Good day, ladies and gentlemen, and welcome to the third quarter 2009 Ctrip.com International Limited earnings conference call. (Operator Instructions) I would now like to turn the conference over to your host for today, Ms. Lin Zhang. Please proceed.

Thank you, Tanya. Thank you for attending Ctrip's third quarter 2009 earnings conference 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 statements except as required under applicable law. Min, James, and Jane will provide business updates, industry outlook, and the financial highlights for the third quarter of 2009 as well as outlook for the fourth 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.

Thanks, Lin and thank you to everyone for joining us today on the call. As we celebrate Ctrip’s 10th anniversary, we are pleased to report that our team once again delivered solid results in the third quarter of 2009. Our net revenues grew 47% year over year and net income grew 8% year over year. We are glad to see that the global financial crisis our team has captured the opportunity of the economic recovery. Each business line of Ctrip leads historic records of the highest quarterly volume during the third quarter. The strong financial performance also demonstrates our ability to effectively control our costs and expenses. Our hotel supply network continued to expand at a rapid pace, with approximately 9,400 hotels by the end of September 2009, compared to approximately 7,600 by the same period of last year. The number of hotels with guaranteed allotment rooms further increased and accounted for approximately 70% of the total hotel supply. Air ticketing business had a resilient growth during the third quarter this year, primarily due to the increased business and leisure travel volume driven by the economic recovery. Our packaged tour business grew 93% due to higher consumer confidence. The comprehensive tour products, high level service and competitive prices along with our new established transparent quality standards are well accepted by our customers. By the end of the third quarter of 2009, Ctrip has reached to 8.2 million active customers, compared to 5.6 million by the same period of last year. And our customers’ loyalty toward services has also been enhanced. We feel honored that Ctrip’s call center was rewarded the golden handset award for the best contact center in China in September this year for the third straight year. We believe high quality of services is a key for its…

Thanks, Min. As we are celebrating our 10th anniversary, we are proud to see that Ctrip has become the leading brand in the online travel markets in China. Ctrip is going to continuously challenge and improve ourselves through all fronts, including customer service, product offers, technology, sales and marketing, and more importantly, developing our people. The travel market in China is fast growing. Ctrip is still young and small compared to the global players. We look forward with excitement to the opportunities the China travel industry presents us in the future. We want to take this opportunity to thank everyone for their continued support to Ctrip. I believe with the passion, commitment, and diligence our team has, Ctrip is going to grow with the China economy and to the China travel industry. Now let me turn to Jane for the update of our financial performance.

Thanks, James. I am very pleased to report the solid results for the third quarter of 2009. Net revenues were RMB545 million, or $80 million for the third quarter of 2009, up 47% year-on-year. Excluding net revenues attributable to ezTravel, Ctrip's net revenues were RMB518 million, or $76 million, for the third quarter of 2009, up 40% year-on-year. Hotel reservation revenues amounted to RMB262 million, or $38 million, for the third quarter of 2009, representing a 41% increase year-on-year and a 16% increase quarter-on-quarter. Excluding revenues attributable to ezTravel, Ctrip's hotel reservation revenues were RMB257 million, or $38 million, representing a 38% increase year-on-year, primarily driven by a 47% increase in hotel reservation volume, which was partially offset by a decrease in commission per room. Excluding revenues attributable to ezTravel, Ctrip's hotel revenues increased by 15% quarter-on-quarter, primarily driven by an increase in hotel reservation volume. Air-ticketing revenues for the third quarter of 2009 were RMB241 million, or $35 million, representing a 45% increase year-on-year, and an 8% increase quarter-on-quarter. Excluding revenues attributable to ezTravel, Ctrip's air-ticketing revenues were RMB234 million, or $34 million, for the third quarter of 2009, representing a 40% increase year-on-year and a 9% increase quarter-on-quarter, primarily driven by an increase in air-ticketing sales volume. Packaged-tour revenues for the third quarter of 2009 were RMB55 million, or $8 million, representing a 93% increase year-on-year and a 53% increase quarter-on-quarter. Excluding revenues attributable to ezTravel, Ctrip's packaged-tour revenues for the third quarter of 2009 increased by 53% year-on-year and 61% quarter-on-quarter, due to the increase in the leisure travel volume. Gross margin was 77% in the third quarter of 2009, remaining consistent with that in the same period in 2008 and in the previous quarter. Product development expenses for the third quarter of 2009 increased by 32%…

(Operator Instructions) Our first question will come from the line of Catherine Leung with Citigroup.

My first question is if you can please discuss the pricing trends in the third quarter and what you have seen so far in October and November and any difference in dynamics you are seeing between the hotel and the air travel business. And my second question is whether you can update us on your developments of your leisure travel initiatives. Thank you.

I will take the first question and [inaudible] will answer the second one. On the price trend, for the hotel business in Q3 the volume growth was very strong. However, the price was still having a 5% to 10% decrease compared to last year’s. For air ticketing, the price has been increased at approximately 5% to 10%, depending on different airlines and different routes, and that trend still holds very similar for Q4 as of today.

In terms of the leisure market, we do see the financial crisis and in China the economy has seen some recovery, the leisure travel demand is growing quite significantly and also in this Q3, it’s normally a seasonal period for leisure demand, so we do see quite some pick-up from the leisure side and that’s why we also see our hotel rooms grow quite significantly this quarter.

Thank you.

Our next question comes from the line of Cathy Chen with Goldman Sachs.

Thanks for taking my questions. The first one is actually a follow-up on the comments regarding the hotel trends during the quarter. Can you give us a bit more color on how much of the volume growth came from leisure versus corporate during the quarter? And the second question on the air side, it looks like the volume growth was a bit slower, given the acceleration in the industry traffic that we saw during the quarter. Can you talk about whether you are seeing any changes in the relationship between your growth and the industry trends going forward? Thanks.

Sure. The rates in the hotel, I think both sides grow very strong. I think our business activities from the corporations have demonstrated its growth due to the economic recovery. And also on the leisure side, our team has put lots of efforts to make sure the weekend travelers are increasing their spending, so both sides are increasing very healthily during the past quarter. For air ticket, the industry data shows approximately maybe 20% increase on the volume. The main reason is that Q3 is a very strong quarter for leisure travelers, particularly for a group tour. However, last year during Q3, due to the Olympic Games, most of the people were staying home to watch the Olympic Games, so in the base of last year, group tours was not there. So if you compare the industry data from this year versus last year, the group tour was one of the very important reasons for the industry growth rate. For Ctrip though, our targeted market is not in group tour. Our targeted market is mainly in FIT -- frequent independent travelers, so if you take out the group tour, our growth rate still is at very healthy multiple of the industry growth rate.

Thanks, that’s very helpful.

Our next question comes from the line of Wendy Hung with RBS.

My first question is regarding your top line guidance -- is it still including the 5% contribution from ezTravel, so the organic growth is 20% to 25%?

Yes, Wendy, I think our guidance includes the ezTravel piece.

Historically I think in terms of Q4, it is kind of weak seasonality but historically, the weak seasonality was always surpassed by the strong sector growth you achieved, so are you expecting to see kind of sequential growth this quarter, a very strong sequential growth you achieved in the past?

For the travel industry, I think the strongest quarter is the Q3 because it’s very warm and kids are out of school so that travel volume has been very strong in Q4 -- Q3, but obviously our team will do our best to deliver a strong result by capturing more market share. So we will work hard on that but the normal trend is Q3 is stronger than Q4 for the industry.

Okay, and my second question is regarding operating margins -- this quarter operating margins expanded quite decently. Do you expect this kind of current operating margin to sustain? And also for 2010, have you [bartered] any special branding expenses for the 2010 Expo?

For the margin, I think based on the current rate, operating margins should be sustainable somewhere around 38% to 40%. That’s a sustainable range. For 2009, we do not want to spend too much money on a one-time event. We would rather spend money on the sustainable growth strategy but we will give a detailed guidance at the Q4 conference call.

Okay, great. Thank you.

Our next question comes from the line of Mike Olson with Piper Jaffray.

A couple of quick questions -- one on the pricing side, you mentioned hotel was down 5% to 10% year over year and air was up 5% to 10% year over year. Does that imply that hotel pricing was flat sequentially and air was up sequentially from Q2 to Q3? And what are you expecting for sequential price changes from Q3 to Q4?

Okay, for hotel, I think the price in Q3 was a 5% to 10% decrease on a year-over-year basis. In Q4, it’s the same compared to last year -- we still see a 5% to 10% range of the decrease, so which means it’s probably flattish on a sequential basis. On the air, in Q3 the price was 5% to 10% increase and in Q4, compared to last year, it’s flattish. So air is -- the price can change on a daily basis. We are monitoring it very carefully.

Okay, and then on -- a quick question on the modeling. There’s this line item, equity income and affiliates -- what should we assume for that in Q4 if you do wind up providing the guidance there?

Sure. We use equity method to pick up Home Inns’ equity income on a one quarter lag basis, so they just announced their earnings and since we own approximately 18% of their shares, so that gives us about RMB15 million for next quarter in the equity income line.

Okay. Thanks very much.

Our next question comes from the line of Aaron Kessler with Kaufmann.

A quick question on the tax rate -- what should we expect going forward for either Q4 2010? Is this kind of a one-time tax benefit or would you be -- is kind of a 13% rate the right rate going forward here?

Most of our entities have a high and new technology status, which enables us to get 15% tax rate, so for your modeling purposes, I believe a 15% tax rate is a sustainable rate. From time to time, certain entities will get special preferential tax treatment and only when we confirm with the government, we book it during the quarter when we confirm with the government agencies. But for your model purposes, I think 15% is a reasonable number to use.

Okay. Great, I will jump back in the queue. Thank you.

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

Congrats on a very strong quarter and the many awards your company has received recently. Quite a team. I have two questions -- let me start with the hotel business. Can you elaborate to us what portion of that growth comes from your budget hotel versus star hotel, especially given that you are one of the large shareholders of Home Inns and so far, how does that synergy play out? And also a related question is about hotel booking commission -- obviously it declined and on a lower price and it is -- is that due to the overall weak price environment or the rising contribution from lower priced budget hotels? So that would be helpful.

I think our revenue for different star hotels are very evenly spread out, so for five-star, four-star, three-star and budget hotel and below, each one of them gets a very even spread. For Home Inns, I think they are one of the many, many chain hotels in the market, so the revenue contribution from that specific hotel is not significant compared to the overall revenue. On the commission per room, I think it’s determined by two factors -- the first one is the hotel price. The second one is the commission rate. Our commission rate is holding at a very steady rate, which is 15%. The main decline, the reason for the decline is because the room rate had declined between 5% to 10%.

That’s helpful. And the second question is regarding the impact of pandemics, and obviously H1N1 swine flu impacted your performance in the previous quarter and going forward, have you implemented any preemptive measure barring any further outbreak of swine flu, and what do you think the impact might be?

For the H1N1, I think this quarter since the government has controlled this disease to a certain degree and we don’t see there is a very severe impact on the travel pattern and consumer behavior. And for Ctrip’s business, I think among our businesses in Q3, we don’t see a significant impact from H1N1 and we will monitor the situation prudently in the coming quarters.

Thank you. That’s very helpful.

Our next question comes from the line of Eddie Leung with Banc of America.

I am asking questions on behalf of Eddie Leung -- just a couple of quick questions; the first one is can you give out the percentage for the increase in air ticketing volume in this quarter? And secondly, can you talk about the opportunities for Ctrip for the Shanghai Expo next year? Thanks.

Sure. I will answer the first question and Min will answer the second one. For the air volume, we were able to achieve 40% volume growth on a year-over-year basis for Q3.

For the Shanghai Expo next year, I think this event will be very helpful for Shanghai and even for China and we are working very closely with the government organization and the industry to provide their best products for leisure customers and I think for this coming event next year, both Ctrip and the China travel industry will benefit from this event.

I see. Thanks.

Our next question comes from the line of Ashish Thadhani with Gilford Securities.

I have a quick question -- on the balance sheet, how have you accounted for the Home Inns investment? Specifically, is there a value that is marked to the market?

On the balance sheet, Home Inns investment is recorded as a long-term investment. Currently because our percentage already requires us to account it for under the equity method, so we are -- we do not mark it to the market.

Okay, so to the extent that Home Inns stock rises or falls, that will not really be reflected on the balance sheet, right?

You are right, you are correct. We will not book any fluctuation on the stock in balance sheet but rather we will pick up 18% net income from their income statement and book it as an equity income in our income statement.

So that would be 18% of roughly $13 million, which they reported recently and that would go with a one quarter lag, right?

Correct. So for Q4, we will pick up approximately RMB15 million in the equity line.

Excellent. Thank you very much.

Our next question comes from the line of Marisa Ho with Credit Suisse.

I just have two follow-up questions -- when you mentioned just now that the air ticket volume increased by 40% year-on-year in the third quarter of 2009, is that including or excluding ezTravel?

Including.

Including ezTravel, so if we strip it out, roughly how much would that be?

No, 40% is without ezTravel.

That’s excluding -- excluding.

Yes, because when we compare, we always have to compare to ourselves because ezTravel is the first time.

And am I correct in saying that the air ticket revenue in the third quarter of 2009 without ezTravel increased by also 40% on a year-on-year basis?

That’s correct.

Right, but you are saying that the ASP increased by 5% to 10%, so the effective ASP was flat on a year-on-year basis or are we looking at an increase on a year-on-year basis?

On a year-over-year basis, depending on the airlines and routes, if you compare to last year’s Q3 price, it is somewhere around 5% to 10% increase.

Okay, right. And also to follow-up on your earlier comment on the fourth quarter air ticketing ASP trend and you were saying that they are roughly showing flattish on a year-on-year basis. If I remember correctly, the first half of the fourth quarter 2008 actually saw a lot of ASP pressure, I mean, probably a bit worse compared to the third quarter of 2008, so the base in fact should actually sequentially become a bit easier but it looked like the ASP trends are kind of weakening a little bit, I mean, compared to the third quarter of this year so are you looking at any particular industry trend or competitive pressure within the airline industry that caused that to happen?

From a seasonality perspective, when we move into Q4, I think the airlines will make a decision to adjust their price based on the seasonality, based on the capacity they have, and also based on how strong the volume is in the industry to make sure their revenue is maximized, so that’s what we have seen so far.

But in your conversation with your airline partners, are you picking up any trends that you think we should be concerned about or is anything basically just fluctuating on a week to week basis?

Nothing specifically -- I think if the economy is holding very strong, the volume will hold strong and the price is sustainable, but obviously airlines have to consider many factors -- capacity is one consideration, how they can -- if they have new routes, they might have special strategies. So so far what we have observed is on a year-over-year basis the price is flattish.

Okay, great. Thank you very much.

Our next question comes from the line of Ming Zhao with SIG.

I have two questions -- the first question is just can you give us some update on the online versus offline in terms of the revenues for call center versus Internet, give us an update on that -- any change there?

For the online versus offline, around one-third of our productions are generated from online and versus two-thirds are generated from offline and we do see the online portion is growing steadily year by year with a certain percentage but still in China as you may know, quite some people will still tend to go for offline and we have around 18% business travelers and most of the travelers, they are used to -- by phone when they travel around and even in the office. So I think we are working -- still we are working very hard to improve our online platform and also as we will still prepare our call center platform to be more user friendly.

So let me ask you -- which part grows faster, relatively?

Online is growing steadily. If you see the percentage change, perhaps we have 1%, or around a 1% increase every year in the past years.

Okay, good. Jane, two questions on the balance sheet items -- the first one is [inaudible] and other current assets, it went up pretty big quarter over quarter and I wonder what is that -- what is the cause there? And also, if we look at the property equity in the software line, it also had a big increase. I just wonder what is happening there.

Sure. The first item is the prepaids. As of September 30th, 2009, we have to prepay our vendors for the tour packages that is going to take place for the October holidays, so normally that specific date, we normally always have to increase the prepaids. The flip side is also if you look at the accruals and custom advance account -- the customer also needs to put down a deposit with us because they need to go out and use our packaged tour. So that is a seasonality phenomenon in these two accounts. The second one is on the property line. The increase is mainly for the payment we have made for our [Nantung] call center. It’s still being built so we made certain payments for that building.

Okay. Thank you.

Our next question comes from the line of Elinor Leung with CLSA.

Thank you for the call. I have two questions -- the first question is regarding the guidance. Is it possible to give more breakdown in terms of guidance in terms of what do you expect in terms of volume and price trends for 4Q for both hotel and air ticketing business? And the second question is regarding the packaged tour -- given that the leisure travel volume is growing very strongly in China, do you have any plans in terms of strengthening the packaged tour business in terms of maybe even M&A in the area? Thanks.

Okay, I will answer the first question and Min will answer the strategy on the packaged tour business. The guidance overall is somewhere around 25% to 30% year-over-year growth for Q4, which includes hotel revenue probably will be somewhere between 20% to 25% volume growth probably will be around 30%, which will be offset by a price -- a decrease in the price. For air ticket, the revenue probably will be somewhere around 30% to 35% and we forecast the volume growth to be around 30%. And for packaged tour, the revenue growth probably will be in the range of 30% to 50% year-over-year increase.

For the leisure business, Ctrip this year, we do see quite a healthy growth in this field and also we provide more products to our customers and for example, last year we have 11 departure cities. This year we have more than 20 departure cities. That means we have more coverage geographically and I think during growth, we will be open to any good opportunity for M&A but we will be quite prudent to evaluate and as you know, it can be easy to buy a company but it is very hard to integrate so for the M&A opportunities, we will always focus on whether it’s a travel related business, whether it can bring a new business line for Ctrip, and whether it can penetrate -- help Ctrip to penetrate into a new geographic area and also whether this M&A can add more key value-added service to our main business line. So I think we will monitor very carefully.

Thanks.

(Operator Instructions) Our next question comes from the line of Michael [Holdano] with GGHC.

I had a question on the commission rates for air ticketing -- I remember, I think it was about a year ago they were deregulated and I guess I was kind of hoping if you could give us some guidance of where they are going, where they were this quarter as a percent -- I think it’s in between 4% or 5% but if you could just give us some granularity, that would be great.

Sure. The commission rate right now is in the range of 5% to 6% excluding surcharge and that range has been very consistent. The elimination for the government required commission rates did not have too much impact on our business, so that’s the current vision. From Ctrip’s side, we will work very hard to improve our efficiency and to make sure we are the most cost effective sales channel for all our business partners to make sure we bring the best value to all the airlines. So we will -- our team is very focused on how to bring the best value to airlines. But obviously the commission rate is determined by the airlines at the end of the day.

And sorry, market share in the hotel and air ticketing across the board -- is there a way you guys could break that out for us?

Yes, for hotel, it is very hard to do -- we only can give you a very -- the best estimation we have. It’s probably around [2% to 3%] in the hotel market. For air ticketing, the number is somewhere around 7% to 8%.

Great. Thank you very much.

Our next question comes from the line of Marisa Ho with Credit Suisse.

Could you give us an update on the progress on the [Nantung] call center and also your plan for the new call center in 2010 and 2011, please?

The [Nantung] call center is still under construction right now and we plan to use this new call center by next year and for our call center seats in Shanghai, we will still remain the existing seats for some key business and also we will allocate our increased volume to the [Nantung] call center next year and from the year beyond. And I think the similar to [Nantung] call center will be a -- like a second headquarters for Ctrip but this call center will mainly focus on the offline business solution.

For 2010 and 2011, how much of a volume increase do you think [Nantung] can handle?

For the volume increase, I think at least three to five years, the [Nantung] call center can handle all the incremental business of Ctrip.

Right. Okay, great. Thank you.

(Operator Instructions) Our next question comes from the line of Jill Fan with [Blue Site].

I just have a question regarding the balance sheet on the accounts payable and deferred revenue, seems to vary quite a bit from quarter to quarter, so can you state a little bit what contributes to the variance?

Sure. Just as we discussed with Ming, October is a very big holiday in China because we have 10 days off, or eight days off, so most of the customers will take the long distance tour to travel. As of September 30th, in order to book their packages, they have to put down deposits with us and we will not recognize revenue until they use our services and they come back from these tour packages. So the accounts payable and as well as the accrued revenue, deferred revenue represents the advanced payment the customer has made but we have not recognized the revenue yet.

Okay. Thank you very much.

(Operator Instructions) We have a follow-up question from the line of Eddie Leung with Banc of America.

Just a quick follow-up on the air ticketing side -- we are looking for some color about the direct sales by airlines, the competitive landscape in this area. And do you see any [inaudible] happening in the third quarter of 09? Thanks.

I think from last year, the airlines are working very hard on the direct sales. I think because the China market is big enough for airline to grow their direct sales, as well as Ctrip to grow its own air ticketing business and I think what airline direct sales and Ctrip, we can acquire much share from the whole market, so we don’t see there’s a significant impact on Ctrip’s business so far.

Thanks, so actually the impact of these swine flu did not impact on the air ticketing side as well? Is that correct?

No significant impact.

Okay, thanks.

Our next question comes from the line of [Zim Yin] with [Wiskel] Research.

Just a quick question -- could you tell me what is the gross margin of your packaged tour segment? And going forward, what do you see the trend of the margin will be? Thanks.

Sure. The gross margin for each line of business is quite different. For packaged tour business, it’s somewhere around 70% to 75% to 80% gross margin. There is a combination of hotel and air ticket.

Okay, so do you see that the trend, that the margin will expand in the future?

I think that range probably is sustainable for the near future.

Okay, thanks.

That concludes our question-and-answer session for today. I would now like to turn the conference back over to Lin for closing remarks.

Thank you for participating in this conference and see you next quarter.

Thank you for attending today’s conference. This concludes the presentation. You may now disconnect and have a great day.