Qunar’s CEO CC Zhuang declared in a recent internal meeting that the company would become profitable by the end of 2016. “I’m telling you exactly what I told investors on Wall Street, because I believe our employees have the right to be fully informed,” he told staff in the meeting.
Qunar reported RMB501.1 million total revenue, a 107.8% y-o-y increase, leading to a 4.3% jump in its share price to close at US$25.61 on December 2 after its Q3 financial report was released on the company website.
In the company meeting Mr. Zhuang acknowledged that Q3 set a milestone for Qunar. “We will take the market by storm. I would concede defeat only if anyone else has 30% of our market share,” he said.
Qunar to become China’s OTA Facebook?
Mr. Zhuang compares Qunar’s positioning in the Chinese market to Facebook, the social networking website that has become an integral element of the internet. According to a Wall Street Journal report, Facebook has garnered a growing following which in turn attracts more developers and marketers to make money through Facebook.
Qunar is also banking on using technology in the future to build a similar platform for the online travel industry.
A Beijing University Mathematics graduate, Mr. Zhuang calculated that Qunar had RMB26 billion in total reported transactions in the last quarter, whereas the total industry reports an average of RMB300 billion in transactions per quarter.
Qunar’s online transaction system currently only handles 5%-10% share of the market. “I hope that in the next five years our transaction system will be able to support transactions of billions of yuan every quarter. In the future we will also offer completely free IT infrastructure to suppliers as our sole source of income comes from the consumer end,” he said.
Qunar has already launched a cloud platform that opens its data, interfaces, resources, supply chain, customers and capital to the entire industry. Facebook also initially used an open platform to penetrate other websites and enable the spread of information through interpersonal connections.
OTA price war
When asked about dealing with strong rivals, Mr. Zhuang said: “It is pointless to look at total revenue in the competition. We’re not afraid of a price war and can go the long haul in any competition because long-term competitiveness is based on the factor of the cost per RMB100 transaction. We have won if our price is set above our bottom line and below our competition’s bottom line.”
Through IT technology, Qunar can also significantly lower the transaction cost for accommodation. “So we will be profitable as long as we have the volume. Qunar’s air ticketing operations also beat the competition because our cost for every 100 yuan in transaction is only 1.5 yuan, whereas Ctrip’s cost is five yuan,” he said.(Translation by David)
