EURASIA TRAVEL Co.,Ltd. Q4 FY2025 earnings call

• Company Overview & Positioning:

  • Eurasia Travel is a Japan-based travel group with two group companies, founded in 1986, approaching its 40th anniversary in 2026, with ~100 total employees, all of whom are experienced tour guides. The company has practiced zero-debt management since founding to build resilience against industry risks.
  • It positions itself as a specialty tour provider in the upper-right (high-value, curiosity/experience-focused) segment of the travel market, differentiating from mass-market OTA and low-cost short-trip providers, focusing on expert-led, custom planned itineraries.

• Post-COVID Recovery:

  • The company continues to see a V-shaped recovery post-COVID, reaching ~80% of pre-COVID business levels, outperforming the industry average of 60-70% recovery. Recent booking demand is described as solid, with growth in participation from working-age customers and a large increase in customers choosing business class travel, pushing up average per-customer revenue.

• Operational Differentiation:

  • All tour planning, booking, marketing and guiding is handled in-house by full-time staff, rather than outsourced, to maintain quality, safety and full control over the customer experience. The company only operates one physical store in Nagatacho, Tokyo, focusing on high-intent customers and offering online consultation, with no plans for broad retail expansion.
  • It does not offer mass-market short/cheap trips or celebrity-guide tours, avoids partnerships with non-synergistic third parties, and prices tours as all-inclusive to eliminate hidden fees for customers. All marketing content (brochures, monthly magazines, owned media) is created in-house by staff who have visited the destinations.
  • The company prioritizes sustainable travel: it has focused on under-tourism since founding, supports local economies via direct local transactions, and post-COVID has become an official partner for Japan's Ministry of the Environment National Parks and Agency for Cultural Affairs Japanese Heritage tourism programs.

• Growth Strategy:

  • The company plans to leverage DX, AI and digital tools to improve operational efficiency, cut costs, enhance customer reach to new and existing customers, improve customer satisfaction and boost repeat business, building on its early adoption of web platforms.
  • Human capital is the company's core asset: hiring is on track for 2024, 2025 and 2026 (after a hiring freeze from 2021-2023), with a focus on hiring for character over purely technical skills, followed by intensive in-house training, with plans to grow headcount back to pre-COVID levels and beyond to support future expansion.

1. ユーラシアの旅 (Eurasia Guided Tour): This is the core business, contributing approximately 90% of total revenue and profit. It offers ~360 itineraries across 170 countries, with an average 15-day trip length. Post-COVID, domestic Japan travel within this segment saw revenue and profit increase 2x to 3x compared to pre-COVID levels, and has remained stable since. Gross margin for the overall business improved to just under 19% in the full 2025 September fiscal year, up from ~15% in the first three quarters of the prior year.
2. World Cruise Business: A niche existing business that focuses on curated, seasonal cruises rather than bulk purchasing/selling. It is a pioneer in river cruises and also offers expedition cruises to polar regions (Arctic/Antarctica) as part of its niche秘境 (off-the-beaten-path) tour portfolio.
3. Custom Individual Travel & Organizer Business: Custom individual travel provides customizable model itineraries with dedicated staff support for bespoke trips. The organizer business, which has operated since founding, leverages the company's extensive network to create unique experiential trips (e.g., exclusive cooking classes with a former Michelin 3-star chef in France).
4. Inbound Business: A new post-COVID growth business that leverages the company's existing global network. It serves inbound travelers from underrepresented source markets (e.g., Latvia, Romania, Uganda, Chile) and offers accessible barrier-free travel planning for disabled visitors (e.g., wheelchair-using travelers from overseas). Gross margin for this segment is just under 30%, a relatively high level.
5. Global Bridge Business: A new business that supports Japanese companies and individuals with overseas expansion, providing advisory and facilitation services especially for underdeveloped markets such as Central Asia.

• Financial Performance Guidance: The company confirms ongoing V-shaped recovery with continuing growth, and plans to increase tour output for the 2026 September term (its 40th anniversary year), adding new cheaper shorter-duration itineraries alongside its existing core product line to drive further revenue growth.
• Mid-term Strategic Targets: The company has publicly set a medium-term target of ROE of 10% or higher, aligned with Tokyo Stock Exchange requirements for capital cost awareness.
• Dividend Guidance: The company has adopted a 10%+ DOE (dividend on equity) target for dividend planning, which insulates dividend payouts from earnings volatility and makes dividend forecasting easier for investors. For the 2025 September term, the annual dividend is revised upward from 14 yen to 31 yen, a 17 yen increase. For the 2026 September term, the annual dividend is planned at 50 yen, a 19 yen increase year-over-year. A medium-term dividend plan through 2029 September term has been finalized.

• Geopolitical and safety risk: The company prioritizes safety risk management, and only operates tours to regions rated Level 1 or lower by Japan's Ministry of Foreign Affairs, and does not offer tours to Level 2+ risk regions, even though this leaves an underserved blue ocean market, to prioritize customer safety.
• Currency risk (Yen depreciation): Yen depreciation increases overseas sourcing costs for the company. The company uses hedging tools such as futures to mitigate risk, but focuses primarily on building sufficient value into its tours to offset price increases from currency impacts, so that customers accept higher prices for the unique experience provided.
• Industry competition: Travel products have no patents, so product differentiation is difficult, and competition with mass-market providers is an ongoing challenge. The company addresses this by differentiating via its operational structure and unique hard-to-replicate experience-focused products.
• Regulatory and operational complexity: Operating tours across 170 countries means the company must comply with a wide range of local labor regulations and destination-specific rules, which adds complexity to product planning and execution.

Q: What makes Eurasia's information gathering and planning capabilities different from peer competitors? / A: Gathering basic information is not difficult, thanks to the internet and local partner networks plus official information from embassies and tourism boards. The real challenge is creating sellable products that match current customer needs, combining multiple different components and complying with all local rules across 170 countries. The company focuses on close customer feedback, frequent destination visits, and continuous partner network development to overcome this challenge.

Q: What is the source of Eurasia's unique competitive advantage that cannot be easily copied? / A: The 40-year accumulated track record of maintaining long-term relationships with local partners around the world, even for destinations visited only once per year, is a core unique asset that builds long-term trust. Additionally, nearly all of the company's staff hold the nationally required certified travel manager qualification, which is very uncommon in the industry and allows the company to operate legally compliant, profitable tours consistently.

Q: How does yen depreciation impact the company's business, and what are you doing to mitigate it? / A: Yen depreciation does push up sourcing costs, which is unavoidable. The company uses futures contracts to hedge part of the risk, but balancing hedging is difficult because over-hedging creates new risks. The core strategy is to compete on unique value, so that even if prices rise 10,000 to 20,000 yen, customers will still accept the increase because of the unique unobtainable experience the company provides.

Q: Is my understanding correct that inbound business has a gross margin just under 30%? How do you achieve this? / A: That understanding is correct. Unlike most inbound travel businesses that use a split operation model with multiple outsourced partners, Eurasia handles all inbound operations in-house, leveraging its existing domestic network and multilingual staff to conduct direct transactions with local suppliers. This allows the company to achieve this high gross margin by cutting out third-party intermediary costs.