ticketing capacity.

The air ticketing, if you look at the market growth, it is about 12% and we were able to grow at 73% for a couple of reasons. I think e-ticketing is definitely a major driving force, because right now our market share is still below 5% and airlines probably takes about 20% to 25% of the total market share. The vast majority of the market is still currently holding by these motel agencies, and with the e-ticket, I think more customers are using credit cards to make the payment and Ctrip is definitely the most reliable company, one of the most reliable companies for consumers to use, rather than to give the confidential information to a small travel agency. I think more and more customers tend to move towards our platform. Also, our efforts to improve our business processes during the e-ticket transition is paying off because we spent tremendous efforts to make sure our consumers are definitely well taken care of during the process and the creation of our new product such as one-hour express lanes really helped us to strengthen our branding and strengthen the consumer’s confidence. If you look at 73% of the growth, it is hard to draw a clear picture as to how much is e-ticket and how much is market driven. I think the market data shows 13%. If we grow with the market, probably we will be at around 10% to 15%. The extra percentage I think largely is the e-ticketing driven portion.

Also, I think with our upgraded online platform, we will attract more and more clients to book online and also to book by their credit card. So in that way, I think more customers will be very comfortable to book by Ctrip with the e-ticketing process.

My second question is regarding a strong pick-up in your leisure travel business, of which clearly at least partly offset the weak seasonality for business travelers. Maybe you can provide us with a breakdown in terms of the sales contribution between leisure travel and business travel.

The leisure travel business, if you look at our packaged tour business, if you take out the lower end group tour from prior year numbers, we were able to grow our FIT packaged tour by more than 100% year over year, and this is the third year I think we were able to grow this business more than 100% year over year. The branding efforts we have put in the market really is helping us for more consumers to know the quality of our services and products, and also we have announced the Ctrip standard during the quarter and it’s very helpful to let the consumer know if you travel with Ctrip, here are the criteria we are standing by. There is no shopping associated to it, the distance from landmark to your hotel is no more than 10 kilometers, the time that you spend on travel on the bus is less than 20% -- all these things adds the confidence for our consumers and they know when they travel with Ctrip, there is a guarantee in terms of quality and services, so that’s very important too. Also, along with the income level that is increasing in China, more and more people can afford to travel. With Europe opening up to China, we can definitely have more products from a longer distance perspective and our product line can also be expanded. So that is the contribution to our leisure travel.

Also, I think the leisure products we provide are quite different from the traditional travel industry, what they can provide and the way most folks on the -- more a little bit tailor made and perhaps the customer-oriented, service-oriented, these kinds of package, so we give them more freedom and more value-added service to those FIT leisure travelers. So in that way, I think we definitely get a very middle to high-end customers from the market, and also we pick up a lot from this market.

My last question is regarding the commission for air ticket -- should we observe some seasonal sequential decline in the air ticket commission? Could you help us to understand that a little better?

Sure. We expect the commission rate for air ticket to be in the range of 4.5% to 5%. That is a normalized range. So if you look at our ticket commission, we were at 4.5% if you include the fuel surcharge. If you exclude the fuel surcharge, our commission rate is at about 5%, which is very much within the normalized range.

Very good. Thank you.

Our next question comes from the line of Kit Low with Goldman Sachs. Please proceed.

Good morning. Thanks for taking my question. Just a quick question; in terms of the day sales outstanding, it seems to have increased quite a bit from I think about 52 days to about 73 days. Is there anything you can shed some light on? Is it because of the corporate travel business or because of the credit card business that you have been engaging into?

We monitor our AR balances very carefully. If you look into the details, 35% of the ARs from hotels commission, and we normally do not book these ARs until we confirm with the hotels that they are going to pay us, so normally we can collect these ARs within 30 days. The historical write-off for these ARs has been minimal, almost close to zero. The second part is the credit card payment. That is about 40% is related to the ticket payment, and we can get these credit card payments from the credit card company within a couple of days, so the risk is very low. Only 25% of the AR is related to the corporate travel and that is something we monitor very carefully. Also, if you compare to last year, the month of December relatively is a slow month in terms of business travel as well as the ARs, but the March month business has a big increase, so there is also some monthly fluctuation in terms of sales. That is the main reason for the ARs, but that’s something management pays very close attention to.

Just one other quick question; in terms of your effective tax rate, I think last quarter you guided around 15%. It seems to be 16%-plus. Is that the trend rate, of creeping up to more the mid- to high-teens at the moment, or is it going to hover around the mid-teens?

The normalized tax rate for us is about 12% to 15% before you take in stock compensation into consideration, and about 16% to 19% after you take into consideration of the stock compensation, so 16% is still within the normalized range of the tax rate. Our tax rate is driven by many factors. The sources of our revenue, which entity is it coming from, whether it is hotel revenue versus air ticketing revenue -- all these factors will impact our tax rate, but I think 16% should be very consistent.

Thank you.

Our next question comes from the line of Lin Shi with Lehman Brothers. Please proceed.

Good morning. Congrats on a good quarter. I have more of a strategic level question. We understand the FIT business is doing very well, assuming your target customer is the high-end individual travelers. We also noticed there are quite some travel groups, including HRS and there’s other aggregators in the travel space, pushing their brands very aggressively in China. Given that your target customer might have the good habit of browsing on the Internet and doing their own research, I just wonder what is your strategy in terms of research to the competition from the outside players in the overseas market and whether you see an acquisition or a strategic investment opportunity in that space.

Right now, you can see because China, the travel industry is booming very fast, so it is very natural that more and more players would like to get more market share in this market. But I think our marketing position is very clear, and also our products we provide are quite special. I think although you can see other players still they try to take part in this competition, but Ctrip still grows very steadily and also our customer is growing quarter after quarter. I think definitely the branding and the product we provide and also the service you can provide makes you different, a kind of differentiation of yourself from the other players. So in this way I think still we will focus on our branding, our service and our products that we still will keep our high growth. For the potential acquisition and merging, I think we are keeping an eye on it but we will definitely find a suitable one. We are not like some other companies, just acquire this and after that then you can gain nothing. So we will be quite prudent on this.

Interesting. I have another question regarding your hotel inventory. I recently had some trouble in finding a hotel room in Beijing because there were so many conferences and activities going on. Going into 2008, especially the Olympics season, several months ahead of the event there will be lots of travelers coming to China. Do you see that you have to take extra inventory or will that result in higher inventory costs?

Recently, the first tier cities are also quite busy, so sometimes in Beijing the room situation is very tight. I think when the Olympic Games come, at that time we think that brings maybe the business traveler going to Beijing will not be so huge like before, because of the Olympic Games. I don’t think in Beijing we will have a very big problem to arrange those business travelers, because I think business travelers definitely they will try to arrange their meetings in other cities, not in Beijing in August. Also, for room allotment, we do have some arrangements with all those partnerships in Beijing. Of course we will try our best to keep more room inventory for travelers, even in the Olympic Games they will come to Beijing. I think right now is still a little bit early to talk about this, but we will do our best to keep our customers more satisfactory during that period.

My last question is about the penetration in second-tier cities. It will be helpful if we get the percentage of revenue contribution from the second-tier regions for hotel and airline.

The second-tier revenue contribution for the hotels was about a 50-50 split in the past, but right now from a revenue perspective, first-tier cities is sliding a little bit below 50% and the second-tier cities has already increased their shares to more than 50%. In terms of volume growth, the first-tier cities grow at about 20% to 30% volume-wise, and second-tier cities grow at about 40% to 50% volume wise. For the air ticket, still the majority of the revenue is from the first-tier cities, because almost everywhere you go, the traffic hub is still within Shanghai, Beijing, Guangzhou, Shenzhen, so about 90% of the revenue is still in the first-tier cities. In terms of packaged tour, I think the major ones, almost 90%, 95% are still from the first-tier cities.

Thank you very much.

Our next question comes from the line of Eddie Leung with Deutsche Bank. Please proceed.

Good morning. Can you give us an update on the competitive landscape in terms of new entrants, such as Mango City? As well as the potential threat from Travel Sky and airlines going direct?

I think Mango City, they did a lot of promotion and advertising last year. As I noticed from this year, the advertising still they are doing a little bit less than before. I think the reason that they changed their top management so still we will see whether they have any new initiatives on the PR promotions. I think with Ctrip, we are still focused very much on the effective promotion on the effective channel cooperation and also effective direct sales. So we will do some very special or different channel sales from the other players, like we just launched the Ctrip Bank of China credit card. This kind of cooperation will definitely benefit our customers. For the air ticketing, all the airline companies, definitely they will want to enlarge their direct sales. Also, I think this will be a kind of chain but still, as you know, the China market is so big and right now, the airline company, the sales generated direct from the airline companies still accounts for a small portion of the total market. I think for airline companies, their direct sales and also for Ctrip's air ticketing business, still we both have very much room to grow. So far, I don’t think there will be a very big, fierce competition amongst airlines and Ctrip. For the Travel Sky, in fact, Travel Sky, they started their hotel booking business I think five years ago. They mainly do this kind business together with their sales terminals. I think for this kind of business, since it is not their core business, I think this is a kind of value-added service for Travel Sky and the volume so far is not so significant, so I don’t think there will be a big competition from Travel Sky yet.

Okay, good to hear that. Thank you.

Our next question comes from the line of Aaron Kessler with Piper Jaffray. Please proceed.

This is Judy Dunn in for Aaron Kessler. A lot of my questions have been answered, so just two really quick questions; I was wondering, with the rising middle class in China, as well as rapidly increasing growth in the leisure travel market in China, should we be expecting Ctrip moving more and more into this market? Also, can you comment a little bit on your new shuttle limousine initiative? Thank you.

Definitely right now more and more young Chinese people, they make more money and the middle class, the middle class you can see is emerging from China, Mainland China. I think what we are doing is we focus very much to develop suitable products for those part of new markets and also definitely that the leisure market will be a very big change for Ctrip's future growing. So definitely we will start to get very in-depth to provide more suitable products and service. For the limo service, right now in China the limo service, a car rental service you can divide into two categories. One is a kind of car rental service provided together with a driver and the other is a car rental driving by the user themselves. As you know, since the market right now for the self driving car rental business is not so ready in the market, so this part of the business will not be our focus right now. What we provide the limo service is a car rental with a car driver. This is mainly focused on the high-end business travelers and leisure travelers. We launched this service among 11 cities and all those cities are major business and the top leisure cities. We think we will try to provide this product to cater to those high-end leisure travelers as well as business travelers, to gain more market from this field.

Thank you.

Our next question comes from the line of Wendy Huang with Evolution Securities. Please proceed.

Good morning. Thanks for taking my questions. My first question is a follow-up on the commission. It seems that your hotel commission, if I’m correct, is RMB69.5 and your air ticketing commission is RMB45. I wonder if they are -- you also mentioned that within the 4.5% to 5% is a reasonable range. I wonder if there is still room for the commission growth in the next one or two years. If there is no room for the growth, what factors limited the commission increase?

Sure. The hotel commission, you are right. It is about -- you can calculate these numbers by just taking the total revenue divided by the room net nights. Air ticketing is the same thing. For the range we gave to you, I think that’s very much stabilized in that range. Sometimes at year-end, when our volume reached a certain level, the hotels or the airlines will give extra incentives to us. However, there is no guarantee and might vary from quarter to quarter, from year to year. Looking into the future years, it is very much depending on the hotel’s policy as well as the airline’s policy, but from our visibility, I think that range is fairly normalized and stabilized.

My second question is about your sales and marketing expenses. You mentioned that you are increasing the branding effort in the future. I noticed that this quarter as a percentage of total revenue, sales and marketing expense actually trended down a little bit. So I wonder if in the future, this percentage will increase as you do more and more marketing and promotion.

We keep a very close look at our sales and marketing. Our goal is never to let our operating expenses to outpace our revenue growth, so our intent and plan is very much to keep sales and marketing in line with our revenue growth. If you let it outpace our revenue growth, that’s not probably the most effective marketing campaign we can run. Call center benefits should be balanced out, but if you keep it, suppress it too, too low we might sacrifice future opportunities, so we make sure we balance out the future opportunities with the cost control measures. Our current plan is definitely to keep it to be in line with revenue growth.

Thanks, that’s very helpful. Thank you.

Our next question is a follow-up from the line of Lin Shi with Lehman Brothers. Please proceed.

Thanks for taking my follow-up question. Regarding the hotel business, we know the China hotel market is highly fragmented. That’s why Ctrip has such a good business opportunity. We recently noticed some start-ups, or some new business initiatives where they have -- it’s kind of a middleware service where they help hotels which do not have an in-house direct online booking system to do like kind of direct sales and help them with their yield management. On the other hand, I’ve been suspecting whether the mature hotel chains will be able to open up their direct booking system to the non-chain hotels. I just wonder whether you or how do you see this kind of new business opportunity, and whether that represents a threat for Ctrip in the longer term?

For the competition side, I think what you talk about, we do see in the market there are a few new players. They will help the independent hotels to sell, to have direct sales function on their website. I think a few players, they mainly focus on the lower end hotels and small hotels. As you know, if the hotel is big enough, normally they will have their own website, so if those hotels don’t have a website, those hotels normally would be the kind of small, low-end hotels. Definitely they will be some help for the hotels but in terms of their customer branding and in terms of the service functionality, I don’t think they will become a major sales channel for those parts of the hotels. In terms of the hotel chains, right now the international hotel chains takes less than 10% in terms of volume and revenue in our company. Nationwide, their market share is about 3% to 5% in volume. If you add up the massive hotel chains, I think all those chain hotels and still they are a small part in terms of if you look across the nationwide hotels in China. The production is more than 80% production of our revenue from January from the independent hotels. So in that way, I think the hotel chain still will be growing but in terms of market scale, still it is a small portion of the total market. Of course, we definitely will work very close with all the hotel chains, both international and domestic hotel chains. I think for those hotel chains, still for the future, this kind of platform is a back way, as a supplementary sales channel for all these kinds of hotel chains to reach more clients nationwide. I think for Ctrip and also for hotel chains themselves, so far we work very closely and benefit each other, so there will be no big problem for us right now. Even in the near future, no big problem.

So you don’t see some very successful hotel chains, like Home Inn or [Hun Ting], they will be willing to open up their inventory or management system to the non-chain hotels, like three to four star?

In fact, Home Inn and also [Hun Ting] or other local chain hotels, they have their own central reservation system. I think this kind of different market segmentation of what we -- we have nationwide customers across 200 and 300 cities. For the hotel chains, they are I think more focused on the local market. I think for the future, we definitely are kind of a supplementary sales channel even for those big hotel chains. So it is kind of -- as I understand, it is kind of a winning situation for those hotel chains and for Ctrip. I think this -- something significant like the airlines. Even in China, the airlines are so big and still the airlines rely very much on the intermediary sales channels, so I do think this kind of business model in China right now.

Thank you very much.

(Operator Instructions) There are no further questions in queue at this time.

Thank you, everyone. We have no further questions so we will conclude this call. Thank you.

Ladies and gentlemen, I would like to thank you for your participation in today’s conference. This now concludes the presentation. You may all disconnect and have a wonderful day.