Trip.com launches a more transparent hotel commission and traffic allocation mechanism, with long-term monetization logic remaining robust

Overview

This report assesses the impact of adjustments to Trip.com’s hotel commission system and traffic allocation mechanism. The new mechanism allows hotel merchants to independently choose within a total commission rate range of 10% to 15% and determines traffic ranking through a five-dimensional scoring system, aiming to improve the transparency of platform rules and respond to antitrust regulatory rectification requirements. Morgan Stanley believes the new policy was introduced in a timely manner, the rate range is broadly consistent with the previous level, and it maintains a positive view on the company’s long-term hotel business monetization capability.

Core views

The core change of the new system is not a significant adjustment to the commission range, but rather the institutionalization and transparency of the relationship among commission choices, merchant tiering, and traffic support. Whether the previous net monetization rate of about 8% to 10% will be affected in the short term mainly depends on merchant choices, traffic allocation, and the execution effectiveness of the new rules. In the long run, the customer sources, conversion, services, and operational value-added that online travel platforms can provide to hotels remain the key determinants of monetization rates, and the report believes Trip.com’s related value has not been impaired.

Analysis framework

The report assesses operating impact based on the terms of the new commission policy, the five-dimensional traffic ranking mechanism, and platform label rules, and uses discounted cash flow analysis to evaluate the target price. The base-case valuation scenario uses a weighted average cost of capital of 12.5%, a perpetual growth rate of 3%, and an exchange rate assumption of Rmb6.80/US$.

Methodology notes

• Valuation methodDiscounted cash flow analysis

  Estimates intrinsic value based on a company’s future cash flows and long-term growth assumptions.

  The base-case scenario uses a weighted average cost of capital of 12.5%, a perpetual growth rate of 3%, and an exchange rate of Rmb6.80/US$, deriving a target price of US$57.00.

• Platform traffic allocationFive-dimensional merchant scoring mechanism

  Uses multiple relatively independent operating and service indicators to comprehensively determine the traffic ranking of hotel merchants.

  The scoring dimensions include information completeness, service quality, popularity, price competitiveness, and commission rate; popularity involves indicators such as transaction value, conversion rate, and repeat purchases, while the price dimension involves factors such as value for money, supply stability, and cancellation policies.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Trip.com Group Ltd (TCOM.US)

  The core covered company in the report and the direct implementer of the hotel commission system reform

  Strengths

  The platform can create value-added for hotels through customer sources, transaction conversion, repeat purchases, service capabilities, and brand endorsement; the new mechanism improves the transparency of commission and traffic rules.

  Weaknesses

  The short-term net monetization rate is relatively sensitive to merchants’ commission choices and the execution effectiveness of the new mechanism, and the cancellation of original traffic products may bring transition costs.

  Comparison

  In the domestic market, it faces competition from Tongcheng Travel and Meituan; the new system’s total commission rate range of 10% to 15% is broadly consistent with the previous level.

  Risks

  Intensifying domestic competition, macroeconomic slowdown, extreme weather suppressing willingness to travel, and policy execution causing short-term pressure on the net monetization rate.

Key data

• Stock ratingOverweightExpected risk-adjusted total return over the next 12 to 18 months will exceed the average level of the analyst’s covered industry.
• Industry viewAttractiveThe industry coverage portfolio is expected to perform attractively relative to the relevant broad market benchmark over the next 12 to 18 months.
• Target priceUS$57.00Base-case scenario based on discounted cash flow analysis.
• Current share priceUS$46.14Closing price on 2026-08-07.
• Implied upsideabout 23.5%Calculated based on the target price of US$57.00 and the closing price of US$46.14.
• New total commission rate range10% to 15%Hotel merchants can choose independently, with different rates corresponding to different traffic support.
• TCOM Selected commission requirement12%Hotels also need to meet the quality requirements stipulated by the platform.
• Previous net monetization rateabout 8% to 10%The short-term impact depends on the actual execution of the new system.
• Weighted average cost of capital12.5%In line with the lower end of the weighted average cost of capital range for Chinese internet companies.
• Perpetual growth rate3%In line with the long-term gross domestic product growth target.
• Valuation exchange rateRmb6.80/US$Consistent with the macro team’s forecast.
• 52-week share price rangeUS$38.04 to US$78.99Range disclosed in the report.

Impact & implications

The new policy is expected to reduce merchants’ concerns about the opacity of traffic allocation and strengthen the explainability of rules through optional commission tiers, independent scoring dimensions, and platform certification labels. In the short term, merchants’ commission choices and traffic migration may cause fluctuations in the net monetization rate; over the medium to long term, if Trip.com continues to provide stable customer sources, higher conversion rates, and service value-added, the platform still has the foundation to maintain the monetization capability of its hotel business. The cancellation of original traffic products such as Yunti also means merchant operating strategies and the platform’s traffic structure will undergo adjustments.

Risks

• Intensifying competition from Tongcheng Travel and Meituan in the domestic market may affect traffic, merchant relationships, and profitability.
• Slower macroeconomic growth may weaken willingness to spend on travel and booking demand.
• Extreme weather may suppress short-term travel activity and platform transaction scale.
• There is uncertainty around the execution effectiveness of the new commission and traffic allocation mechanism, which may affect the previous net monetization rate of about 8% to 10%.
• The valuation is sensitive to assumptions of a 12.5% weighted average cost of capital, a 3% perpetual growth rate, and an Rmb6.80/US$ exchange rate.
• Morgan Stanley has disclosed business and shareholding relationships with Trip.com Group Ltd, and investors should treat this report as one factor in their decision-making.

What to watch

• The actual distribution of hotel merchants’ choices within the 10% to 15% commission range.
• The impact of the new five-dimensional scoring system on hotel exposure, conversion rates, and transaction value.
• Whether the hotel business net monetization rate remains at the previous level of about 8% to 10% after the implementation of the new mechanism.
• Merchant coverage, consumer recognition, and traffic contribution of the TCOM Selected label.
• Merchant migration and changes in the platform traffic structure after the cancellation of original traffic products such as Yunti.
• Domestic competitive landscape, progress in outbound travel recovery, and renminbi trends.