Qunar Considers U.S. IPO as China Travel Demand Fuels Growth

Qunar.com Inc., a Chinese travel search site partly owned by Baidu Inc. (BIDU), is considering an initial public offering in the U.S. as it expects soaring demand for travel services to double revenue this year.

Qunar broke even in 2010 and more than doubled sales in 2011 to “a few hundred million” yuan, Chief Executive Officer CC Zhuang said in an interview. He declined to give a timeframe or other target terms for a share sale.

The website gets most of its revenue from cost-per-click travel ads and may raise money from U.S. investors after selling a $306 million majority stake to Baidu (BIDU), the nation’s biggest search engine, last June. China’s tourism market may overtake Japan’s as the world’s largest after the U.S. by 2013, Boston Consulting Group Inc. said in March.

“We are a unique platform that connects the traditional IT system of airlines and hotels with massive information searches on the Internet,” Zhuang said Jan. 12 at Qunar’s Beijing headquarters.

Zhuang is attracting users by offering flight and hotel booking information that isn’t limited to specific vendors and allows searchers to make reservations directly with airlines, hotels and services that match their needs.

China travel industry revenue is expected to increase 14 percent annually to 5.5 trillion yuan ($871 billion) in 2020 from 1.5 trillion yuan in 2010, according to Boston Consulting Group.

“Moving forward, the whole nation will be more and more comfortable using online travel,” Zhuang said.

Tencent, Ctrip

Tencent Holdings Ltd. (700), China’s biggest Internet company, on May 17 said it bought a 16 percent stake in Qunar’s competitor ELong Inc. for $84.4 million to expand in online travel. Chinese rival Ctrip.com International Ltd. (CTRP) listed on the Nasdaq Composite Index (CCMP) in December 2003.

Ctrip.com has declined 42 percent in the past 12 months in Nasdaq trading, compared with a 1.6 percent drop of the Nasdaq Composite Index, according to data compiled by Bloomberg.

Qunar will consider an IPO “as soon as the market becomes stabilized,” said Zhuang, who worked for the World Bank in Washington from 2001 to 2005.

Qunar, which means “Where do you want to go?” in Chinese, was founded in 2005. It provides information on flight tickets, hotels, packages, and visas, among other travel services, according to its website. Its search functions list options for travelers, who are then directed to the websites of airlines, hotels and other travel services, to make their purchase.

Catching the West

Travel booked on the Internet accounts for about 7 percent of China’s tourism market and that ratio is expected to surge to 30 percent in the next five years, similar to current levels in the West, Zhuang said.

Qunar hasn’t used the cash from Baidu’s investment so far, according to Zhuang. He wants the company to have cash on hand to tap opportunities, especially growth in mobile device applications.

“In the next few years, mobile travel is going to be big,” he said. “Mobile travel may have new game rules, may have new ideas -- something we don’t even imagine today, but they will appear one night somewhere in the world.”

To contact Bloomberg News staff on this story: Michael Wei in Shanghai at mwei13@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

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