Qunar eyeing acquisitions to expand reach in fast-growing tourism sector

(Bloomberg) Updated: 2014-08-23 07:57

Qunar Cayman Islands Ltd, the Chinese travel website controlled by Baidu Inc, is actively seeking acquisitions to help expand market share, Chief Executive Officer Zhuang Chenchao said.

Qunar is looking for high-quality technology companies as it aims to "capture and restructure" China's travel market by consolidating other companies, Zhuang said on Friday.

Qunar held talks to merge with competitor Ctrip.com International Ltd in April, people with knowledge of the discussions said at the time, before Ctrip agreed this month to a $500 million investment from Priceline Group Inc. Zhuang declined to comment on the talks and said the company will focus on expanding its share of market segments including hotels and tour packages.

China's online travel market may grow to 465 billion yuan ($75 billion) by 2017, according to iResearch Consulting Group, as an expanding middle class spends more on leisure.

"The Chinese online travel market is huge and bigger than anybody imagined," Zhuang said. "Whoever is the last guy left at the table is going to get huge profitability. We have the commitment to make that happen. That's going to be Qunar."

The company has a "half-a-billion-dollar war chest" to help fund acquisitions and other investments in the business, including more than $200 million in cash, and a $300 million line of credit from Baidu Inc, Zhuang said.

While Qunar has a share of about 20 percent of China flight bookings, it has only about 3 percent of hotel bookings and less than 1 percent for tour packages, Zhuang said. Qunar's goal is at least 20 percent in each segment, he said.

Getting there will also require more investment in network infrastructure and adding more staff, including sales people and engineers, Zhuang said. As a result, it's "too early" to talk about profitability.

On Thursday, Qunar said its second-quarter net loss widened to 421.6 million yuan from 41.2 million yuan a year earlier. The loss was smaller than the 423.2 million yuan average of three analysts' estimates compiled by Bloomberg.

Sales more than doubled to 400.4 million yuan, exceeding the 347.8 million yuan average of seven analysts' estimates. Revenue growth will be 90 percent or more in the third quarter, Qunar said.