Tuniu (TOUR) Grew Packaged-Tour Revenue but Swung to an Operating Loss. What Went Wrong With Margins?

Tuniu Corporation (NASDAQ:TOUR) reported a decline in its operating results for the second quarter, with net revenue rising 3.0% year-over-year to RMB138.9 million, while packaged-tour revenue grew by 6.8% to RMB121.1 million. However, the cost of revenue surged 27.9% to RMB62.5 million, exceeding the top line. Gross profit contracted 11.1% to RMB76.4 million, and the gross margin dropped to 55.0% from 63.8%.

Consequently, Tuniu reported a RMB6.1 million operating loss, compared to RMB7.1 million operating income in the previous year. Despite this decline, Tuniu's packaged-tour growth signifies that demand for its core travel products remains strong. The company has been focusing on expanding small-group, private, and customized tour offerings to meet the demand for more personalized and flexible travel options.

Tuniu maintained a marginally profitable position below the operating line, with GAAP net income attributable to ordinary shareholders reaching RMB0.7 million. The company's strong liquidity position, with approximately RMB1.0 billion in cash and cash equivalents, offers additional room to absorb uneven travel demand. The revenue mix plays a significant role in margin pressure.

Management revealed that outbound tours accounted for approximately 30% of the gross merchandise value, down from over one-third a year earlier, as transaction volume in the Middle East and Africa fell by more than 20%. Lower advertising-service fees from tourism boards and bureaus, suspended promotional activities in certain destinations, and other revenue declines also contributed to the margin pressure.

Within domestic travel, the growth in self-guided Hotel Plus X products resulted in another margin headwind, as these products generally have lower profitability compared to organized tours. Sales and marketing expenses increased by 21.5% to RMB54.7 million, or 39.4% of revenue, driven by higher promotional expenses, which more than offset reductions in research and development and general and administrative expenses.

Tuniu's outlook for the third quarter anticipates revenue between RMB202.1 million and RMB212.2 million, representing growth of 0% to 5%. This outlook suggests limited evidence that near-term revenue growth will restore operating leverage. While Tuniu's organized-tour growth is encouraging, the quarter highlights that revenue growth alone does not translate into stronger operating economics.

The key question remains whether outbound travel can recover and if promotional spending can lead to higher-margin bookings. Until gross profit begins to grow alongside packaged-tour revenue, Tuniu Corporation remains a cautious margin-recovery story rather than a straightforward travel-growth investment.